Corporatism’s Original Sin

Revised 04/05/2014

What’s missing in most political economic discussions I’ve seen is an understanding of the difference between a “free market” economy and corporate capitalism.

When one person damages another, it is a fundamental moral principle that the first person should indemnify the second 100%, limited only by the first person’s ability to pay.   If I buy a car for $20,000 and my child kills someone while driving the car recklessly, my liability is not limited to the residual value of the car after the accident.  My entire net worth is on the hook for restitution.  Similarly, in a “free market” common law partnership, investors are fully liable for the acts of the enterprise. If the enterprise accumulates debt or creates externalities (damage to others or society at large) exceeding the enterprise’s liquidation value, each individual investor is personally liable in civil court for the full value of the debt and/or damage.  This is as it should be.    It’s only recently, within the last 200 years, that the use of corporations to circumvent this “personal responsibility” has become widespread.

Corporations differ from partnerships in that they are chartered by the state. In the vast majority of cases, corporate charters grant limited liability to the stockholders in the corporation.  This allows individuals to invest in a corporation and share privately in unlimited profits of the corporation, while avoiding all personal liability beyond what they paid for their initial stock purchase. Losses exceeding the corporation’s liquidation value must be absorbed by creditors or other injured (innocent) parties, often by the general public.  Not even prior dividends can be “clawed back” to pay such debts.  Shareholders can profit from decades of corporate fraud or abuse that damages other individuals or the general public, and no dividends they’ve received are available to compensate victims or creditors.  Such accumulated dividends can far exceed the initial investment. This limited liability is a privilege, an entitlement granted by the state to preferred individuals (shareholders) via the corporate charter. Thus, large shareholders and executives in limited liability corporations are like medieval nobility, a privileged, entitled class.

Thus, the chartering of corporations is a government “interference” in the “free market” of natural law and morality. In fact, it’s the granddaddy of all government interventions in the market. It is the state’s original sin, which makes all the other abuses of corporatism possible.  Giving investors license to be negligent in the effects their investments have on others is an abomination.  But the first order effect of limited liability (privatizing gain while socializing costs) pales in comparison to the 2nd and 3rd order effects (market distortions), some of which are discussed below.  Knowingly approving of this government interference privileging corporate investors while objecting to any sort of government action mitigating the power of corporations as “statist” is hypocritical to say the least.

 

Nobody in their right mind would put their entire net worth at risk in a common law partnership without maintaining tight control of the partnership, to avoid unwittingly incurring excessive personal liabilities. Such tight control is impossible in enterprises the size of modern corporations. Therefore, huge concentrations of wealth and power are a second order effect, impossible without limited liability.  At a third order, the concentration of power allows the BoD and CEO to deal unfairly with individuals, be they non-management employees, customers or the general public (through externalities such as pollution).  Another third order effect is the obscene wealth gap between non-management workers and their CEOs and large shareholders.  The ignorance of the small shareholder, fostered by the bait of limited liability profits, allows even them to be swindled by unscrupulous CEOs.  Finally, there’s the fourth order corruption of the political system, made possible by the wealth gap.

The issue of limited liability and its effects is poorly understood and never discussed on either right or left.  I recall Ralph Nader discussing corporate charters at one time, but even he did not zero in on this government-granted privilege.  It is studiously ignored by all others in the political-economic elites. I suspect this is partly because the corporate elite don’t want it discussed, but most of them are also ignorant of this reality.  One of the reasons I advocate an alliance between socialists, Greens and other left-libertarians on the one hand and Paulistas, right-libertarians, Contitutionists and traditional conservatives on the other is because I believe a deeper understanding of the foundations of corporatism will help both sides understand the system better and possibly come to a consensus on what needs to be done.

On a tactical level, we diverse dissidents have far more in common with each other than we do with corporate Republocrats.  We are all anti-war, opposed to Empire, for greatly reduced military expenditures, against government bailouts and other subsidies of large corporations, suspicious of the Federal Reserve, suspicious of large corporations, for an end to the war on drugs, for the protection of our civil liberties, for freedom of movement, against torture and for electoral reform and ballot access.  On a Federal level, many disagreements can be devolved to state and local control.  We left-libertarians are against NCLB and other Federal interference in education, so why not push to abolish the Department of Education as advocated by right-libertarians?  Health care and local infrastructure can also be left to the states.  That’s how single payer came to Canada.

