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Statism, Obsolescence, Waste, and the Modern Corporation

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tunk Posted: Mon, Nov 21 2011 3:07 AM

Despite that many people here are skeptical about Kevin Carson's mutualism, I would highly encourage everyone to read his study for the C4SS, "The Great Domain of Cost-Plus". Whether or not you think corporations would prevail in a free market, Carson makes a convincing case that the corporate model as it exists today, in its highly wasteful and irrational form, has only been made possible through state subsidization, qua Pentagon funding and the various military-industrial/prison-industrial/highway-real estate, etc., complexes, which gurantee a source of revenue for large companies by which expensive and inefficent modes of production (including mass production, the suposed savings from which is often more than offset by huge overhead and marketing costs) can be pursued that serve only to mark up the final price. All the malfeasances that are said to have been caused by laissez-faire -- corporate culture and bureaucracy, mass marketing costs, planned obsolescence, push-distribution, excessive inventory, and accumulated waste -- can be traced back to this process.

Paul Goodman's phrase “great domain of cost-plus” sums it up perfectly.  The culture of cost-plus is traditionally associated with the public utility, and (in the brilliant work of Seymour Melman) the military contractor. The firm is insulated from market competition, and has a guaranteed revenue source, so that it can set its prices on a cost-plus markup basis.  There is, accordingly, no incentive to minimize costs.  The higher the production cost is padded with waste and featherbedding, the higher the firm can set its prices.  This is the cost-maximizing incentive structure that resulted in the Pentagon's notorious $600 toilet seats.  But it prevails as well, in kind if not to quite the same degree, in the large firms in civilian oligopoly markets.  The large corporation has a significant portion of its operating costs subsidized by the state, and typically operates with a superfluity of investment capital from retained earnings.  It exists in a market of restricted competition in a state-fostered cartel.  Not only is most competition in terms of brand image and minor variations in features rather than price, but even the competition in features is limited by the ability of oligopoly firms to collude in rationing technical improvements over time—with the help, of course, of government regulations in limiting the range of competition in product features and quality.

I'm personally convinced now that a really free market would see fewer firms the size of Walmart, and more decentralized production, including worker-owned enterprises and entrepreneurs running operations out of their homes.

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Doug French made a similar case from the perspective of mergers at the Mises Circle in Houston this year...

 

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I completely agree, although I work from the folly of "limited liability" as it has been treated in courts.  Union Carbide kills like 5,00 people, and nobody gets strung up?  What if I killed 5,000 people?  Yet we are both "people" to the court?  Well, that ain't justice, and a free market would not bear it.

"What Stirner says is a word, a thought, a concept; what he means is no word, no thought, no concept. What he says is not what is meant, and what he means is unsayable." - Max Stirner, Stirner's Critics
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Clayton replied on Mon, Nov 21 2011 2:29 PM

It is a myth promulgated by the left that "capitalism" is synonymous with "bigger is better" and "economy of scale."

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Wheylous replied on Tue, Nov 22 2011 9:53 PM

I thought you guys weren't anti-corporation and thought that contractual LLC could exist in the free market.

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including mass production, the suposed savings from which is often more than offset by huge overhead and marketing costs

Can this be substantiated?

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I can't speak for the rest of the posters, but I can't envision such an egregious distortion of "personhood" surviving if it were not foisted upon us at gunpoint.

"What Stirner says is a word, a thought, a concept; what he means is no word, no thought, no concept. What he says is not what is meant, and what he means is unsayable." - Max Stirner, Stirner's Critics
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What is "personhood"?

 

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In what sense?  Legally, existentially, etc.

"What Stirner says is a word, a thought, a concept; what he means is no word, no thought, no concept. What he says is not what is meant, and what he means is unsayable." - Max Stirner, Stirner's Critics
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Stephen replied on Fri, Nov 25 2011 10:34 PM

Government interventions impose costs on both larger and smaller businesses. The effect is quantitatively and qualitatively indeterminate. Pieces like this just cherry pick the facts so that they seem to support their core thesis. In this case, that smaller businesses are more natural.

