By Douglass Carmichael In the process of writing a book on getting to GardenWorld (It’s where we really want to go so why aren’t we using our wealth and resources to get there?) I found myself needing to better understand our political vocabulary. It has led me to look at original sources and I want to share some surprising findings.
First, we all hear about ‘free market capitalism” as the essence of freedom. I knew from writers like Keith Hart (Money in an Unequal World) that markets, which are free exchanges, and capitalism, which is market control, are opposed principles. Forcing us to talk about free markets, as if that is what the progressives are complaining about, lets capitalism off the hook. Part of the reason that capitalism is so powerful as a control mechanism is because of its ability to use corporations. I wanted to see what, for example, Adam Smith in the Wealth Of Nations might have to say about capitalism. I ran a search on the text version and found 12 references. To my surprise every one of them was critical of the corporate idea. Here are some examples
(These quotes are all from searching for “corporation” in the text of The Wealth of Nations at
http://etext.virginia.edu/toc/modeng/public/SmiWeal.html Spelling from the original.
The exclusive privileges of corporations, statutes of apprenticeship, and all those laws which restrain, in particular employments, the competition to a smaller number than might otherwise go into them, have the same tendency, though in a less degree. They are a sort of enlarged monopolies, and may frequently, for ages together, and in whole classes of employments, keep up the market price of particular commodities above the natural price, and maintain both the wages of the labour and the profits of the stock employed about them somewhat above their natural rate. It is to prevent this reduction of price, and consequently of wages and profit, by restraining that free competition which would most certainly occasion it, that all corporations, and the greater part of corporation laws, have been established. In order to erect a corporation, no other authority in ancient times was requisite in many parts of Europe, but that of the town corporate in which it was established. In England, indeed, a charter from the king was likewise necessary. But this prerogative of the crown seems to have been reserved rather for extorting money from the subject than for the defense of the common liberty against such oppressive monopolies. Upon paying a fine to the king, the charter seems generally to have been readily granted; and when any particular class of artificers or traders thought proper to act as a corporation without a charter, such adulterine guilds, as they were called, were not always disfranchised upon that account, but obliged to fine annually to the king for permission to exercise their usurped privileges. The immediate inspection of all corporations, and of the bye-laws which they might think proper to enact for their own government, belonged to the town corporate in which they were established; and whatever discipline was exercised over them proceeded commonly, not from the king, but from the greater incorporation of which those subordinate ones were only parts or members. I am continuing the quotes… In China and Indostan accordingly both the rank and the wages of country labourers are said to be superior to those of the greater part of artificers and manufacturers. They would probably be so everywhere, if corporation laws and the corporation spirit did not prevent it. Corporation laws enable the inhabitants of towns to raise their prices, without fearing to be undersold by the free competition of their own countrymen. An incorporation …. makes the act of the majority binding upon the whole. In a free trade an effectual combination cannot be established but by the unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind. The majority of a corporation can enact a bye-law with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever. Corporation laws, however, give less obstruction to the free circulation of stock from one place to another than to that of labour. It is everywhere much easier for a wealthy merchant to obtain the privilege of trading in a town corporate, than for a poor artificer to obtain that of working in it.
The obstruction which corporation laws give to the free circulation of labour is common, I believe, to every part of Europe. That which is given to it by the Poor Laws is, so far as I know, peculiar to England. It consists in the difficulty which a poor man finds in obtaining a settlement, or even in being allowed to exercise his industry in any parish but that to which he belongs. It is the labour of artificers and manufacturers only of which the free circulation is obstructed by corporation laws. The difficulty of obtaining settlements obstructs even that of common labour.
…that exclusive corporation spirit which prevails in them, naturally endeavour to obtain against all their countrymen the same exclusive privilege which they generally possess against the inhabitants of their respective towns.
End of quotes.It is amazing to me that while it’s obvious why those people dependent upon this economy don’t look for this kind of criticism from Smith as their ideological father, those who are critical have not made more of what Smith actually says. The point for us it is that the corporations actually undermine markets. Corporations were created by the state through a chartering system that gave privilege in exchange for responsibility for a limited time period of, say 20 years. The undermining of this social contract, the abandoning of the corporate charter reciprocity, will turn out to be seen, I think, as one of the great mistakes of the 19th and 20th centuries. It is like a cancer in the DNA of the Constitution.In my nest post I’ll turn to John Locke and the strange origins of the idea of private property.
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