October 3, 2011

The Eminently Real Free Market (XXXIX): Sketchy Stories (27): The Corporation as “Sociopath” (4)

Opposition to “corporate greed” seems to unite the various motley crews milling about these days near Wall Street, which they dream of “occupying,” soon with the help of labor unions and more frankly socialist outfits. Perhaps they see their main chance to reclaim their place in the national spotlight. We wonder what’s keeping Mr. Ferrara and his comrades, given their anti-corporation animus, from mingling with that crowd and showing it the way forward to a glorious Distributist future. We think it would be good for business.
* * *
Having already planted the word “kill,” Mr. Ferrara now moves in for it with histrionics worthy of pulp fiction. Dear reader, take a deep breath:
In sum, the corporate “personality” unleashed upon the world by the laws and courts of secular post-Christian nations exhibits all the features of a human psychopath, as [Joel] Bakan has noted: singularly self-interested (because by law the first duty of corporate management is to protect shareholder profits), lacking in empathy, irresponsible, manipulative, grandiose, unable to feel remorse or to accept responsibility for its actions, superficial in relations with others, and afflicted by a tendency to asocial behavior. But, unlike a mere flesh and blood psychopath, the mega-corporation of the capitalist world economic order, linked everywhere to government and to the bureaucracies it captures (such as the World Trade Organization), has the power to affect entire nations and even the whole human race with its self-interested decisions. (26)
In short, the modern limited liability corporation (LLC) is a criminal conspiracy, one little better than, for example, the Brooklyn Combination, A.K.A. “Murder, Inc.”
Apparently such an irresponsible introduction of the concept of corporation to his readers does not embarrass Mr. Ferrara, a lawyer who deals professionally with that form of business organization. We are embarrassed for him.
Every corporation is a conspiracy, a literal “breathing together,” a voluntary union of independent natural persons who recognize their interdependence in achieving a common aim. Christians form a conspiracy when two or three of them are gathered in Jesus’ name. Roman law regarded the Catholic Church as a criminal conspiracy until Constantine decriminalized Her. When a person is baptized, he or she is incorporated into the Body of Christ (Corpus Christi). And so, while some conspiracies are criminal (Psalm 2:1-2), some are not (Isaiah 8:12).
The idea of treating a collective entity as a legal (fictitious, artificial) person is therefore not to be held up for ridicule, at least not responsibly. There is ancient precedent for that idea, which has noble as well as ignoble, Christian as well as pagan motivations.  The Roman State that once outlawed the Church regarded itself, as least implicitly, as an international, perpetual, property-holding, and business-transacting non-natural person.
As though to illustrate God’s sense of irony, however, the Church’s self-consciousness as an international, perpetual, property-holding, and business-transacting non-natural person was formed during the senescence of that Christian-immolating State. The Body of Christ is also the Bride of Christ (if Christ is the Bridegroom of Matt 9:15), and we presume Mr. Ferrara’s interpretation of reference to that non-natural Person is realistic, not nominalistic.
Rome eventually collapsed, but not before unwittingly providing Her with an imperfect but serviceable real-world model of legal organization. And so the language and structure of Eastern Roman Emperor Justinian’s Corpus Juris Civilis (539-534) is reflected in the Church’s Corpus Juris Canonici (Canon Law) a millennium later, coinciding with Her explicit self-recognition as a corporation.
By a further cunning of history, the secular world later imbibed the theory and practice the corporation from the Church. As soon as they were powerful enough to do so, States as rent-seeking criminal enterprises arrogated to themselves the right to grant licenses to private corporations and charge for the privilege. The salient point, however, is that the corporation developed in the West when states were weak. They in turn emulated the organizational entrepreneurship of the corporation that was the Church.
As Austro-Reformed economist and historian Gary North succinctly puts it: “The historical model for the limited-liability corporation was the Church.”
Over time, civil law in the West formally recognized the existence of an implicit agreement with respect to the legal immunity of church members. The state does not create this legal immunity. On the contrary, the state has recognized a previously existing legal immunity. To argue that the state should no longer recognize this immunity in the name of a universal principle of full liability without any exceptions is to grant enormous power to the state to undermine both custom and contract.” Rothbard's Defense of Contractual Limited Liability,” LewRockwell.com, September 28, 2005.
Dr. North does not explore this gradual “recognition of immunity,” which was a function of relative State weakness, not necessarily of respect for the rights of the Church. For when the nascent modern state picked up where the moribund Roman State left off, it seized the opportunity to interfere with voluntary contract and declare incorporation a privilege rather than a personal right of property. For that dimension of our story, we must turn to Duke University Professor Timur Kuran.
As a prelude to for explaining why Islamic law got around to recognizing the corporation as an artificial person only a little more than a century ago, Professor Kuran sheds light on a critical chapter in the Church-world dialectic:
Following the split of Christianity in 1054, and during the struggle to emancipate religion from the control of emperors, kings, and feudal lords (1075-1122), the Roman Catholic Church began calling itself a corporation. This struggle, considered to have culminated in the Papal Revolution, gave rise to the new canon law (jus novum) of the Catholic Church. Canon law, which dealt with a wide range of issues, including jurisdiction, property, and contracts, built on innumerable concepts, enactments, and rules belonging to the inherited secular and ecclesiastical legal systems. Unlike its forerunners, however, it emerged as a systematized body of law. Articulated in texts, it was supported by theories pertaining to the sources of law.*
By contrast, Mr. Ferrara’s Bakan-alian “psychoanalysis,” while perhaps entertaining, is wholly unenlightening. It potentially subjects all non-natural persons to its morbid diagnosis (which has no more authority than Also Sprach Bakan). 
Language appropriate for describing the behavior of deranged natural persons cannot without grave fallacy be used to describe, let alone indict, the corporate person whose constituents they are.** In the hands of an anti-Catholic propagandist, Mr. Ferrara’s method will almost certainly portray Holy Mother Church as Mommy Dearest.
Mr. Ferrara never mentions the elements of limited liability, namely, that it protects (a) shareholder assets from personal claims made against any member and (b) personal assets of members from claims made against the corporation. Business corporations are about resource-pooling, asset-shielding, and owner-shielding. Their virtues are durability, perpetuity, transferability. And since corporation law also protects non-business corporations like the Catholic Church, She finds it in her interest to incorporate according to such laws in the territories in which She carries out Her mission. There was a time, of course, when mere public announcement of incorporation sufficed. As Rothbard explains in Power and Market, which Dr. North cites:  
. . . corporations are not at all monopolistic privileges; they are free associations of individuals pooling their capital. On the purely free market, such men would simply announce to their creditors that their liability is limited to the capital specifically invested in the corporation, and that beyond this their personal funds are not liable for debts, as they would be under a partnership arrangement. It then rests with the sellers and lenders to this corporation to decide whether or not they will transact business with it. If they do, then they proceed at their own risk. Thus, the government does not grant corporations a privilege of limited liability; anything announced and freely contracted for in advance is a right of a free individual, not a special privilege. It is not necessary that governments grant charters to corporations.
But there are earthly as well as heavenly reasons for embracing the corporate form. Unincorporated partnerships being risky to the capital they pool, economic advance tends to follow that embrace, stagnation its repudiation. (See Professor Kuran’s cited paper. No law of corporations passed the Ottoman Parliament until 1908.)
The LLC is not a sufficient condition of such advance, but it seems to be a necessary one. Dr. North again: “. . . the most rapid period of economic growth in mankind's history,” if one condescends to consider such crass things, “took place from about 1875 to 1914—the era of the modern limited-liability corporation.”
It took place because the state, at long last, extended the same right of contract to businessmen that churches had enjoyed from the beginning. Rothbard wrote in Man, Economy, and State (1962): “The great advantage of the joint-stock company is that it provides a more ready channel for new investments of saved capital.” (Ibid.)***
In his tribute to Han-Hermann Hoppe, Sean Gabb devotes a few pages that address the politically tainted contemporary reality of the LLC. One section of that paper is actually entitled, “Limited Liability: The Worm in the Free-Market Bud,” which unfortunately (in our opinion) is not followed by a question mark. In that section and in the pages that follow (10-14) Dr. Gabb addresses, calmly and urbanely, libertarian concerns that can in the hands of others become grist for a quasi-Marxist propaganda mill (currently on display near Wall Street). We implore you to consider Dr. Gabb’s treatment of the issue (and contrast it with Mr. Ferrara’s).****
To show he is not the first libertarian to express a sensibility that some might deem “leftist” (and in fact was first expressed by the Old Right) Dr. Gabb quotes Murray Rothbard (the last of the Old Rightists). With your indulgence we close this long post with that apt passage (which we have extended slightly on both ends and broken up into sentences for greater ease of on-screen reading):
Indeed, the New Deal was not a revolution in any sense; its entire collectivist program was anticipated: proximately by Herbert Hoover during the depression, and, beyond that, by the war-collectivism and central planning that governed America during the First World War.
Every element in the New Deal program: central planning, creation of a network of compulsory cartels for industry and agriculture, inflation and credit expansion, artificial raising of wage rates and promotion of unions within the overall monopoly structure, government regulation and ownership, all this had been anticipated and adumbrated during the previous two decades.
And this program, with its privileging of various big business interests at the top of the collectivist heap, was in no sense reminiscent of socialism or leftism; there was nothing smacking of the egalitarian or the proletarian here.
No, the kinship of this burgeoning collectivism was not at all with Socialism-Communism but with Fascism, or Socialism-of-the-Right, a kinship which many big businessmen of the 'twenties expressed openly in their yearning for abandonment of a quasi-laissez-faire system for a collectivism which they could control.
And, surely, William Howard Taft, Woodrow Wilson, and Herbert Clark Hoover make far more recognizable figures as proto-Fascists than they do as crypto-Communists.*****

