 After Locofocos, or early libertarians in New York, clamored together to agitate for a new state constitution that would democratize the process of incorporating businesses, American economic history entered a revolutionary phase. For Locofocos, it was a blindingly bright accomplishment. But in hindsight, it was yet another troublesome compromise. By now, corporations are so commonplace, so ubiquitous, and considered so necessary, that we barely stop to ask whether it's ever been justifiable in the first place. Well, here to help me tackle one of the great relatively forgotten questions in libertarian history is Gary Chardier. He has a PhD in philosophy from Cambridge, he teaches law and business ethics at California's La Sierra University, and he's been one of the country's leading left libertarian thinkers for some time now. Welcome to Liberty Chronicles, a project of Libertarianism.org. I'm Anthony Comegna. So I think you have a particularly interesting sort of personal history of intellectual influence and change over time. Could you, Gary Chardier, give us your how I became a libertarian story? You know, I think like a lot of libertarians of my age, I'm 51, I grew up with Gold Right parents, I programmed computers, I read science fiction, and I was socially awkward. So it was a really, it was in some ways a pretty natural progression. I found myself radicalizing the views that my parents had, moving from their position, which was in many ways pretty conventionally conservative Republican, with a few interesting exceptions. And so I ended up embracing libertarian views by the time I was, say, 14 or 15, 14 probably. And I had kind of started down the path toward being a fairly radical libertarian. And then I got, as it were, sidetracked in college, as I think probably happens to a lot of people. I encountered issues in college that I hadn't really thought about sufficiently, issues having to do with poverty and social inequity of various kinds. And that sent me down a detour in the direction of what was in many respects probably fairly conventional social democratic politics of the kind you might associate with a lot of people in academia. But really I think largely re-radicalized me was the one-to-punch of George W. Bush and Barack Obama, two amazing guys who showed me just how awful the state could be in different ways and their support for the warfare state, their commitment to corporate privilege, and so forth. These things really prompted a great deal of cynicism on my part and led me ultimately to discover the work of libertarians like Roderick Long and Kevin Carson. And as a result to discover that there was a way in which my early commitment to libertarianism could be reinvigorated in tandem with a, I think, much richer and more thoughtful responsiveness to a range of social problems. And so I could come home, and yet of course not just come home, but come home now to astrand libertarianism that I had been at best pretty minimally aware of, the modern descendants of Benjamin Tucker and Lysander Spooner and the 19th century individualist anarchists who really, as I discovered, were up to really fascinating things and whose ideas continued to thrive and flourish in the very capable hands of people like Roderick and Kevin and Charles Johnson and Sheldon Richmond and others. So I took a long detour and came home. I think that's the true answer. And you call yourself a left libertarian? I do, at least in context in which that's helpful. If you read the Wikipedia article, left libertarianism, you find that there are at least three different, rather different meanings of that term, including anarcho-communism, the sort of neo-Georgist position that might be associated with Steiner and Valentine and Tzuka, and then the kind of view that we would be inclined to embrace. And so sometimes it's helpful to talk about left libertarianism. Sometimes it's probably more useful to spell things out in more detail. Sometimes I'll use the term left-wing market anarchism, but I think context is everything. What exactly is the left part of that then? What do you see as sort of the leftist element in this kind of libertarianism that you ascribe to, which we'll dig into a little more here soon? Yeah, so that's a great question. Obviously there's no platonic universal that is the left. We find in different contexts quite different meanings associated with that expression, as a lot of libertarians will know, the origins of the left-right distinction seem to have to do with where people sat in parliament, but clearly that's a different world than the one we're in now, I guess the French parliament particularly. So there you might have thought that the basic left-right distinction was one between the friends of the king and the enemies of the king, the friends of freedom and social equality and the opponents and the friends of authority. And there's something to that. I guess when I've tried to spell out what I have in mind in talking about the left, I tend to think of what I regard as the best elements of the new left in the 60s, which obviously had itself a variety of libertarian elements. And so I probably stacked the deck by going in that direction. But I tend to think about opposition to exclusion, subordination, deprivation and war. And obviously that needs to be spelled out in a lot more detail. And obviously there's overlap with a variety of other positions there. But when I think about the left, I'm thinking therefore about probably speaking, a family of positions committed to social inclusion, unhappy with hierarchy in favor, therefore of empowerment and again, very much opposed to violence as a means of solving social problems. I think in today's context, one of the major monkey wrenches in a system like that is the corporation. Now this is an institution that libertarians have been attacking for centuries now, even though we might forget that in today's intellectual paradigm of libertarianism. There really is not much space for a left libertarian critique of the corporation, although it's been around forever for hundreds and hundreds