What is Dr. Paul's position on corporate charters?

[Hangly Man]

As a former lefty and WTO protester, this is the only part of the Paul platform that makes me a little nervous. My concern might be unfounded though, because I haven't heard his position, or really even the Libertarian position on the issue.

In a libertarian America, what kind of checks would exist on the power of very powerful corporations like Halliburton, Union Carbide, and others who, in the past, have done some Very Bad Things.

The way it should work, or, the way it works with private citizens is: everyone is free to do what they want, until they infringe on the freedom of someone else. When that happens the courts get involved.

What happens though when it is a corporation infringing on the rights of an individual? In that case, if the court rules against the corporation, it can't really hold it accountable in the same way because of the limitations the corporate charter places on its liability. (A corporation can't be imprisoned, for example.)

There is technically the possibility that the government can revoke the charter of a corporation that does not operate in the public interest, but I'm not sure this has ever been done.

I'm curious what Ron Paul and other knowledgeable supporters think about this question. What is the libertarian solution to limit threats to individual liberty that hail from the private sector?

[bbachtung]

Ron Paul is as opposed to "corporatism" as he is to big government.

Check out this 2002 speech:



Congressman Ron Paul
U.S. House of Representatives
July 9, 2002

Has Capitalism Failed?

It is now commonplace and politically correct to blame what is referred to as the excesses of capitalism for the economic problems we face, and especially for the Wall Street fraud that dominates the business news. Politicians are having a field day with demagoguing the issue while, of course, failing to address the fraud and deceit found in the budgetary shenanigans of the federal government- for which they are directly responsible. Instead, it gives the Keynesian crowd that run the show a chance to attack free markets and ignore the issue of sound money.

So once again we hear the chant: "Capitalism has failed; we need more government controls over the entire financial market." No one asks why the billions that have been spent and thousands of pages of regulations that have been written since the last major attack on capitalism in the 1930s didn’t prevent the fraud and deception of Enron, WorldCom, and Global Crossings. That failure surely couldn’t have come from a dearth of regulations.

What is distinctively absent is any mention that all financial bubbles are saturated with excesses in hype, speculation, debt, greed, fraud, gross errors in investment judgment, carelessness on the part of analysts and investors, huge paper profits, conviction that a new era economy has arrived and, above all else, pie-in-the-sky expectations.

When the bubble is inflating, there are no complaints. When it bursts, the blame game begins. This is especially true in the age of victimization, and is done on a grand scale. It quickly becomes a philosophic, partisan, class, generational, and even a racial issue. While avoiding the real cause, all the finger pointing makes it difficult to resolve the crisis and further undermines the principles upon which freedom and prosperity rest.

Nixon was right- once- when he declared "We’re all Keynesians now." All of Washington is in sync in declaring that too much capitalism has brought us to where we are today. The only decision now before the central planners in Washington is whose special interests will continue to benefit from the coming pretense at reform. The various special interests will be lobbying heavily like the Wall Street investors, the corporations, the military-industrial complex, the banks, the workers, the unions, the farmers, the politicians, and everybody else.

But what is not discussed is the actual cause and perpetration of the excesses now unraveling at a frantic pace. This same response occurred in the 1930s in the United States as our policymakers responded to the very similar excesses that developed and collapsed in 1929. Because of the failure to understand the problem then, the depression was prolonged. These mistakes allowed our current problems to develop to a much greater degree. Consider the failure to come to grips with the cause of the 1980s bubble, as Japan’s economy continues to linger at no-growth and recession level, with their stock market at approximately one-fourth of its peak 13 years ago. If we’re not careful- and so far we’ve not been- we will make the same errors that will prevent the correction needed before economic growth can be resumed.

In the 1930s, it was quite popular to condemn the greed of capitalism, the gold standard, lack of regulation, and a lack government insurance on bank deposits for the disaster. Businessmen became the scapegoat. Changes were made as a result, and the welfare/warfare state was institutionalized. Easy credit became the holy grail of monetary policy, especially under Alan Greenspan, "the ultimate Maestro." Today, despite the presumed protection from these government programs built into the system, we find ourselves in a bigger mess than ever before. The bubble is bigger, the boom lasted longer, and the gold price has been deliberately undermined as an economic signal. Monetary inflation continues at a rate never seen before in a frantic effort to prop up stock prices and continue the housing bubble, while avoiding the consequences that inevitably come from easy credit. This is all done because we are unwilling to acknowledge that current policy is only setting the stage for a huge drop in the value of the dollar. Everyone fears it, but no one wants to deal with it.