On a more strategic level, cooperation will encourage dialogue.  More right-libertarians will become conscious that government predominantly concentrates and shifts wealth to a small group of elites through limited liability charters and other means.  They will come to understand that limits on wealth generated through such privilege are legitimate.  And who knows, perhaps we left-libertarians can be convinced that charter schools and even vouchers would not be so bad if corporations (including non-profits) can be restricted from participating.

Limited liability is the fly in the right-libertarian ointment.  Right-libertarians can not consistently advocate for deregulation and no government interference in the “free market” without advocating for the abolition of limited liability and hence abolition of the modern corporation, which in the short run might be disastrous.  They can not claim progressive taxes are unfair to or envious of high income, high wealth elites when most of that wealth results from grants of privilege by government.  They can not argue that strong government limitations on executive pay are an unwise interference in the “free market,” or that CEOs “earn” their pay, as the CEOs could not extract such pay without the power of the limited liability entitlement.  They can not rail against “statism” or “collectivism” without railing against corporations, which are themselves “collectives.”  While cold turkey abolition of limited liability (and hence the modern corporation itself) would in the short run be disastrous, it is irresponsible to allow government to create such institutions, then fail to regulate them.  Tight government restrictions on total executive compensation and an ability to “claw back” past dividends and CEO compensation of enterprises convicted of criminal acts are regulations consistent with a philosophy of individual freedom and accountability.

On the other hand, “progressives” and Greens are often too quick to relinquish personal economic freedom.  They need to listen to their right-libertarian brothers and sisters and see the distinction between small business and huge corporations, between high incomes that are earned through creativity and hard work and those that are extracted through the power of a bureaucracy.  They need to understand that government regulations and social welfare programs are stopgap measures, necessary only so long as large concentrations of economic power are enabled by government.

Fortunately for those of us who want to rein in the power of our elites, right-libertarians such as Paulistas tend to be highly principled individuals, searching for a coherent, consistent ideology that can guide them and their candidates and help them avoid corrupting political pressures.  This inconsistency in their philosophy has the potential to “flip” a large number of them from a right-libertarian to a left-libertarian ideology espousing free markets for individuals and strict, tight regulation of corporations and their management.  Some might even begin to see the wisdom of government ownership of natural monopolies such as utilities and insurance.

This is one of the reasons I advocate an alliance between socialists, Greens and other left-libertarians on the one hand and Paulistas, right-libertarians, Contitutionists and traditional conservatives on the other.

On a tactical level, we diverse dissidents have far more in common with each other than we do with corporate Republocrats.  We are all anti-war, opposed to Empire, for greatly reduced military expenditures, against government bailouts and other subsidies of large corporations, suspicious of the Federal Reserve, suspicious of large corporations, for an end to the war on drugs, for the protection of our civil liberties, against torture and for electoral reform and ballot access.  On a Federal level, many disagreements can be devolved to state and local control.  We left-libertarians are against NCLB and other Federal interference in education, so why not push to abolish the Department of Education as advocated by right-libertarians?  Health care and local infrastructure can also be left to the states.  That’s how single payer came to Canada.

On a more strategic level, cooperation will encourage dialogue.  More right-libertarians will become conscious that government predominantly concentrates and shifts wealth to a small group of elites through limited liability charters and other means.  They will come to understand that limits on such wealth generated through the power of privilege are legitimate.  And who knows, perhaps we left-libertarians can be convinced that charter schools and even vouchers would not be so bad if corporations (including non-profits) can be restricted from participating.

A much more sane and equitable system would be one where non-limited liability businesses would be exempt from most government regulation, while all limited liability enterprises would either be owned and run by the state or tightly regulated by the state, with all management compensation limited to some reasonable multiple of the median non-management employee pay.

We’re not going to get to such a system any time soon, though I believe it’s necessary either as a consequence or prevention of further irreversible global warming. The more people understand all this, the sooner we’ll get there, so we need to promote discussion and awareness of this mechanism amongst both the “right” and the “left.”