* Timur Kuran, “The Absence of the Corporation in Islamic Law: Origins and Persistence,” The American Journal of Comparative Law, Vol. 53, No. 4 (Fall, 2005), 791. Text also available here. Highly recommended.
** To infer the character of the whole from the character of its parts is to commit the fallacy of composition. This is a fallacy even in the case where the validly drawn conclusion is true, e.g., a floor whose every tile is all-green is necessarily all-green. A given LLC may indeed be a criminal conspiracy, and we may rightly suspect it to be just that if it is exhaustively comprised of criminals who incorporated just to further their several criminal interests. That is no warrant, however, for imputing criminality to the LLC as such or insinuating that the LLC is intrinsically a ruse for evading accountability.
*** North also observes: “. . . long before the limited-liability corporation, there was a limited-liability church. I want to go to join a church without worrying about what the U.S. Supreme Court determines regarding my liability as a member. A 5-to-4 decision by this most monopolistic of all American institutions does not in fact constitute the really supreme court.”
**** Sean Gabb, “Hans-Hermann Hoppe and the Political Equivalent of Nuclear Fusion,” in Property, Freedom, and Society: Essays in Honor of Hans-Hermann Hoppe, Jörg Guido Hülsmann and Stephan Kinsella eds., Auburn, AL: Ludwig von Mises Institute, 2009, 7-20. The link takes one to a free .pdf of the Festscrift.