Ignorance, as well as disapproval for the natural restraints placed on market excesses that capitalism and sound markets impose, cause our present leaders to reject capitalism and blame it for all the problems we face. If this fallacy is not corrected and capitalism is even further undermined, the prosperity that the free market generates will be destroyed.

Corruption and fraud in the accounting practices of many companies are coming to light. There are those who would have us believe this is an integral part of free-market capitalism. If we did have free-market capitalism, there would be no guarantees that some fraud wouldn’t occur. When it did, it would then be dealt with by local law-enforcement authority and not by the politicians in Congress, who had their chance to "prevent" such problems but chose instead to politicize the issue, while using the opportunity to promote more Keynesian useless regulations.

Capitalism should not be condemned, since we haven’t had capitalism. A system of capitalism presumes sound money, not fiat money manipulated by a central bank. Capitalism cherishes voluntary contracts and interest rates that are determined by savings, not credit creation by a central bank. It’s not capitalism when the system is plagued with incomprehensible rules regarding mergers, acquisitions, and stock sales, along with wage controls, price controls, protectionism, corporate subsidies, international management of trade, complex and punishing corporate taxes, privileged government contracts to the military- industrial complex, and a foreign policy controlled by corporate interests and overseas investments. Add to this centralized federal mismanagement of farming, education, medicine, insurance, banking and welfare. This is not capitalism!

To condemn free-market capitalism because of anything going on today makes no sense. There is no evidence that capitalism exists today. We are deeply involved in an interventionist-planned economy that allows major benefits to accrue to the politically connected of both political spectrums. One may condemn the fraud and the current system, but it must be called by its proper names- Keynesian inflationism, interventionism, and corporatism.

What is not discussed is that the current crop of bankruptcies reveals that the blatant distortions and lies emanating from years of speculative orgy were predictable.

First, Congress should be investigating the federal government’s fraud and deception in accounting, especially in reporting future obligations such as Social Security, and how the monetary system destroys wealth. Those problems are bigger than anything in the corporate world and are the responsibility of Congress. Besides, it’s the standard set by the government and the monetary system it operates that are major contributing causes to all that’s wrong on Wall Street today. Where fraud does exist, it’s a state rather than federal matter, and state authorities can enforce these laws without any help from Congress.

Second, we do know why financial bubbles occur, and we know from history that they are routinely associated with speculation, excessive debt, wild promises, greed, lying, and cheating. These problems were described by quite a few observers as the problems were developing throughout the 90s, but the warnings were ignored for one reason. Everybody was making a killing and no one cared, and those who were reminded of history were reassured by the Fed Chairman that "this time" a new economic era had arrived and not to worry. Productivity increases, it was said, could explain it all.

But now we know that’s just not so. Speculative bubbles and all that we’ve been witnessing are a consequence of huge amounts of easy credit, created out of thin air by the Federal Reserve. We’ve had essentially no savings, which is one of the most significant driving forces in capitalism. The illusion created by low interest rates perpetuates the bubble and all the bad stuff that goes along with it. And that’s not a fault of capitalism. We are dealing with a system of inflationism and interventionism that always produces a bubble economy that must end badly.

So far the assessment made by the administration, Congress, and the Fed bodes badly for our economic future. All they offer is more of the same, which can’t possibly help. All it will do is drive us closer to national bankruptcy, a sharply lower dollar, and a lower standard of living for most Americans, as well as less freedom for everyone.

This is a bad scenario that need not happen. But preserving our system is impossible if the critics are allowed to blame capitalism and sound monetary policy is rejected. More spending, more debt, more easy credit, more distortion of interest rates, more regulations on everything, and more foreign meddling will soon force us into the very uncomfortable position of deciding the fate of our entire political system.