  • Liberius Cato

    One thing a lot of anti-capitalist protesters never realize is that crony corporatism isn’t capitalism. It requires a state to give the corporations the level of power they have now. Whenever a state erects barriers that create a protected class, it also creates a disfavored class, being those who lack such protections, or have to pay for those protections without the benefit of them. All of the problems we have on both sides of our libertarian and libertarian-leaning aisle here are a result of too much government interference in things that they ought to stay out of. It’s my hope that we can eventually come to some sort of agreement. We are passionate and principled people, and each of us has our own unique take on how things ought to be, but I think we can all agree that the current mess doesn’t work for anyone – except the protected class, which also happens to be our ruling elite.

  • Southernfink

    Brilliant article this, well done anti_republocrat !

  • http://mosquitocloud.net/ aprescoup

    “Knowingly approving of this government interference empowering investors, while objecting to any sort of government action mitigating this advantage as “statist” is hypocritical to say the least.”

    I think it would interesting to invite some reasonable right-libertarians into this discussion since their disdain for statism seems to, often enough, stop at that threshold and hence, as you’ve noted, invites the label of hypocrisy.

    I’ll extend an invitation to a few right-libertarians whom I follow on disqus, and I also invite everyone here to do the same.

    Unfortunately liberals and progressives pining for piling up additional regulations instead of demanding that this privilege be withdrawn, are simply inviting corruption into the bloated big government tent. I can’t think of any expansive government not becoming corrupted by moneyed interests and power.

    Term limits and the elimination of a professional political class – “There is no distinctly native American criminal class save Congress!” – would also benefit governance.

    They need to understand that government regulations and social welfare programs are stopgap measures, necessary only so long as large concentrations of economic power are enabled by government.

    Absolutely! And I would throw out a parallel challenge to right-libertarians with regards to charities replacing the left wing’s “stopgap measures.” Both solutions seem like admissions of a failed socio-political economic system.

    Conjoined with the LLC (corporate personhood) issue is the distortion, embraced by many right-libertarians about corporate speech, Citizens United, which they defend, as a matter of course without regard to the issues you raise.

    We do need to open up a broad ranging and honest dialogue with all anti-authoritarian/libertarian segments of the public, aimed at finding sufficient consensus to unite against the establishment, while understanding that whatever differences remain pale in comparison with those we hold in common vis a vis the untenable status quo.

    Great essay, great sentiments and insights – let’s get to work!

    • Southernfink

      So true, this is a brilliant article that looks at the consequences and how corporate un-accountabllity is created, on another matter I would appreciate your opinion on a recent exchange where plagiarism was mentioned in relation to posting articles here, in my opinion, proper credit is always given to the authors as well as the source for the articles…your opinion is most appreciated.

    • Dr J

      Thanks for the invitation, aprescoup. This is an interesting topic.

      I don’t think I’d call limited liability a “privilege” per se, in the sense that it doesn’t stand alone. It’s an aspect of tort law. So if you’re going to have government-enforced tort law, you need to decide one way or the other on the issue.

      I would tend to agree with anti_r, it makes more sense not to have limited liability. IMHO corporations are administrative conveniences for coordinating groups of people, and they should neither confer special rights like limited liability nor remove rights like political speech. So if we’d hold people personally liable when they act individually, we should do the same when they act as a corporation.

      That said, I don’t think the change would be as dramatic as he suggests, because companies would insulate themselves. If executives took on big personal liabilities when they accepted a job, corporations would buy insurance on their behalf, and this would quickly become a standard part of employment contracts.

      It certainly wouldn’t rein in salaries. On the contrary, if you took a job where you had to take on big personal financial risks, you’d demand a higher salary to make up for it. This is probably one of the unintended consequences of Sarbanes-Oxley, which makes executives personally liable for misstating financial figures.

      Now the anti-statist in me has to pose the converse question. Even with limited liability laws in place, CEOs who screw up badly lose money, jobs, and future hireability. Which is to say they’re already much more accountable than government actors. Barney Frank ought to be in jail for his gross mismanagement of the housing and banking sectors, but he wasn’t even fired. How do we get accountability from the public sector?

      • mrrogerb

        I’m sorry but for some reason this came to me instead of the person you were replying to.

