September 19, 2011

The Eminently Real Free Market (XXXV): Sketchy Stories (23): Slavery for the Corporation?

Yesterday, while enjoying the sights, sounds, smells, and tastes of the annual San Gennaro Festival in New York’s Little Italy, we paused in the Mulberry Street courtyard behind Most Precious Blood Church to peruse the tables displaying various trinkets. Having walked from one end of the festival to the other from Prince to Canal Street, we were in need of some nourishment. As we did an about-face, the eatery announcing the availability of espresso, cappuccino, and gelato directly across the street was, Lo!, Bella Ferrara Café. (Yes, French, not Italian spelling.) Our blogging duties rudely tugged, and to them we now return.
* * *
The reader who takes Mr. Ferrara’s sketchy stories seriously searches in vain for any Catholic case against Austro-libertarianism as a political option. That is, after all, TCATL’s focal point to which all of its parts should have been ordered. We are slogging through his sketchy stories to see whether Austro-libertarians actually support, implicitly if not explicitly, the evils that those stories allegedly illustrate.
(And so those who wonder why we are “only” up to page 23 should ask what Mr. Ferrara is doing in the 41 pages that precede anything that begins to look like a Catholic argument. Those pages do, however, reveal his notion of the ethics of discourse, and we are pleased to make a topic out of that.)
Unfortunately for the determined reader, however, not only does Mr. Ferrara not even argue for such support, but the sources he draws upon to buttress his insinuations are not even Catholic. We have seen that in his use of the writings of Kevin Carson, Joel Bakan, and Charles Beard. This habit is on display in his fifth sketchy story, which concerns: "The rise of the limited liability, publicly held corporation." (23)
The LLC is the distinctive invention of liberal societies, according to prolific pro-market (but non-libertarian) Catholic scholar Michael Novak, whom Mr. Ferrara disparagingly calls a “hyper-capitalist.” (23) (Would Mr. Ferrara like to be referred to as a hyper-Catholic?)
What is the problem with the idea of a legal person to which no personal liability attaches? (24)
With the rise of the publicly held limited liability corporation, capitalists achieved the ability to amass capital without limitation, operate anywhere in the world, and undertake without personal liability ventures that would have been considered immorally reckless (sic; as opposed to morally reckless?) during all the centuries of Christendom (24. Emphasis in the original.)
Those were the centuries, we recall, when the slave trade blended into the soundtrack of the life of Christendom. The Catholic monarchs who acquiesced, and worse, in that trade certainly enjoyed limited liability. State personnel always have and always will. If Mr. Ferrara has a problem with that state of affairs, it would be good for him to say so.
That inconvenient episode aside, he never makes a topic out of the alternative to the limited liability corporation, which occurs to any half-awake reader, namely, the unlimited liability corporation.
If those who pool their capital to undertake a large-scale enterprise can be personally sued for harm that might befall anyone due to its operations, they would stand to lose not only their investment, but also their shirt, so to speak. Under those circumstances, it is highly unlikely that the enterprise would be undertaken. That is, there would be very little “amassing of capital.”
Now, we expect an anti-capitalist writer to favor policies that inhibit the pooling of capital, even if the inhibition keeps productivity and living standards lower than they would be without it. We do, however, also expect him to take responsibility for that preference. How far, for example, would Mr. Ferrara extend the law of conspiracy so that liabilities attach to the actions of corporate personnel as such? Instead of exploring such issues, Mr. Ferrara prefers to give currency, once again, to the thoughts of that paragon of impartiality, Joel Bakan: “by leveraging their freedom from the bonds of location . . . could now dictate the economic policies of government.”*
Not long ago, however, Mr. Ferrara told us that one of the evils allegedly attending the Industrial Revolution was the state terror that “prevent[ed laborers] . . . from moving about in search of higher wages.” Those are the words of Kevin Carson, another non-Catholic muse of Mr. Ferrara’s. Why, if we may ask, may not the corporation enjoy the freedom from the “bonds of location,” which freedom is held to be a personal right? Does he favor slavery for corporations?
