By Insula Qui
Although libertarians consistently oppose the government and taxation, we often fail to see how the government is involved with private businesses. Many of us may know the horrors of the military-industrial complex, the media-industrial complex, or even maybe the medical-industrial complex and the banking-industrial complex. But we are still missing a sufficient amount of radicalism in our critique of the current economy. By supporting a free market, we do not need to support corporations, furthermore, we need to accept and oppose the corruption in the business world even if the state is ultimately responsible.
Whenever a company spends money on the government, they do so to obtain a license to steal. The government only sells violence and can never be a productive agent. Corporate lobbyists are not benevolent libertarian actors as they strive to influence the state for their own profit.
This may not be by using direct subsidy and it may not involve an actual transfer of wealth to a corporation. However, at the very least the government must restrict competition by regulation and licensing or provide an exemption from liability to the business. Many libertarians are still under the illusion that whenever businesses do something, they do it for the improvement of their product and their service. However, this is only true whenever there is a completely free market economy and then only incidentally. The only reason for why corporations care about quality is that it brings profits. Whenever profits can be increased without expenses on quality, companies will prefer doing so, barring any moral issues the executive might have. And even if the executive is reluctant to use state force, they are bound by contract to exploit any available resource to increase the profits to shareholders, even if it involves government violence.
As aggression initiated by the state is not met with private defence, it is a perfectly justifiable strategy from a profit-maximizing standpoint to use government violence. But this should not be ethically acceptable to any libertarian and we should stand opposed to any use of government violence. And we should not turn a blind eye to violence if used at the behest of private businesses. But we discover a necessary truth by following this path. If violence used on behalf of businesses is ethically wrong, we must also find that corporations as such are unethical from a libertarian perspective. We cannot justify the existence of corporations and we must challenge all forms of limited liability and subsidy.
Many libertarians have made this point, but it is still a relatively obscure piece of knowledge outside libertarian groups. This leads many to insinuate that libertarianism, as a philosophy, works to aid corporations and not to directly challenge them. And many libertarians concede the theoretical necessity of corporations and make excuses for the perpetual existence of said corporations. What we need to do is conclusively establish that corporations are engaged in large-scale theft and could not exist under a libertarian social order.
The first important part of understanding the corporation is limited liability, this is the state giving a charter to a company to distinguish it from any individual involved in that company. A limited liability company is itself not responsible for the actions of any individuals involved in the company and the individuals are not responsible for the actions of the company. The corporation becomes a distinct legal entity that did not exist before and now exists only due to a charter by the state. This is inherently enough evidence that corporations could not exist in a libertarian society.
But we can still conceive of a scenario where enough people would recreate corporations on the free market. But this makes no sense, no person has a reason to willingly choose to engage in exchange that has limited liability over an exchange that has unlimited liability. Any trade done with a limited liability corporation is inherently more dangerous as no person has to take responsibility. This is similar to a foundational problem with the state being organized irrationally. It’s more beneficial to trade with businesses that have individual accountability for their actions.
Furthermore, from austrian economics, we learn that lending is fundamentally the same thing as owning a share. Simply put, both are different ways to structure contributions to businesses that will only pay off in the long term. This means that any objection on the basis of people being unable to invest in companies is faulty. And most stock owned by regular people does not come with voting rights, which would not imply any liability on the owners of the stock. However, in both scenarios, if the investment or the loan defaults, each person who invested in the company would be liable to pay the costs of the debt acquired by the company. This is not a bad thing as companies would simply be forced to not take gratuitous debt when they cannot afford to pay it off.
And this leads us to the final point, a limited liability corporation would never be lent any money on a free market to as there is no guarantee of retrieving that money during a bankruptcy. If the government is not there to ensure that the loans are paid, the company cannot guarantee that loans will be paid. And if that company already has insurance against bankruptcy, then there would be no problem with that company having unlimited liability as the debt will get paid. Corporations will never exist in a libertarian economy, which is not a bad thing.
But we still have to demonstrate that corporations are fundamentally involved in regular theft. And even if we put aside the obvious factors of government legislation and subsidy, we are confronted by the fact that corporations always abuse the legal system of the government. To put this in other terms, corporations as separate entities from any individual can easily use government courts to their own advantage. This is the reason why many are critical of libertarianism, corporations can defend themselves much more easily than individuals can challenge corporations.
However, if every lawsuit against a corporation was a lawsuit against its executive or board, it would be simpler to avoid any such issues where corporations find crime lucrative and easy. And this is what we have experienced in the statist economy, challenging corporations is hard even when they are in direct violation of property rights. And the people who successfully challenge corporations are ordered to not speak of the legal matter. (A famous example is the old woman who got scalded by McDonald's coffee and ended up disabled and disfigured.)
We, as libertarians, do not need to excuse everything that takes place in a perverted market economy. Rather, we need to focus on that which would take place if we had a truly free market. To that end, we must consistently oppose corporations. It might be true that a similar arrangement between the stockholders and a business could be negotiated in a libertarian economy, but it would not be limited liability and it could only function based on the principle of insurance.