Libertarians are not corporate apologists

In a libertarian society, corporations wouldn't exist.

TAMPA, October 22, 2012 — In the wake of Ron Paul’s campaign and with Gary Johnson rising in the polls, libertarianism may just get a hearing for the first time in decades.





One hundred years ago, Woodrow Wilson first articulated the “progressive” argument about why and how the government should tightly regulate corporations to protect the public. His arguments are still widely accepted today.

For Wilson, the problem was that corporations get too big and use their vast wealth to influence the government. Size changes the dynamics of the employment contract. For example, employers used to live in the same town as their employees. Now, the employer might live in another state.

For Wilson and the progressives, too much voluntary association is a bad thing. Wilson made all of the same, absurd arguments one hears today about how the free market poses a danger to society, while ignoring the elephant in the room concerning the corporate question: limited liability.

The privilege of being released from liability beyond what one has invested in the corporation violates the rights of all who haven’t agreed and causes economic distortions.

The first is size itself. Without the guarantee that one’s personal assets are off limits in a lawsuit, one must take more risk in buying stock in a corporation. Imagine if potential stockholders knew that their personal assets might be at risk in a case like the BP oil spill. Some number of shareholders would decide against taking that risk, or at least limit it by acquiring less stock.

This is the natural balance between risk and reward that limits the size of any going concern. The more ownership one acquires in the firm and the larger the firm becomes, the more personal risk one takes on. Once the government releases the stockholder from liability, this natural balance is destroyed. Risk is removed, allowing the corporation to grow beyond what it otherwise would.




In a libertarian society, entrepreneurs would be able to do most things that corporate shareholders do. They would be able to pool their money with as many people as they like, even millions of other people. They would be able to release each other from liability. They would be able to secure agreements from their customers and vendors to do the same.

However, they would not be able to release themselves from liability to people who hadn’t agreed. Their potential liability to third parties would act as a natural deterrent to inordinate growth.

They also wouldn’t be able to use regulations to keep out new competitors, because there would be no “regulations” as we know them today. Yes, there would be laws against force and fraud and committing torts. But the government wouldn’t be telling companies how to avoid committing a tort or how to run their businesses in the safest manner. Not only would this result in an enormous increase in competition and thus consumer choice, but it would also foster spectacular innovation compared to the stifled environment that businesses operate in today.



Down with corporations. Bring on the free market.




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