        • Southernfink

          Disqus is in maintenance mode, strange things happen.

          • mrrogerb

            Thanks. I knew something was off somewhere but it’s okay I still like Disqus.

      • http://mosquitocloud.net/ aprescoup

        Since anti_r is better versed in the specifics of LLC, i’ll let him pick up the particular string of the thread.

        My instincts tell me that it would not be the hayride you are implying for CEOs or chronically negligent corporations.

        Take JPM, or any other of the seven largest banks for which breaking laws is calculated as the price of doing business, and whose transgressions are settled with pennies on the dollar, to say nothing of the price of externalities which the public is left paying for. Any person found to be supporting drug running, terrorist states, or repeatedly swindling the public would have their public life interrupted. I don’t see how one could reasonably make a case for buying insurance against harmful fraud – and it’s largely fraud anti_r is pointing to, I think.

        “On the contrary, if you took a job where you had to take on big personal financial risks, you’d demand a higher salary to make up for it.”

        Hell, people who take life-risks when signing up with the military are sure as hell not seeing salaries commensurate with the risk. Why should financial risk trump life? What kind of nutty society would buy into it if freed of propaganda?

        I think that this entire topic of corporate financial sanctity will need some deeper drilling. I have to run, but will be back.

        Nice “seeing” you.

        • mrrogerb

          Sorry I got the message you sent instead of the person you were replying to.

        • Dr J

          I don’t buy your premise that something would change if politicians had different legal recourse against JPM and the other largest banks. They are on the same team, playing different roles in a drama staged for our benefit. What you’re proposing is simply a new plot device.

          The financial crisis was very much Washington’s creation. It was fundamentally about housing, triggered by the bursting of a government-inflated mortgage bubble. The government created an “affordable housing” crisis. The government claimed to be solving it by requiring banks to write subprime mortgages. The government created and effectively insured the secondary market in mortgage-backed securities. The government granted an oligopoly to three ratings firms to pass judgment on the soundness of those securities. The government ignored warnings that the market was overheated and disaster imminent. The government raised interest rates and popped the bubble. After the crisis, the government issued a report placing most of the blame outside Washington. Financial firms got a token slap on the wrist.

          The investigations could have played out very differently, with Wall Street execs getting much more explicit about the extent of the government’s culpability. But they didn’t, because it wasn’t in the script.

        • http://www.byebyedemocracy.org/ kokanee

          Limited liability is a key characteristic of a corporation. Certainly a mere investor shouldn’t lose more than his or her investment if someone commits fraud or gross negligence.

          Board members and management are still personally liable for fraud and gross negligence. That hasn’t changed. What has changed is that it’s not enforced nearly as often as it should. i.e. big business and government are too closely connected.

          • anti_republocrat

            I’m not unsympathetic to a “mere investor.” I myself own stock in several limited liability corporations. I will continue to play the game by the established rules.

            That doesn’t mean we shouldn’t pay attention to the (largely unintended) consequences of what the government has done by chartering limited liability corporations, and either end those consequences by eventually eliminating those entities entirely, or else mitigating those consequences through countervailing government actions.

            Advocating the continued existence of these statist entities, while opposing and labeling as “statist” any attempt by government to mitigate them is morally wrong. I will do my best to educate right-libertarians on this and convert them to either a left-libertarian or a consistent anarchist view. I may cooperate with or even vote for those who refuse to budge, if they reciprocate and have decent positions on other issues. Almost anything is better than the Republocrat pigs currently in control. There really is no lesser evil when it comes to bombs, missiles, depleted uranium, detention or death without trial and universal surveillance.

            • http://www.byebyedemocracy.org/ kokanee

              My mistake. I was defending corporations not the sleazy LLC investment vehicles. I’d probably nail you (as the hypothetical government) as a principle owner or some such thing.

              re: “There really is no lesser evil when it comes to bombs, missiles, depleted uranium, detention or death without trial and universal surveillance.”

              Truer words have never been written.

              • anti_republocrat

                As far as I know, all corporations enjoy limited liability for their shareholders. I don’t see much difference between them and LLCs, though I understand there are some differences and certain tax advantages make LLCs even slightly worse.