of years. Libertarians have been talking about the problems with corporations. So I asked you here to help me tackle this issue of libertarianism's corporation problem. I remember several years ago when I was a young Austro-libertarian student, I was going to one of the year's more popular education events. And that people on a circuit always are sure to stop here too. And two of my favorite historians were there giving sort of a joint session on, I don't know, something like problems in the 19th century. It was about American history. And I asked them, I was beginning my own honors thesis as an undergrad working on William Leggett, one of these early loco-focos and critics of corporations. And I was curious about why did people like William Leggett and these radical Jacksonians, why did they hate corporations so much? And they thought they were monopolies and all this. I asked them, both of these historians, why did these people hate corporations so much? And they basically shrugged their shoulders. They had no idea. And they said they didn't know what to tell me. And I was hugely disappointed. I walked away from that event thinking these purported experts have overlooked one of the major questions in the history of their own movement. I just could not understand that. So then I spent my time in graduate school trying to answer the question. And I came to the history of loco-focosism. So now I want to ask you, can you briefly tell us what is the issue that historical libertarians or classical liberals, what is their issue against incorporation? I think it's great that you emphasize, that we're talking about a libertarian heritage of criticism of corporate power, quite possibly corporate form, that go back several centuries. I think modern American libertarians often have a kind of historical tunnel of inclusion in virtue of which libertarianism really somehow emerges, I don't know, post-World War II with a split between Murray Rothbard and the folks around Bill Buckley. And clearly there's a much, much richer heritage there. Later libertarianism, because of, I think, some historical accidents associated with the Cold War, has tended to be identified with the right. But the classical liberal libertarian tradition includes a whole lot of anti-status quo politics over many centuries that certainly feels much more left-ish to me. So it's perhaps not altogether surprising that there's been this concern about the corporation. And that's because it seems as if, first of all, the corporation has been a locus of state-secured privilege. The corporation has been a particularly visible example of the business entity or business association that secures and obtains a variety of cartelizing privileges and subsidies and so forth. That's certainly true in particular with regard to the corporate form itself and certainly the associated important feature of limited liability. So there's at least an interesting argument about the degree to which entity status, the idea that the corporation, exists in an important way separately from all those who were involved, whether that could be itself established by contract. But if it could be established by contract, as many libertarians have suggested, there's obviously the problem that what the state's done has been to artificially reduce transaction costs and make it at any rate much easier for people to simply opt into that form rather than to do so perhaps with the negotiation of alternatives on the table as they would if it weren't sort of pre-available in virtue of the general corporation statutes. There's also separately the problem of limited liability, which clearly has been a persistent concern. So we have, of course, two kinds of limited liability. Limited liability in contract and limited liability in tort. And so limited liability in contract, you might think, would be relatively easy to establish by contract. But again, if you did that, you would still have to negotiate. And there still would be alternatives on the table. And those transaction costs would have to be taken into account. Limited liability in tort, of course, is a, and I should say, just to back up for folks who are legal geeks, we talk about limited liability. The idea is that in a lawsuit, whether in contract or tort, the corporation's assets are at stake, but not the assets of the shareholders, the assets of the shareholders that are not themselves, so directly part of the corporation. So obviously this serves as a real incentive for people to invest in a corporation because they know that while they may lose their investment, their own personal assets won't be at stake at any rate. So limited liability in tort clearly is another matter entirely because here, so suppose, for instance, we're talking about a case in which the corporation poisons the groundwater and causes a bunch of people around a manufacturing plant to get cancer. So here we have a situation in which those people don't have, in general, any kind of prior contractual relationship with the corporation. So they can't agree by contract to limit any suits in which they might engage to one's concern just to the assets of the corporation as a whole. So you might think, if the shareholders really are owners, why wouldn't they themselves be in one way or another liable for the debts of the corporation? So if the corporation becomes liable because of, say, this instance where it's polluted the groundwater, why stop the assets of the corporation? So again, there are arguments to be had about that, but the point again is that the law simply solves that problem on behalf of the corporation without allowing for perhaps the kind of flexibility and the kind of potential risk that would have to be sorted out more carefully. So you've got these features of the corporate form itself that I think many libertarians have rightly seen as statused. And then there's just the fact that the corporation, once it exists, quickly becomes a locus, as I say, of state-secured privilege in various ways, and the corporation can become a means of concentrating wealth that then can then be used