Freedom vs. Markets

Silly title, eh? Yea, well Radley Balko ought to take note. That’s what his tome on Corporations vs. Markets might as well be titled.

There’s a difference, of
course, though opponents of both fail to recognize it. Free markets,
peaceful commerce and capitalism consist of voluntary, mutually
beneficial exchange. They create wealth. They enable people to live, to
live better, and to live more comfortably.

And corporations don’t "consist of voluntary, mutually beneficial exchange"? Corporations don’t "create wealth"? Corporations don’t "enable people to live, to live better, and to live more comfortably"? Those seem like pretty essential things to me, and they generally apply to corporations just as well.

Corporations, on the other hand, are government-created entities
that act in their own interest. As such, they often use government to
better their advantage, most always to the detriment of free
enterprise. When I defend markets and the machinery of markets, I’m not
defending corporations.

Corporations "act in their own interest"? You mean, they don’t act in the interest of their stockholders, i.e., their owners? And who is "they"? Who is acting, the corporation, or its employees, officers, and directors who are put in pace by the owners?

The essential defining characteristic of a corporation is that it is a voluntary association of individuals (stockholders, directors, officers, employees) under a complex hierarchy of agreements, contracts, policies, authority, responsibility, and accountability. It conducts business, voluntarilly, with clients of all sorts. Yea, it’s a legal construct too. So is marriage, but marriage can hardly be defined as essentially nothing more than a state-recognized contract.

Yes, the actors within corporations cozy up to to the politicians. Sometimes, they’re just buying the privilege of exercising rights they already have, which is justifiable. Other times, they seek laws and regulations that either mandate the purchase of their products or services by force, erect barriers to entry into particular markets, or make things tough on an out-of-state or international competitor. Despicable, but it’s nothing a sole-proprietorship or partnership couldn’t do if they have the purse strings and/or political influence.

In short, it’s silly to uphold capitalism and free markets, but in the same breath, say you’re not also upholding the technology that makes capitalism and free markets so effective. That technology is the the concept of the corporation.

On another point, it seems to me that if capitalism and free markets are upheld because of the moral premise of the freedom of individuals, then the freedom of individuals to form business associations (corporations) naturally follows. However, if one only sees the practicality of capitalism and free markets, but not of corporations, well, then, who cares, ’cause all that matters is what’s practical, right?

Update 1: More on Corporations.

Update 2: Morer on Corporations.

Update 3: Radley Balko posts some clarifications.

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  1. Kyle Bennett on May 9, 2005 at 13:01

    I'm bothered by the term "legal construct", as if corporations spring up from nothing because the state-god willed them into existence. As you say, it is a complex heriarchy of contracts, etc., which really represent agreements. It is those agreements that are the essential characteristic. The legal "construct" can only come afterward, and is merely a recognition or formalizing of them.

    The real question is what rights this entity has. There is no basis I've ever heard for why it should have either more or fewer rights than any individual within it.

    In practice they often have more or fewer legal rights – not because of their nature as a corporation, but because of the nature of those outside the corporation who create legal rights. If there is a problem with corporations (and there is), then that is the source of the problem.

  2. elijah on May 9, 2005 at 16:43

    nice blog, clean and easy to read, typepad seems to be the way to go

  3. A on May 9, 2005 at 17:05

    Nice post. Corporations rock. Everything they do is logical.


  4. Richard Nikoley on May 11, 2005 at 14:25

    Hey, "Common Sense." I deleted your insulting comments. Feel free to repost if you can make a civil point. I'm the only one, here, who gets to toss around words like "stupid" at people; but even for myself, that will generally be in the context of a blog entry, not a comment.

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