      • http://www.byebyedemocracy.org/ kokanee

        I’m sure corporations are willing to pay a CEO handsomely to make unethical, borderline and outright illegal decisions if there’s profit to be had.

      • anti_republocrat

        “That said, I don’t think the change would be as dramatic as he suggests, because companies would insulate themselves. If executives took on big personal liabilities when they accepted a job, corporations would buy insurance on their behalf, and this would quickly become a standard part of employment contracts.”

        The problem I stated is the limited liability of the investor, the individual shareholder. This has little to do with the personal liability of the the executives and the BoD.

        Sole proprietors and investors in common law partnerships are 100% personally liable for debts incurred and damages caused by their business. Their entire net worth can be held to account. To protect themselves, they will insist on having tight control and intimate knowledge of the business and what it’s doing, since only by such control can they prevent the business from doing things that could ruin them financially. Such tight control and knowledge limits the size that the enterprise can attain. An insurance policy to cover the risk generated by allowing the enterprise to grow out of control would be very expensive, and it’s doubtful there would be a non-incorporated insurance company capable of handling it.

        Shareholders in limited liability corporations are insulated from such catastrophic losses. Their loss is limited to the value of the stock they purchased in the corporation that incurred the liability. That’s what limited liability means. It has nothing to do with limiting the liability of the CEO or BoD. This limited liability gives them license to invest in an enterprise they do not control, with no worry that the enterprise will incur liabilities that could cost them more than their initial investment, and the very real hope that their investment will return profits far in excess of any fixed interest loan or deposit they could make. Because the investor is only risking the initial investment and not his entire net worth, he does not insist on control and oversight.

        This allows limited liability corporations limitless growth, and with their size comes concentrated economic and political power. Since Citizen’s United, their political power is now virtually unlimited, since few individuals can command a megaphone as large as a corporation, and campaign contributions have essentially become pay to play bribes.

        “I don’t think I’d call limited liability a “privilege” per se, in the
        sense that it doesn’t stand alone. It’s an aspect of tort law.”

        Absent a charter granted by the executive or some sort of statute (passed by the legislative branch) allowing other methods of gaining the privilege, I believe the common law of tort would not limit liability short of the defendant’s ability to pay. In fact, sometimes liability isn’t even limited by ability to pay, as I’ve heard of individuals enduring court judgements that can’t be discharged even in bankruptcy.

        Yes, limited liability is a privilege granted to investors. It is not a “natural right.” This is born out by the fact that it does not exist in common law (at least, that is my understanding from what I’ve read). It requires an affirmative act of government to create limited investor liability. It is therefore a privilege not enjoyed by investors in non-limited liability enterprises or personal tools like vehicles.

        • Dr J

          Okay, Auntie, but tort settlements are in general just not that big. They don’t usually sink companies, so they wouldn’t represent dramatically larger exposures for investors. And again, investors (or the company on their behalf) can insure against them.

          Even if that were not the case, I don’t see that any of the outcomes you predict (tight control, smaller companies, and more cautious operation) would follow. Lloyds of London insured all sorts of external parties, backed by unlimited liability of its Names. That didn’t apparently encourage sufficient diligence to prevent the asbestosis exposure that ultimately sank Lloyd’s insurance market.

          • http://mosquitocloud.net/ aprescoup

            ” but tort settlements are in general just not that big.”

            Then that too would need to be adjusted. As for insurance, repeated offenders would become uninsurable or be facing prohibitive premiums. As is “regulators” give most outsized corporate giants, repeatedly, mere slaps on the wrist.

            I think your Lloyds example points to incompetent risk managers at the firm. But considering the frequent fraud, theft, general harm and externalities costs many outsized corporations pass onto the public the capitalist system, as it exists, deserves a coup de grace.

          • anti_republocrat

            First you say tort settlements aren’t that big, then you cite one that sank Lloyds of London. Which is it? Don’t you think any other unlimited liability partnership insurance conglomerate would be chastened by what happened to Lloyds?

            Anyway, tort’s a piker compared to just plain financial mismanagement and the potential for an enterprise’s bankruptcy where individual investors would have to pay off creditors. Be honest, would YOU invest in Citigroup or JPM if you knew you’d personally have to help pay off depositors if the bank went belly up?

