Re: `capitalist' character values

From: Russell Blackford (
Date: Mon Jul 23 2001 - 04:26:36 MDT

Felix Ungman said
>The principle of limited liability corporations is central to capitalism,
>and cannot/shouldnt be abandoned even in an minarchist state.

Good try, but not so. :-)

Felix, it is quite possible to have capitalist acts (exchanges of goods,
services, money) without restriction, yet make no provision for limited
liability corporations. The truth of the matter is merely: "The principle of
limited liability corporations is central to mercantilism."

>When starting a company you need both an idea and some starting capital.
>Often, the investor is not the same person as the entrepreneur (and is
>usually not involved in running the company). The basic principle of
>corporate act is that the investor may loose the amount of money initally
>invested, but not more that that. He is not held responsible for the
>company's actions.

We all understand how it works. How is it *justified*? The investor is
getting money back if the thing makes a profit. Why isn't s/he jointly and
severally stuck with liability for the company's torts and breaches of
contract? (Actually, this *would* be the situation at common law.) Why
should the government be able to pass a law allowing the investor to limit
the risk?

Maybe if there were no such laws, one approach to get *some* of the benefits
of a corporation would be for the entrepreneur, a natural person, to simply
borrow money from various investors and remain liable for the full loss. But
this assumes that the investors are not actually trading, they are just
creditors - just bankers. This is not a corporation. There is still a
natural person with full liability, unattractive as that may be to

>Corporations are legal entities that should exist in minarchist states.
>They are based on contracts between the corporation and the state, just as
>any other first class citizen of that state.

(1) where does the state get the moral authority to enter into such
contracts? Why isn't it restricted to making contracts for the purposes of
running the military and the police force (and a minimal court system)? If
the government passes a law that says I can't get the full amount that the
members of a trading association owe me, isn't this theft of my chose in
action against the members of the trading association? If I disagree with
such a law being passed, but the government passes it anyway, haven't I been
coerced? How can this law be imposed on an unwilling minority who disagree
with it? Anyway, where does the state get the right to create laws that are
not unanimously accepted by its citizens? Don't tell me that the *majority*
agree with the laws in question, because that could be the case with many
other laws that libertarians oppose. A *majority* has no right to hold a gun
at my head and take away my chose in action. How do you distinguish what
laws the government can pass without unanimity and what laws it cannot pass?
In short, what is your theory of political obligation, or government
legitimacy? What size and shape of state is allowed by underlying ethical
principles? What kinds of laws am I obliged to obey? What are the necessary
and sufficient conditions before I and the state are obliged to recognise
something as your property?

(2) Felix, what do you mean "just as any other first class citizen of that
state"? *I* sure wasn't created by a contract with the state. As far as I
know, my parents used a totally different method! I find this very puzzling.
Have you left something out here, perhaps?

Hey, folks, keep those defences of corporations coming.



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