to, in one way or another, pursue ginnies from a political process. So all of those things, I think, have troubled people over time. Now, Alexis de Tocqueville famously wrote about associationism in America, especially the power of people just simply associating with each other on a voluntary basis in basically clubs whose purpose would be to do a certain thing, like build a school in the town. You know, they would get together and form a town school association that would, you know, have the goal of building a school within a few months. And then they would go ahead and do that. And meanwhile, in Paris, you would have to petition the bureaucrat in charge of education to eventually come to your town out in the countryside and build a school, and it would take years. So de Tocqueville said, well, this American pattern of associationism is really incredibly efficient, and it explains a large part of their democratic culture, it's reflective of their democratic culture, and it helps produce this amazingly prosperous condition that they enjoy. You know, how is the incorporation any different from an association? Is it simply that corporations are associations with, you know, monopolies or privileges attached to them? So what seems clear is that de Tocqueville's cheering for associations can't have been in any straightforward way cheering for corporations, because certainly many, probably almost all of the time he wrote of the American associations that performed these various civic goods obviously weren't incorporated. So clearly incorporation wasn't crucial for that. And the corporate form was certainly apparent in societies like England's, where the same level of associational freedom and associational vitality weren't had. So I think it's pretty important to treat those as distinct. Associations obviously are wonderful, and that's something that any free society is going to depend on the ability of people to form and reform a variety of free associations. But when the association acquires just straightforwardly as a result of state privilege, entity status so that it's no longer just the people involved, but it now has some kind of independent existence, when it can then go on to hold assets and to avoid liabilities in ways that depend on its having that entity status. And that's certainly when it becomes a pressure group in search of long-term privileges. Whether we want to say that makes it a something that's qualitatively different from de Tocqueville's associations, or whether you want to say no, this is really just a special kind of association. I'm not sure much turns on that, but what's clear is that the additions are troubling in a way that the associational form itself is not. I'm wondering why did so many liberal or radical thinkers who were anti-corporate over the centuries, why did they so closely link the idea of monopoly and corporation? I mean, plainly it was possible for smaller people, I suppose, people who were not at the very top of the power elite. It's possible for them to open corporations, especially like you said, in an environment like the US or Britain as time went on in the 19th century. But yet there was still this linkage of the idea of monopoly, like some medieval king granting out monopoly privileges to some special totes of his to go do the mining in this region or to go conquer some territory in America and then you own it all. And the idea of corporation, people pulling their capital toward a particular business venture. Why was there such a strong linkage for so long? So you're the historian and I suspect really could answer the question better than I can, but I have the sense that the fact that for so long the corporation was a special creation of the state made a huge difference here. So of course, first of all, for a very long time, the only entities that were described as corporations were state entities. So the city might qualify, for instance, as a corporation. So then you have kings extending this privilege of special status to favored groups. Well, I think it's unsurprising that these favored groups didn't just want to petition, let's say, for entity status or even for limited liability. They were at the same time getting special monopoly grants. And so I think it would have been quite natural for the king to grant a corporate charter that came with a set of monopoly privileges. And so because of that then, I think it would have been very clear to people over an extended period that when a corporate charter is granted by the royal authorities, this isn't just a kind of innocent inducement to business activity, but it really is intended precisely to confer on the king's cronies a kind of privilege that clearly otherwise would have been available. And so then when you move to general incorporation statutes, obviously, some of that element of cronyism goes away because the charter isn't just handed out on an arbitrary discretionary basis to the king's cronies. But at the same time, people are very much aware that when business people pool their resources in an entity that is separate from themselves and that therefore can give them a certain kind of insulation against poor choices, that in various ways they're going to be incentivized to engage in bad behavior. And they may well engage in utilizing the wealth they've pooled to seek privileges in one way or another in the state. So I think there's certainly been a progression then in the history of the corporation, but it seems to be that the early history set the tone and the fact that that early history was in the backdrop would understandably have made people suspicious. And the continuing mischief-making engaged in by corporations even after general incorporation certainly would have encouraged that kind of suspicion in the part of the public and certainly in the part of the cherry trees. Now, as I've covered on the show before, the triumph of general incorporation state by state, it happened in constitutional conventions and it started really with New York in 1846 and the Loco Foco movement to reform that state. And the corporation