Out-of-the-blue Mr. Ferrara asks:
How can the market be “free” when its fundamental business unit, created and advantaged by legislative and judicial fiat, shields its human officers, directors and investors from the normal consequences of misdeeds and bad judgments?” (24)
Didn’t he really mean to ask “How can the market be free . . .” (without scare quotes)?
No truly free market, which would be one on which no legislative or judicial fiat either creates corporations or advantages one over another, would shield a corporation's officers, directors, and investors from the consequences of any aggression they may commit under the color of limited liability. There would be no government as we know it, and therefore no “friends in government,” to grant subsidies.** The term “bad judgment” is ambiguous, however, and should not be confused with a bad will. The parties that pool their capital for the purpose of corporate investment put that capital at risk, which may very well amount to being at the mercy of bad judgment. There is no shield from market consequences for bad judgment, nor in the law for aggression.
From there Mr. Ferrara leaps to the financial meltdown of 2008 as confirmatory of the theory of the corporation that he selectively borrows from others.
. . . the very governments that purport to regulate them grant them regulatory exemptions and other market-skewing privileges not available to small businesses. The mere threat that a corporate hegemon will pack up and leave, or go bankrupt, is often sufficient to extract what it wishes from government at all levels. (24)
Have we caught Mr. Ferrara implicitly affirming the reality the free market? After all, if the latter is an illusion, no privilege can skew it. In any case, his value judgments are merely implicit: he has not argued for them. The reader is apparently expected to go with the flow, occasionally nodding his head in agreement. And so, for instance, speaking of “hegemons,” is it better for a government to be so powerful as to prevent a corporation from packing up and leaving, to “bind” it to a “location” like the English government once did those hapless laborers?
The method of the propagandist, however, is not to enter into the thought of others and wrestle with it before assessing it, but to take the parts he likes, cafeteria-style, and discard the rest. (During the Cold War, Soviet propagandists would ransack the news for quotes from many people in the news who said something that could be construed as support for the Soviet position on X, Y, or Z, thereby creating an impression of a chorus of support.) Mr. Ferrara does not pay attention to the diverse non-Catholic worldviews underlying the works he ransacks. And so, for example, he elects Kevin Carson the left-libertarian as “the man” for one purpose, Joel Bakan the democratic socialist for another, and quasi-Marxist Charles Beard for yet another. When it comes to the corporation, the man of the hour is “legal commentator” Daniel J. H. Greenwood, whom he quotes to support his leftoid demonizing of the corporation.***
Professor Greenwood does not, note well, share Mr. Ferrara’s presuppositions about God, man and state, but is a democratic socialist theoretician—Dissent is one of his literary venues—whose argument against the corporation is presuppositionally democratic. That is, democracy is the unquestioned assumption underlying his academic brief against the corporation. Since it is not Mr. Ferrara’s, however, why does he quote Professor Greenwood? How does that help Catholics form an opinion about Austro-libertarianism? That is, in the light of Mr. Ferrara's Catholic and anti-democratic worldview, why should a Catholic care what non-Catholic and pro-democratic Professor Greenwood has written on the corporation?
There are two most important differences [Professor Greenwood writes] between a democracy and the other forms of government. First, democracies take their citizens to be the ends of the law: the good of the citizen is the good of the state. In a democracy, the citizens are never only tools to some goal greater than themselves, means simply to be exploited, or strangers to be treated entirely at arms [sic] length. Second, democracies allow the citizens to debate and decide their own good; it is not imposed on them by government or some supra-governmental movement. Democracies do not have established churches, in the broadest sense.