            • http://mosquitocloud.net/ aprescoup

              “Be honest, would YOU invest in Citigroup or JPM if you knew you’d personally have to help pay off depositors if the bank went belly up?”

              By this time, both would have died many deaths and the question would be moot. So, excellent point!

            • Dr J

              Most tort settlements aren’t that big. Lloyds was an insurance market indemnifying many smaller firms. The firms may have done fine. They had insurance.

              I probably would invest, because I need to invest retirement savings somewhere. Even if I didn’t, it wouldn’t slow JPM down much. Their money comes from trading, not from investors.

              • http://mosquitocloud.net/ aprescoup

                Would you invest in either without the government’s TBTF, free insurance guarantee?

                Was it not their insurance, reinsurance, rehypothetication and sundry other scams which, had their plants in the USG not intervened, would have seen a complete financial and corporate – down to honest and manageable size — welfare queens slaughter.

                I’m not sure that the public would stand for a repeat event, which is hardly a black swan on the far horizon anymore…

                p.s.

                The trades are on fictitious assets with enormous leverage on essentially free money, Credit Default Swaps, etc in something on the order of 1 quadrillion dollars, albeit nominal, but still nothing more than a “smoke and mirror” financial system, piled on the carcass of the real economy.

                I think you may be representative of what has often been described, since 2008, as a retail investor muppet.

              • Dr J

                Was it not their insurance, reinsurance, rehypothetication and sundry other scams which, had their plants in the USG not intervened, would have seen a complete financial and corporate – down to honest and manageable size — welfare queens slaughter.

                I don’t think I understand the question. If you’re asking whether unlimited liability would have prevented the wild derivative market, it seems unlikely. Derivatives are contracts and can be written with any settlement rules the parties agree to. If they found it expedient to exempt shareholders from liability in the event of default, they would have done so.

                I think you may be representative of what has often been described, since 2008, as a retail investor muppet.

                I am feeling more and more like Beaker these days.

              • anti_republocrat

                “Derivatives are contracts and can be written with any settlement rules the parties agree to. If they found it expedient to exempt shareholders from liability in the event of default, they would have done so.”

                OK. Let’s suppose there’s no limited liability and the bank or AIG or whomever ends up owing derivatives counterparties far more than its total assets including stock. Let’s suppose the parties, as you suggest, have contracted that the shareholders are not to be personally liable for what’s owed on the derivatives. Well, guess what, current law is that derivatives take precedence over ordinary bondholders and other non-secured creditors (eg, depositors in a bank) during bankruptcy proceedings. Ie, derivatives counterparties are first in line to get their money. That means there would still be oodles of debt to be repaid to bond holders and depositors. It wouldn’t matter what the derivatives contracts said. Since counterparties get their money first, and other creditors would still have to be paid off, the personal assets of the non-limited liability investors would be subject to that liability.

                God, I feel like an abolitionist talking to someone steeped in the tradition of slavery who just can’t imagine a non-slave system. I’m talking about abolition, and he’s saying that wouldn’t have any effect because he could just import more slaves from Africa.

              • Dr J

                Well, you do have this air of a firebrand preacher, now that you mention it.

                It’s absurd (from my outsider’s perspective) for derivative holders to get preference over bond holders, and this seems like the sort of rule that could shift pretty quickly if other rules changed. So your predictions still sound to me to overestimate the impact of unlimited liability, because they discount the shifts in other rules as the whole system found a new equilibrium. If we started driving on the left side of the road, I’m sure there would be a few collisions, but everyone would adapt soon enough.

                I will nevertheless join you in supporting unlimited liability, Preacher Man.

              • anti_republocrat

                If only I could speak as well as I write. Too often I find myself tongue tied.

                Take note that my position on limited liability is not inflexible. To some extent, my preaching on the subject is a bit of political judo to force right-libertarians to recognize the overwhelming support government gives to corporations and the 1% at the expense of the 99%. For them to whine about taxes, minimum wage laws, right to work and government regulation while supporting the existence of corporations is either ignorant or hypocritical, and I aim to eliminate ignorance as an excuse.