process was at the very top of their list and it was one of the things they were most effective in changing. They helped democratize the institution by generalizing who could actually get a corporation set up and how it happened and it extended limited liability to all sorts of different corporate activities and far, far more people than ever before could now incorporate their business. And there's this explosion of new charters in the late 1840s and throughout the 1850s and corporations just are everywhere at that point. It's not just railroads and bridges and steamboat companies and stuff like that. It's all sorts of things becoming incorporated. So that by the time we get to today, 150, 60 years later, corporations are everywhere. They're ubiquitous. They're considered totally necessary, proper. They're rarely questioned as a good thing. And even we libertarians whose history is built on this, we forget that it was ever a question whether these are justifiable institutions in the first place. So I'd like for us to try to tackle some of the critiques of the anti-corporate left libertarian point of view here. Are we just a couple of modern day Luddites here arguing about something that is clearly a benefit? So, no, I think we're not. That's a short answer. It seems to me that given the alternative, the alternative that there would be specially privileged entities created by legislative acts and entitled to really unique legal positions, the push by the Locofocus for general incorporation certainly seems like a breath of fresh air and indeed an instance of, as you say, democratization. I think it's interesting to wonder what the Locofocus might have said had the risk of special incorporation not been on table, what kinds of arrangements they would then have favored if they hadn't had to counter that other possibility. And so while they certainly sought in pressing for the changes they did to level the playing field, clearly a more level playing field would be established in the case in which really the issues would have to be sorted out by contract and by common law court decisions and there wouldn't be any possibility of state intervention. So, yeah, I don't think we're Luddites to think that the general incorporation statutes, even if dramatic improvements on what preceded them, still in one way or another, unnecessarily reduced transaction costs and unnecessarily reduced risks while probably at the same time encouraging wealth concentration in the hands of corporations and thus perpetuating some problems. So, I don't want to at all be dismissive of the positive step that the Locofocus took, but I think we can do better over time. Now, is it true that you're simply a rabid social justice warrior who wants to be able to strip or review corporate charters whenever you feel like they're doing something wrong? Maybe take away a company's charter if they host Jordan Peterson or something? You know, that thought hadn't actually occurred to me. I'm just not interested in playing those games. I'm certainly not interested, I think, in any legal arrangement that lets courts or legislatures or executives, that lets any entity, whether in a stateful or a stateless society, just arbitrarily, willy-nilly fiddle with the legal status of individual entities. My preference is that we sunset the corporate form entirely and let people craft arrangements through contract and through argument in courts about where to draw lines, for instance, with regard to shareholder liability that really can be reflective of how things can turn out in the absence of state transaction saving, cost saving measures. I'm wondering, then, how exactly would that work, do you think? Especially in today's climate where there are so many potentially disruptive new technologies out there either underway right now, being developed right now in production and in distribution at the moment, something like the Bitcoin distributed ledger, that's in action and that could dramatically transform the way we do contracts. How do you think some of these things would work? How would people pool their capital together and limit their liabilities for actions taken by a gigantic corporation? Something like Uber that is potentially responsible for all sorts of liability. Why would people invest their money in an operation like that that is untested, charting new waters every day, trying new things? There's so much risk in that. Why do that if you can't use the force of government to protect your investment? It seems to me that if you're thinking about the kind of risky environment that we're in now, it certainly makes sense to ask the question, as courts I think are perfectly capable of doing, am I a passive investor or am I simply pretending to be a passive investor to shield myself from liability when in fact I really am more influential over corporate decisions than I perhaps like to advertise? We know, so again, this is all about the transaction cost issue, I think, we know that a court can, as the expression goes, pierce the corporate veil in particular cases when it does seem as if limited liability and entity status are being used to shield bad actors against liability for their mischief making even now. So it's not as if that's somehow impossible now, it's just that the pre-existing corporate form and corporate protections make that harder. So I think the flip side is certainly true, that you might well expect common law courts to begin with the assumption that truly passive investors in publicly traded corporations really did operate at enough of a distance from corporate decision making that they might not be responsible, not because of any general principle of limited corporate liability, but because their role is really not that of owners despite the language that's often used, I mean really they're not that different, perhaps say for banks lending money to corporations just that they have very good returns and you were going to say something. Well, I wonder about that because that seems to me a little like saying, oh, northerners had nothing to do with slavery, they were just