Well, “in the broadest sense” Professor Greenwood is excluding as incompatible with democracy not only a state-established church, or “confessional state” to borrow Mr. Ferrara’s terminology, but also any undefined “imposition” by “some supra-governmental movement” on citizens. That is, the words of Mr. Ferrara’s academic expert are not reassuring to a Catholic, and so perhaps we were being generous in characterizing its author as merely non-Catholic. For should there arise a “democratic consensus” to the effect that the preaching of the Gospel tends to undermine the efficacy of that consensus, citizens would be within their democratic rights, according to Professor Greenwood, to resist such “imposition.”
The note Professor Greenwood attaches to this description of democracy takes us to another article of his, one that “begin[s] to explain the theory of democracy as partnership,”****. There we find this personal credo, remarkable for a peer reviewed academic journal (or maybe not so remarkable):
. . . I place myself firmly in the pluralistic tradition of the United States Constitution: our different decision-making systems serve irreducibly different values, and that is the way it should be. (863)
Should? Where did that come from? On the sacred subject of democracy, Professor Greenwood is neither a pluralist nor relativist, but quite the monist and absolutist. We are not inclined to cut him any slack.*****
But why on Earth does Mr. Ferrara—a chief columnist for The Remnant, whose writers regularly denounce pluralism as symptomatic of the Americanist heresy—recommend the opinion of this pluralist to his Catholic readers? Is it because his worldview is internally incoherent?
Maybe. But there's a simpler hypothesis. In the war Mr. Ferrara has decided to wage on Austro-libertarianism, such apparent incoherence doesn't matter. What matters is that one has a stick with which to beat them. What Mr. Ferrara thinks he can get away with, he will try.
To Be Continued

* The Corporation, 22. “Now,” Mr. Bakan writes, as though the powerful had resisted the temptation to dictate until the modern age. Let us hear him further. To remain in a location voluntarily, as opposed to being forced to stay, those responsible for investing the corporation’s assets must find it attractive:
To remain attractive, whether to keep investment within their jurisdictions or to lure new investment to them, governments would now have to compete among themselves to persuade corporations that they provided the most business-friendly policies. A resulting “battle to the bottom” would see them ratchet down regulatory regimes—particularly those that protect workers and the environment—reduce taxes, and roll back social programs, often with reckless disregard for the consequences. (Ibid., 22)
Maybe even immorally reckless disregard. The Bakans of this world support the imposition of taxes and social programs in violation of property rights with reckless disregard for consequences; the Austro-libertarian supports the repeal of both types of aggression because justice demands it, regardless of consequences. Note well that it is for Mr. Bakan’s support for “bonds of location” that Mr. Ferrara cites him.
** That libertarians have long recognized, and condemned, corporate lobbying and subsidy-seeking is another inconvenient fact that Mr. Ferrara ignores (when he’s not repeating Mr. Carson’s mocking “diagnosis” of “vulgar” libertarians as absent- or double-minded, which says more about Mr. Ferrara than it does about the targets of his perjoratives). See the literature cited in Walter Block and J. H. Huebert, “Defending Corporations,” Cumberland Law Review, 39:2, 377, n. 75. See also agriculture economist Richard W. Wilcke’s anti-lobbying study, “An Appropriate Ethical Model for Business and a Critique of Milton Friedman’s Thesis,” The Independent Review, IX:2, Fall 2004, 187–209.
*** “Markets and Democracy: the Illegitimacy of Corporate Law,” University of Missouri Kansas City Law Review, vol. 74, 2005, 102.
***** As we shall see later, Mr. Ferrara is a qualified admirer of Austro-libertarian Hans-Hermann Hoppe’s Democracy: The God that Failed. He believes Dr. Hoppe made a compelling case for the moral inferiority of democracy to monarchy with respect to the exhaustion of state resources. The charitably disposed reader might reasonably expect Mr. Ferrara to qualify his citation of Professor Greenwood, if only to clarify the difference between the latter’s democratic worldview from his own. But a propagandist is concerned only with the intended immediate effect of the cited work, not with the burden of living up to such a reader's expectation.