                For the short term, what I’d like to see is restoration and tightening up of inheritance taxes coupled with a maximum wage law. No more perpetual “charitable” foundations from which privileged heirs can draw outlandish salaries. Executives of limited liability corporations should have their total compensation limited to 20 times the pay of the lowest paid employee. That’s total compensation including salary, bonus, stock options, stock awards, deferred compensation, non-qualified retirement programs and anything else anybody might think up. If the corporation is so inefficient and unproductive that it can only afford to pay its workers $16,000/yr, then the CEO doesn’t deserve more than $320,000/yr. If he wants more, he should increase the productivity and wages of his workforce. This should apply only to executives of limited liability entities, those who contract with such entities and others in positions of power that can extract compensation without earning it, not to artists and others who command such compensation through free exchange.

                I think once the SHTF, a maximum wage might be doable. Abolition of limited liability will take a while longer, if ever. If it does come, please don’t buy those bargain basement JPM shares. I want only the best for you, my friend.

              • Dr J

                Oh, libertarians are keenly aware of the overwhelming support government gives to corporations and the 1%.

                That’s why we oppose government policies that distribute wealth from the poorer to the richer, which most of the policies you cite do. Raise taxes on the rich? The rich will shift their money or move, and we’ll lose not only their tax base but their spending. Raise minimum wages and union protections to help poor workers? That will lock even poorer non-workers out of jobs completely, making the poorest even worse off. And so on. It’s no coincidence that income inequality started taking off with the expansion of government in the 1960s.

              • anti_republocrat

                This graph:
                http://www.csmonitor.com/var/ezflow_site/storage/images/media/content/graphics/2012/0220/awealthgap_g1/11743278-1-eng-US/AWEALTHGAP_g1_full_600.jpg

                shows you are 180 degrees wrong. The smallest wealth inequality was in the period from 1943 to 1980, when the top marginal income tax rates were high. Those were also times of phenomenal economic growth. After falling from the pre-depression high in 1928, with a precipitous fall during WW II, the wealth gap continued to decrease during the 1950s when marginal tax rates were over 90%. The lowest wealth gap was in the mid 1970s, and it didn’t start increasing fast until 1980, the start of the tax revolt era.

                We need to put this issue aside. If the past 30 years of deregulation policy failure haven’t convinced you, I never will. I’m satisfied with your concession that consistency demands an end to government support of corporations and the 1%, and that part of that support is limited liability for investors.

                Instead, we should focus on areas of probable agreement. How are we going to fight Federal government evils in the areas of:

                - war
                - excessive military spending
                - covert foreign interventions
                - extrajudicial killings and detention
                - massive surveillance of non-suspects
                - the war on drugs
                - legalized bribery through campaign contributions
                - corporate bailouts overt by Treasury covert by Fed
                - Federal interference in policy that should be left to the states such as education and healthcare. (Ie, stop forcing states to privatize education through Race to the Top and grant ERISA waivers to allow states to handle healthcare any way they want.)

                -

              • Dr J

                Measuring by the Gini coefficient, the lowest wealth gap was around 1968. It rose dramatically during the New Deal, fell during and after the war, and then started rising again around the time of Johnson’s Great Society expansion. Reagan didn’t help it any, for sure, but it continued to climb under Clinton.

                http://www.libertarianprepper.com/the-sinister-roots-of-socialism/gini-index-usa/

                As for “30 years of deregulation policy,” can you please point out those years in the graph below? The federal regulatory budget grew (in 2005 dollars) from $15B in 1980 to $19B in 1990 to $29B in 2000 to $50B in 2010.

                http://research.columbian.gwu.edu/regulatorystudies/sites/default/files/u38/regbudget20100518.pdf

              • anti_republocrat

                Your Gini coefficient graph shows the coefficient in 1980 was slightly higher than in ’57, ’66 or ’68, but about the same as the average for the entire post-war period to that point. Yes, it started to trend upward after Johnson’s cuts to marginal tax rates but was still significantly lower than in 1950 or 1962. It climbed steeply in the Reagan-Bush 43 years except for a very small down tick in 91-92. You refuted nothing I said about income.

                I had written nothing about regulation in the post about income inequality and very little about it (other than limits on extracted compensation) earlier. But now that you’ve shown a graph and all those numbers, I see that regulatory spending grew very slowly from 1980-1990, the period that showed the greatest growth in your Gini coefficient during the entire last half of the 20th Century.