funding the slave trade and sailing the ships and things like that. I'm not so sure that you can be a passive investor in a company. So that's an interesting possibility. I think one can ask the question I guess in the case of the investor, how much control does that investor have? I think it seems to me that's a factual inquiry about the extent of influence that the investor potentially has. And then one can ask the question if the investor has a certain amount of influence, do the investors seek to exercise that influence? And I do think again, unavoidably the courts would find themselves engaged in factual inquiries about that. So how precisely they would draw those lines, I'm not sure, right? I just think that unavoidably courts would find themselves engaged in kind of thinking that probably common law courts did to some degree in the 19th century asking, are we going to stifle productive investment from which we all benefit if we assume that any of all investors who are arms length investors are fully liable? And so maybe you want to respond, no, there are so many bad things that the corporations might do that it really is worth holding the sort of Damocles over the heads of individual investors. You might think, however, in those cases, I can imagine that there would be insurance arrangements that probably would be invoked in one way or another to provide shielding there. I have to stop and think about the economics of such arrangements. But I think the bottom line is a corporation that wanted to attract investment from anonymous members of the general public would, it seems to me, need to provide some kind of security there. You couldn't just assume in advance, I suppose, that a court would rule in a certain way. And so yeah, perhaps in that case, what you need to do would be to say, if you choose to invest here, recognize that the value of your shares is constrained by the fact that we do have to keep paying for this liability insurance for you, if you want to buy in, that's a possibility. And so that might be a certain kind of self-regulating mechanism there. Yeah, I mean, we'd have to talk more about the institutional arrangements, but that's unfundly. Well, now this leads me back to an earlier thread. I'm wondering again then, what happened in the 20th century for libertarians to stop concerning themselves very much with the question of corporations? Is Ayn Rand to blame for making us love and respect business people so much and their great business as entrepreneurs? Or is it really the fault of, I guess, the Cold War, which just sort of automatically identified everything with the smacking of the left with communism and libertarians can't have that, so we're on the right. What really happened here, or is it something maybe more sinister that we also have had our interests, material interests in the corporate form? Yeah, so I think great questions. It seems to me, as I've observed before, it really seems to me that the post-World War II identification of American libertarianism with the corporate sector is an anomaly. It seems pretty clear that there wasn't much enthusiasm for big business on the part of the so-called old right, and certainly not on the part of 19th century and earlier libertarians and classical liberals. It seems to me this is really this anomalous feature of the unstable alliance between the Cold War, Buckley Right, and libertarians like Rothbard and Frank Meyer. I think that political background undoubtedly matters, the sense that somehow the enemy of my enemy is my friend, I think almost always a bad basis for decision making. I think Rand surely has to bear some blame here for telling us that big business is America's persecuted minority. Rand herself at her best certainly knew how to paint pictures of business people who were anything but members of a persecuted minority and certainly not manipulate the system, but by saying things like that she certainly did encourage a kind of moral blindness, I think, on the part of the number of libertarians who came of age in the 50s and 60s with regard to the merits of not only the corporate form in the narrow sense, but the role that the large corporations played in American social political life. Whether there's also on top of that an unwillingness to face some of these problems because of our own economic interests, I mean, look, I think we always have to be aware of those kinds of possibilities. I teach at a university and undoubtedly some money that the university possesses, it possesses because some corporation donated it. I find myself sometimes willing to roll my eyes at criticisms by the status left, let's say of Charles Koch. Is that because I get a tiny grant from the Koch Foundation to run lectures? Maybe. I think we should be aware of that kind of thing, but I think there are all sorts of libertarians who don't have much, if anything, to do with corporate money, and even those who do in one or another receive corporate grants or benefit from corporate marshals are not, I think, is a general matter just unprincipled shields. Of course, you might expect me to say that. But I think it's more this broader cultural thing that really starts after the war and I think does include both the Cold War, right libertarian alliance and certainly the influence of Rand with her vision of corporate titans as heroic and probably the way in which that influenced the self-understanding of immigrant people. A special thanks to Professor Gary Chardier for joining me on the show today to talk about libertarianism's corporation problem. It may be too much to ask that you all come away from this, a bunch of rabid anti-corporate loco-focos, but I hope that it has at least provoked a new and fresh set of serious questions in your minds. The loco-focos were among the first generations who actually had to deal with the corporation problem as it was taking shape. They played a serious role in determining how corporations would look for the next two centuries. But today, we stand in our own swirling era of constant reform. We cannot afford to make the same mistakes they did.