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Stephen replied on Fri, Nov 25 2011 10:48 PM

A legal person is an entity which owns (has legal title to) something. It can be a real entity, such as a human being, or an artificial entity such as a business. All artificial entities are owned ultimately by real entities. They cannot be self-owners. For example, some plot of land may be owned by XYZ Ltd. which is in turn owned exclusively by Smith. In this case, the land is artificially owned by the legal person XYZ Ltd., and therefore indirectly, but really, owned by Smith. 

How is artificial legal personhood incompatible with the free market exactly. It fits within the Libertarian legal framework so far as I can tell.

And limited liability means limited liability in the repayment of debt obligations which the lender agrees to in the first place. It is not a carte blanche to freely commit torts.

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John James replied on Sat, Nov 26 2011 12:19 AM

In what sense?  Legally, existentially, etc.

You tell me.  It's your word.  What did you mean by it?

 

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Jargon replied on Sat, Nov 26 2011 12:49 AM

From the time period of 1890-1905, the big box firms of heavy industry were losing their market share to small businesses, y'know before the wave of 20st Century federal market intervention. This is well documented in Gabriel Kolko's Triumph of Conservatism.

In a free society I don't think that this personhood would exist in the legal sense. Chances are there would be firms which would recognize an offense committed between an individual within a corporate body and somebody else (you, likely). Private Law society would much more likely be an individualized process. State Law is built up by artifices of collectivism. When you strip it away, there's only  a person/people who are responsible for committing a crime.

As for limited liability I think I heard someone mention on here that there would be a market for liability insurance. This sounds, of all the answers I've heard, closest to reality. So there would be a certain limited liability but not like our current state solution. Risky businesses would pay higher rates, thus offensive business practice would become less profitable. Consistent with free market ideas, being a dick would have a high pricetag.

Land & Liberty

The Anarch is to the Anarchist what the Monarch is to the Monarchist. -Ernst Jünger

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JJ,

I meant legal status as a "person".  The "corpus" in "Corpo-ration".  Wow, what are the odds I'd be using that word with you again, huh?

"What Stirner says is a word, a thought, a concept; what he means is no word, no thought, no concept. What he says is not what is meant, and what he means is unsayable." - Max Stirner, Stirner's Critics
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Clayton replied on Sat, Dec 3 2011 8:18 PM

@Wheylous: The better term is "firm" - my understanding is that corporation is a largely statutory creature. Of course, there will be firms (even very large firms) in a free market. Stock-shares are a natural way to spread risk for insurance and investing by shifting the risk burden off the businessmen and onto the speculators, freeing businessmen to focus on what they know: their business. The stock-exchanges serve to limit and contain speculation. As we can see from the headlines since 2008, the ultimate aim of the central planning megalomaniacs is to strangle the speculation market en masse.

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Clayton replied on Sat, Dec 3 2011 8:22 PM

Corporate personhood permits key decision-makers in corporations - CEO, board members, etc. - to shed legal liability for certain kinds of decisions. Basically, as long as they were "following the rules" when they made the decision, they are not liable as individuals, only "the corporation" can be held liable.

I believe "limited liability" as used in LLC specifically refers to limiting liability of shareholders in stock-share corporations. If MegaDyn Corp spreads toxic fumes and sickens people, is only MegaDyn and its management liable, or can the shareholders be sued as a class? While I think it doesn't make sense for shareholders in most instances to be held liable (due to the necessity of causality in liability), I also don't think it makes sense for liability to be statutorily limited. It should be decided by case law.

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Clayton - LLC protections can be established in the free market through contracts:

http://blog.mises.org/4269/in-defense-of-the-corporation/

http://blog.mises.org/9084/corporations-and-limited-liability-for-torts/

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