If we were to choose freedom and capitalism, we would restore our dollar to a commodity or a gold standard. Federal spending would be reduced, income taxes would be lowered, and no taxes would be levied upon savings, dividends, and capital gains. Regulations would be reduced, special-interest subsidies would be stopped, and no protectionist measures would be permitted. Our foreign policy would change, and we would bring our troops home.

We cannot depend on government to restore trust to the markets; only trustworthy people can do that. Actually, the lack of trust in Wall Street executives is healthy because it’s deserved and prompts caution. The same lack of trust in politicians, the budgetary process, and the monetary system would serve as a healthy incentive for the reform in government we need.

Markets regulate better than governments can. Depending on government regulations to protect us significantly contributes to the bubble mentality.

These moves would produce the climate for releasing the creative energy necessary to simply serve consumers, which is what capitalism is all about. The system that inevitably breeds the corporate-government cronyism that created our current ongoing disaster would end.

Capitalism didn’t give us this crisis of confidence now existing in the corporate world. The lack of free markets and sound money did. Congress does have a role to play, but it’s not proactive. Congress’ job is to get out of the way.

http://www.ronpaullibrary.org/document.php?id=688

[Hangly Man]

What specifically can be done to combat it though? Abolition of corporate charters and limited liability? Forbidding corporate execs from serving in the government? What's the constitutional solution?

There's a lot of merit in Dr. Paul's comment that if the government has no money the lobbyists won't come looking for a handout, but large monied interests could still try to influence politics to try to skew the laws in their favor. Things like the DMCA, for example.


Edit:
Oops, forgot to thank you for the article. Thank you for the article!

[Crickett]

[QUOTE=Hangly Man;787959]What specifically can be done to combat it though? Abolition of corporate charters and limited liability? Forbidding corporate execs from serving in the government? What's the constitutional solution?



See, the paradyme shift is, that if the government does not control the corporations, then there would be nothing to lobby about. If a corporation is in a state and is doing something Very Bad, then the people of that state put a stop to it and there is no whining to the Feds, because they don't get into that. Maybe the state next door to that one would help, too. This is all not going to change overnight, but it must begin to go in that direction.

It is also a HUGE shift, to be a neutral country again, and to give peace a chance. We need to try it instead of being so fearful of what other countries might do to us if we did.

[pdavis]

I don't know Ron Paul's position on corporations but considering that he is a fellow Austro-libertarian, I assume he is completely against corporations since they are a creation of the State and are protected by the State.

[bbachtung]

What specifically can be done to combat it though? Abolition of corporate charters and limited liability? Forbidding corporate execs from serving in the government? What's the constitutional solution?

There's a lot of merit in Dr. Paul's comment that if the government has no money the lobbyists won't come looking for a handout, but large monied interests could still try to influence politics to try to skew the laws in their favor. Things like the DMCA, for example.


Edit:
Oops, forgot to thank you for the article. Thank you for the article!

Under a constitutionally-limited federal government, it would be up to the states to decide whether to grant corporate charters, etc.

[Gilby]

Might not be Ron Paul's position, but here is the position of 2004 Libertarian Nominee, Micheal Badnarik:

Regarding your description of free trade vs. state corporatism at your website, How can we prevent the propagation of Multinational corporations without resorting to government regulation? Is that form of Government regulation a necessary evil, or is there a method for preventing the formation of huge multinationals and monopolies without the government restricting free trade? If so, how would this method be implemented?

"Free trade," like any other term, is often coopted to mean something other than what it should. In the context of modern America and the globalization phenomenon, it is often used to refer to a web of regulations, restrictions, subsidies, government-created monopolies and privileges. That's not free trade.

First, let's look at the nature of corporations. They come into existence with the grant of a government charter. They sell stock under the auspices and pursuant to the rules of the Securities and Exchange Commission. In court, they are treated as "persons" with "rights" -- and for purposes of liability, their stockholders are held harmless beyond the value of their stock itself.

A market in which single proprietorships and partnerships must compete against what are essentially mini-branches of government, with all the attendant privileges and immunities, isn't a free market. It's a rigged game.