                I’ll answer no further posts along these lines.

              • anti_republocrat

                “Their money comes from trading, not from investors.”

                Yes, most of their earnings come from trading. The riskier the trades, the higher the profit (as long as the economy is expanding and the bubbles are growing). Also, banks are highly leveraged in that their debt to equity (shareholder investment) ratios are large compared with other sectors. Without limited liability, all this would put individual net worth at far greater risk than investing in some non-limited liability manufacturing or retail business.

                I’m not going to repeat myself anymore. You insist that limited liability is no big deal, and it would be no big deal to abolish what I believe is an abomination.

                So join with me in demanding its abolition along with all government bailouts and bankruptcy preferences for derivatives. As soon as it’s abolished, I’m convinced there will be tons of JPM stock for sale for pennies on the dollar. You are welcome to buy as much as you want at bargain basement prices.

                “There are thousands of Indians down there, and when they get done with you, there won’t be nothing left but a greasy spot. This ain’t the Washita River, General, and them ain’t helpless women and children waiting for you. They’re Cheyenne brave, and Sioux. You go down there if you got the nerve.” — Little Big Man

  • http://www.byebyedemocracy.org/ kokanee

    anti_republocrat —Great article and welcome to MC!

    There was a time when CEOs and B of Ds were held personally accountable for fraud and gross negligence. They used to go to jail. Now all they do is write a company check. There also was a time when CEOs didn’t make 500 times the average wage of their companies’ wages. Their exorbitant salaries are an indication of extraordinary profits and therefore, in economic terms, of an inefficient market. I think (but not entirely sure) that CEO pay is linked to their “connectedness” to government officials. The CEOs have their own club: The Business Roundtable. Also, there is way too much cross B of Ds sitting on each others boards. More democracy needs to be brought to corporations. Limit the boards one can sit on and strip management from voting shares where the real owner didn’t vote. Extraordinary market power needs to be dissipated.

    • http://msjnews.net/ KB723

      There was also a time when the Media, (60 Minutes) held them accountable for such actions… Seems so long ago!!! =(

      • http://www.byebyedemocracy.org/ kokanee

        I don’t quite remember but I think they called it investigative reporting. So long ago…

        • http://msjnews.net/ KB723

          I read a lot of stories about how Aljazeera America was going to fill those shoes, but have not yet watched anything there, have you???

          • http://www.byebyedemocracy.org/ kokanee

            I haven’t watched anything but don’t get your hopes up.

            Al Jazeera was tamed a long time ago when it got into the news as an anti-American news organization. It happens to be based out of Qatar —a dictatorship (monarchy) that is an ally of the US. Al Jazeera America has been completely sanitized for American audiences. The good news is that one can still get to Al Jazeera English by clicking, “Visit Al Jazeera English” at the bottom of the page.

            • http://msjnews.net/ KB723

              Interesting, than it seems I have not missed Much….

              • http://www.byebyedemocracy.org/ kokanee

                Pretty sure you haven’t missed anything.

              • http://msjnews.net/ KB723

                Are you on G+??? I removed one account last night, Ziggy told me about the place so I dropped by only to find I had an account there, although I never signed up there, and now my youtube account is also there… Can’t hide from these fools anywhere I guess… I think I need to start over, I had many followers so I should have kept the other account…

                Can we be Booted here for being off topic???

                https://plus.google.com/u/0/b/114271357068648181290/

              • http://www.byebyedemocracy.org/ kokanee

                re: “Can we be Booted here for being off topic???”
                Not that I know of.

                I hate Google Plus. Google keeps making me sign up for it to access this or that and then I delete my Google plus account afterward. It’s pretty funny. I don’t like having everything attached to one account. No now I have two youtube accounts one linked and one unlinked and it keeps asking me which one I would like to use. It’s very annoying. BTW, I’m over at MSJ now…

              • http://msjnews.net/ KB723

                Crazy… I can’t figure it out and Yes it gets annoying, I saw you were over there, so am I… =)

  • http://mosquitocloud.net/ aprescoup

    Excellent essay, a_r!

    Recc’d.

    I’ll get back with my comment in a few hours. In the meantime, thanks!