01 December 2013

The origin of corporations

In an online discussion an anti-corporate anarchist who held that the regulatory state is just a tool of corporations' project of extracting wealth from society linked the article Our Hidden History of Corporations in the United States, and said:

It's hard to discern why [progressives] ... are so ingrained in seeing government as their sole savior in fighting against corporate Frankensteins — but they are clearly incorrect, as a legal and historical matter.

I wanted to keep this lovely reply by another participant in the discussion:

I have never denied the moral hazard in tax breaks and limited liability. I have never denied the corruption ensuing from thence in how corporations can achieve protected status from government.

I, like Theodore Roosevelt, and some of our early practitioners of government, would never have been cozy with this idea. Nevertheless, the reality is that corporations file for incorporation, pay on a periodic basis for their limited liability, but are not created by government.

More particularly, you can thank the Supreme Court for its ruling in Dartmouth College v Woodward, February 2, 1819, for first overturning the attempt by government to limit and control business charters.

How can you read these paragraphs and not see that government put up a good fight against corporations:

But the men running corporations pressed on. Contests over charter were battles to control labor, resources, community rights, and political sovereignty. More and more frequently, corporations were abusing their charters to become conglomerates and trusts. They converted the nation’s resources and treasures into private fortunes, creating factory systems and company towns. Political power began flowing to absentee owners, rather than community-rooted enterprises.

The industrial age forced a nation of farmers to become wage earners, and they became fearful of unemployment—a new fear that corporations quickly learned to exploit. Company towns arose. and blacklists of labor organizers and workers who spoke up for their rights became common. When workers began to organize, industrialists and bankers hired private armies to keep them in line. They bought newspapers to paint businessmen as heroes and shape public opinion. Corporations bought state legislators, then announced legislators were corrupt and said that they used too much of the public’s resources to scrutinize every charter application and corporate operation.

Government spending during the Civil War brought these corporations fantastic wealth. Corporate executives paid “borers” to infest Congress and state capitals, bribing elected and appointed officials alike. They pried loose an avalanche of government financial largesse. During this time, legislators were persuaded to give corporations limited liability, decreased citizen authority over them, and extended durations of charters.

Attempts were made to keep strong charter laws in place, but with the courts applying legal doctrines that made protection of corporations and corporate property the center of constitutional law, citizen sovereignty was undermined. As corporations grew stronger, government and the courts became easier prey. They freely reinterpreted the U.S. Constitution and transformed common law doctrines.

Corporate personhood was a court reporter's mistake in Santa Clara County v Southern Pacific Ralroad. And forever after it has become a stare decisis nightmare.

Corporations were never intended nor are now creations of government.

Having said that, I still believe with you we need to fix corporate status.

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