Corporations Aren’t Evil.


This is a Thought Box essay.

tl;dr: jump to the summary of points.

1,600 words

I recently moved back to Cambridge, MA, from Cincinnati, OH. The cultures of the two places are different, and the average person talks about different things in a different manner. One thing that I was reminded of when I moved back to Cambridge is that many individuals have strong opinions about corporations. The prevailing one is that corporations are some shade of bad; some individuals think that they should be abolished in favor of syndicalist arrangements, and some just think they should have a variety of restrictions and taxes placed on them by the government to curtail their range and type of operation.[1]

In most of my conversations with these individuals, I have been struck by the astounding lack of knowledge about what corporations are, and why they exist in the first place. Many individuals around Cambridge do not have a basic understanding of corporate law, and yet have strong opinions that should presuppose such knowledge. Most conversations that I have that center on corporations take this summary form:

Person A: I think that corporations caused [this bad thing], and as a result [this or that restriction should be placed upon them].

Me: What, specifically, is a corporation?

Person A: It’s like a business, like Bank of America.

Me: That is a substitution of one particular instance of a thing for a definition of the thing. I’ll ask again: what is a corporation?

Person A: [cannot give an answer]

Me: A corporation is a legal entity that is treated as a single person with various rights and obligations. Or, a la Merriam-Webster’s: a body formed and authorized by law to act as a single person, although constituted by one or more persons, and legally endowed with various rights and duties including the capacity of succession.

What is a corporation for?

Person A: To make money [usually for the few, the powerful, &c].

Me: No. They exist, as tools, to enable individuals to perform the tasks, render services, or produce the products that they then only sometimes exchange for money. If they are a money-making corporation (as opposed to a non-profit corporation like the ACLU) the tasks, services, and products are what make the money. Corporations are set up to coordinate voluntary cooperative actions among individuals, so that they may more effectively render a service or product. They distribute liability, equity, and responsibility; advocate for various social and legal causes; and many other things.

Until one knows why a thing exists, and what it is, one cannot possibly have an effective policy stance regarding that thing, corporations included. The problem that corporations were set up to solve is coordinating voluntary cooperative actions among individuals. If it appears that that is not what they are being used to do, one must look at the context in which they are permitted to operate, and only then consider ways to change the tool so that it can properly perform its function. For comparison, think of a hammer.

A hammer, like a corporation, is a tool: an artefact or abstraction created to amplify or augment the abilities of their user to achieve a specific purpose. In isolation, without context, the concept of “good” or “bad” does not apply to tools. They are moral amplifiers, with the primary moral designation belonging to the moral agent who uses them for good or bad ends. A hammer can either be used to build a house, or bash in someone’s skull; in other words, there are house-hammers and murder-hammers. The kind of hammer is determined by whose hand holds it. If someone commits murder with a hammer, it does not then make sense to create a law whereby the ends of hammers must be dramatically softened so as not to have lethal potential. This law completely ignores what hammers are (hard tools to drive things together, primarily nails and related pegs into various materials) and why they exist (human bodies are too squishy for that, so we need help). It would also result in hammers falling into disuse because they’ve been made useless, or they would be used for purposes other than those for which they were originally intended, having found that purpose foreclosed.

By ignoring the nature and raison d’etre of a tool, one cannot properly prescript or proscript it, and one will likely end up incentivizing mis– or disuse of a tool. I think it is abundantly clear why this is the case, especially when applied to a tool like a hammer. But the logical chain is broken when people think about tools like corporations, which are more complex and abstract. For these tools, most don’t find it important to understand what they are or why they are. The upshot is the proliferation of restrictions and prescriptions for corporations that are the intellectual and pragmatic equivalent of hammer-softening.

In sum: corporations are tools, the primary purpose of which is to coordinate voluntary cooperative human action. Some corporations coordinate activities aimed at producing goods and services for a profit, some coordinate legal activities to fight injustice in courts, and still others do a multitude of other things. Like all tools, corporations are moral amplifiers, and are not in themselves good or evil; they only magnify the good or evil done by those who wield them. One should understand all of these things and more before holding strong opinions about corporations, let alone holding views on the laws that should apply to them.

Corporations are evil.

This is how I imagine many people think about corporations.

Without this understanding, as well as more information (such as the distinction between a corporation, a limited liability company, a limited partnership; that corporations are organized at the state level; etc—[but these distinctions are worthy of a separate post]), one should not possess a vociferous or strong opinion about corporations or the law that binds them. Otherwise, one will be “the more modern type of reformer” that the writer/thinking/other-thingser G.K. Chesterton described:

IN the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”

This paradox rests on the most elementary common sense. The gate or fence did not grow there. It was not set up by somnambulists who built it in their sleep. It is highly improbable that it was put there by escaped lunatics who were for some reason loose in the street. Some person had some reason for thinking it would be a good thing for somebody. And until we know what the reason was, we really cannot judge whether the reason was reasonable. It is extremely probable that we have overlooked some whole aspect of the question, if something set up by human beings like ourselves seems to be entirely meaningless and mysterious. There are reformers who get over this difficulty by assuming that all their fathers were fools; but if that be so, we can only say that folly appears to be a hereditary disease. But the truth is that nobody has any business to destroy a social institution until he has really seen it as an historical institution. If he knows how it arose, and what purposes it was supposed to serve, he may really be able to say that they were bad purposes, or that they have since become bad purposes, or that they are purposes which are no longer served.  But if he simply stares at the thing as a senseless monstrosity that has somehow sprung up in his path, it is he and not the traditionalist who is suffering from an illusion. We might even say that he is seeing things in a nightmare. This principle applies to a thousand things, to trifles as well as true institutions, to convention as well as to conviction. It was exactly the sort of person, like Joan of Arc, who did know why women wore skirts, who was most justified in not wearing one; it was exactly the sort of person, like St. Francis, who did sympathise with the feast and the fireside, who was most entitled to become a beggar on the open road.  And when, in the general emancipation of modern society, the Duchess says she does not see why she shouldn’t play leapfrog, or the Dean declares that he sees no valid canonical reason why he should not stand on his head, we may say to these persons with patient benevolence:

“Defer, therefore, the operation you contemplate until you have realised by ripe reflection what principle or prejudice you are violating. Then play leapfrog and stand on your head and the Lord be with you.” (The Thing, “The Drift from Domesticity,” 1929).

Furthermore, one will be “totally irresponsible” as described by the economist Murray Rothbard:

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance (The Libertarian Forum,The Death Wish of the Anarcho-Communists,” 1970).


[1] This view already betrays ignorance on the topic of corporations, because it ignores non-profit corporations like the ACLU.

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