I don't oppose growth or success. I support unrestricted trade across international borders, and I support companies developing themselves internationally. But the fact is that corporate growth today isn't natural market growth. It's growth encouraged and enhanced by government-dispensed privilege. It's artificial, and it distorts rather than serves the market.

We need to restore justice to the system. Stockholders are owners, and should be liable for the consequences of that ownership like any other owners. I have no doubt that the market will come up with "portfolio insurance" to protect the stockholders from ruinous claims, but that in itself will provide a market check on unrestrained, unaccountable growth -- companies which act irresponsibly will find that their stockholders can't buy, or have to pay unreasonably high, insurance premiums, and therefore aren't interested in having the stock.

Corporations don't have rights and don't face consequences. People do. Tinkering with that has been disastrous. It's time to get back to full responsibility for individuals instead of government privilege for corporations.
Source: slashdot (http://politics.slashdot.org/article.pl?sid=04/09/20/1423219&tid=11&tid=219)

[Hangly Man]

See, the paradigm shift is, that if the government does not control the corporations, then there would be nothing to lobby about. If a corporation is in a state and is doing something Very Bad, then the people of that state put a stop to it and there is no whining to the Feds, because they don't get into that. Maybe the state next door to that one would help, too. This is all not going to change overnight, but it must begin to go in that direction.


I'm fuzzy on corporate law, so I'm hoping you or someone else can enlighten me.

Corporations are chartered by states already, I'm pretty sure there's no such thing as a federally-chartered corporation.
If a certain company is chartered in Delaware, does the state government of Massachusetts have the ability to prevent them from doing business within their borders? Or to impose tariffs on them? What exactly is the proper mechanism the people would use to put a stop to them?

Let's use Enron as an example. I don't know where Enron was chartered, but let's say it's Texas. Also let's pretend they didn't go bankrupt, and nothing they are doing violates any criminal laws. How does the state government of California prevent Enron from, for example, jacking with their electricity supply? What tools are available to reign them in?

[Hangly Man]

Might not be Ron Paul's position, but here is the position of 2004 Libertarian Nominee, Micheal Badnarik:

Stockholders are owners, and should be liable for the consequences of that ownership like any other owners. I have no doubt that the market will come up with "portfolio insurance" to protect the stockholders from ruinous claims, but that in itself will provide a market check on unrestrained, unaccountable growth -- companies which act irresponsibly will find that their stockholders can't buy, or have to pay unreasonably high, insurance premiums, and therefore aren't interested in having the stock

Source: slashdot (http://politics.slashdot.org/article.pl?sid=04/09/20/1423219&tid=11&tid=219)

Aaaah, that's very interesting. It's also quite an eloquent solution! If that is the Paul Platform, then I have no further reservations.

[ErikBlack]

I am in favor of getting rid of the corporate structure altogether, although this is a state function and not something that would fall under President Paul's jurisdiction. Limited liability is no longer needed to promote innovation, the profit motive is enough. Corporations were originally formed to finance sea voyages where the risk of losing the ship and all of its members was great. The business ventures of today are not nearly as risky. If there is some benefit to be had from retaining the corporate structure accountability could be reintroduced by holding each member of the board of the directors personally liable for the actions of the corporation, in accordance with their votes regarding key company decisions, which would have to be recorded as part of the minutes. Corporations do not have rights such as free speech or privacy. They are granted privileges by the state. In my opinion these privileges should be rescinded or predicated on good conduct.

[john_anderson_ii]

In a libertarian America, what kind of checks would exist on the power of very powerful corporations like Halliburton, Union Carbide, and others who, in the past, have done some Very Bad Things.



The greatest check you could ever put on a corporation is stiff competition. All the courts and all the laws in the world aren't as healthy as a dozen small companies vying for your business instead of a huge behemoth demanding it. It's not the 'evil corporations' that are the problem. It's the 'evil corporations' in bed with government that is the problem. You can't trust the law to reign in these giant monopolists when the monopolists are the ones lining the pockets of the lawmakers. It's letting the fox guard the hen house.

The libertarian philosophy is 'hands off' in general. We have anti-trust laws that should be enforced across the board, not selectively and dependent upon industry and product. Combine that with the absence of red tape and regulation that prevents entrance of companies into an industry, and you have more competition. More competition means nicer corporations.