Libertarians are not corporate apologists


TAMPA, October 22, 2012 — In the wake of Ron Paul’s campaign and with Gary Johnson rising in the polls, libertarianism may just get a hearing for the first time in decades.

Already, the usual fallacies have resurfaced. If you don’t want the government to run education, you must be against education. If you don’t want the government to run healthcare, you must not want people to get healthcare.

This misunderstanding is often summed up with comments like, “I’m not sure I’m comfortable with an ‘every man for himself’ society.” This springs from the absurd assumption that human beings never confer benefits upon one another except when forced to do so at gunpoint.

One corollary of the “every man for himself” theory is that a libertarian society would “let corporations run wild,” resulting in a small, wealthy elite controlling all of the resources and exercising oligarchical rule over the rest of society. (So do we live in a libertarian society now?)

Most people would probably be surprised at the libertarian stand on corporations. In a libertarian society, they wouldn’t exist. Corporations are creatures of the state. They are created by the government and endowed with privileges that individuals do not have. This contradicts a fundamental premise of libertarianism, that all people are created equal and have equal rights.

One hundred years ago, Woodrow Wilson first articulated the “progressive” argument about why and how the government should tightly regulate corporations to protect the public. His arguments are still widely accepted today.

For Wilson, the problem was that corporations get too big and use their vast wealth to influence the government. Size changes the dynamics of the employment contract. For example, employers used to live in the same town as their employees. Now, the employer might live in another state.

For Wilson and the progressives, too much voluntary association is a bad thing. Wilson made all of the same, absurd arguments one hears today about how the free market poses a danger to society, while ignoring the elephant in the room concerning the corporate question: limited liability.

The privilege of being released from liability beyond what one has invested in the corporation violates the rights of all who haven’t agreed and causes economic distortions.

The first is size itself. Without the guarantee that one’s personal assets are off limits in a lawsuit, one must take more risk in buying stock in a corporation. Imagine if potential stockholders knew that their personal assets might be at risk in a case like the BP oil spill. Some number of shareholders would decide against taking that risk, or at least limit it by acquiring less stock.

This is the natural balance between risk and reward that limits the size of any going concern. The more ownership one acquires in the firm and the larger the firm becomes, the more personal risk one takes on. Once the government releases the stockholder from liability, this natural balance is destroyed. Risk is removed, allowing the corporation to grow beyond what it otherwise would.

Having created the problem in the first place, the government then proposes to mitigate the effects of the distortion it has caused with heavy regulation. This further distorts the market’s natural balancing mechanisms.

Regulations drive up the operating cost of doing business and provide barriers to new firms entering the market. The larger, established players can absorb the costs due to economies of scale. Smaller firms cannot and are kept out of the market by high entry costs, if not more directly by other regulations like permitting or licensing.

The effect of regulation is exactly the opposite of its intention. The largest and most powerful corporations are insulated from competition, allowing them to grow even larger, while putting less pressure on them to improve quality or lower price. That’s why most regulations are written by corporate insiders themselves.

In a libertarian society, entrepreneurs would be able to do most things that corporate shareholders do. They would be able to pool their money with as many people as they like, even millions of other people. They would be able to release each other from liability. They would be able to secure agreements from their customers and vendors to do the same.

However, they would not be able to release themselves from liability to people who hadn’t agreed. Their potential liability to third parties would act as a natural deterrent to inordinate growth.

They also wouldn’t be able to use regulations to keep out new competitors, because there would be no “regulations” as we know them today. Yes, there would be laws against force and fraud and committing torts. But the government wouldn’t be telling companies how to avoid committing a tort or how to run their businesses in the safest manner. Not only would this result in an enormous increase in competition and thus consumer choice, but it would also foster spectacular innovation compared to the stifled environment that businesses operate in today.

Libertarian conclusions are inescapable without completely abandoning cause and effect reasoning. With risk providing a natural limit to growth and free entry into the market providing significantly more competition, the largest firms must be smaller and competition and choice must increase.

A century of progressive governance has produced exactly the results that the progressives purport to oppose: an enormous concentration of wealth in the hands of a small percentage of society and a few large firms dominating every economic sector. We have nothing to lose giving libertarianism a try.

Down with corporations. Bring on the free market.

Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.


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Thomas Mullen
Tom Mullen is the author of A Return to Common Sense: Reawakening Liberty in the Inhabitants of America. He writes weekly columns on his blog and has been featured on The Daily Caller, The Huffington Post, Daily Paul,, 321 Gold! and Peter Schiff’s Tom has been a guest on Fox’s Freedom Watch with Judge Andrew Napolitano, Adam Vs. the Man, Free Talk Live, and numerous other programs. Tom is originally a native of Buffalo, NY and graduate of Canisius College. He earned a Master’s Degree in English from State University of New York College at Buffalo. He now resides with his family in Tampa, FL.