Arnold Kling  

A Corporate State?

California is another country... Mr. Efficient Markets...

Mencius Moldbug writes,

the purpose of property is to prevent violence. The formalist is completely unconcerned with the moral legitimacy of property rights. She is entirely concerned with their stability. To a formalist, a system in which no involuntary property transfers occur is always ideal

...The US government today has no king. On the other hand, it is certainly a distinct entity, and we can regard it as a corporation, that is, a virtual person with a single identity.

...this corporation (which here at UR, we call "Washcorp") is a normal primary or sovereign property holder. Washcorp is thus a sovereign corporation, or sovcorp. Its primary ownership of its swath of North America, which to avoid confusion with political entities we call "Plainland," is an absolutely normal relationship. The validity of Washcorp's ownership of Plainland does not depend on the Constitution, the last elections, or any other magical rite, but simply on the stable and exclusive military control it exercises over the territory. As for the fees that Plainlanders pay to Washcorp, they are the normal cost of property rental.

...Neocameralism is the idea that a sovereign state or primary corporation is not organizationally distinct from a secondary or private corporation. Thus we can achieve good management, and thus libertarian government, by converting sovcorps to the same management design that works well in today's private sector - the joint-stock corporation.

...While none of them comes anywhere near the neocameralist ideal, the city-states of Singapore, Dubai and Hong Kong certainly provide a very high quality of customer service. Note that none of them has any concept of constitutional, limited, or democratic government.

Read the whole thing, or at least the second half.

He seems to be arguing that the best form of government would be profit-maximizing corporate city-states competing with one another for citizens.

My argument against this is that it simply shifts the crux of the problem to corporate governance. The crux of the problem is how can society be organized so that the incentives to engage in violence are minimized.

In a corporate city-state, there is an incentive to engage in violence in order to control the city-state. Latin American military juntas in the 1950's were constantly undergoing coups.

We think of corporate governance as stable, but that is only because the managers and shareholders operate in an environment where their disputes are resolved peacefully under the watchful eye of the government. We don't have violent coups to take over Microsoft or Goldman Sachs, ultimately because the government will not allow it. However, if Microsoft owned all of the land in the Seattle region and there were no higher authority, a clique of colonels would have plenty of incentive to stage a violent coup. So you would have violence and instability in the corporate city-state world. See Snow Crash, the novel by Neal Stephenson.

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CATEGORIES: Political Economy

COMMENTS (9 to date)
Ross Williams writes:

Found a lot of problems, one of them being this statement:"Washcorp's financial goal must be to maximize the value of its equity, ie, its property." I say no.

Abstractions can be an important tool to understand concepts, but we cannot forget that it is the individual who ultimately acts, and not a corporation. We cannot speak of a corporations goals, but only that of its CEO, VPs and other workers. In the case of the US, those in power are only there for a certain amount of time, they do not have strong incentives to preserve the value of the empire beyond their time in control. If they can tax the country now and let someone else worry about the future consequences, the only thing stopping them would seem to be simple altruism.

Taking this into consideration, it would not be valid to say that the corporate model of government would cause it to behave as a libertarian one in all respects except taxation.

I have never heard of the author before, but his claim to have studied Austrian economics was not showing up in this post. I really don't enjoy the Austrian-economics-as-a-stage-i-am-going-through-in-life-but-will-never-study-it-seriously crowd

Troy Camplin writes:

If we think of the federal government as a corporation, then we still have a strong argument for libertarianism in Charles Koch's new book "The Science of Success." Maybe we should send a copy to every person in government.

Ross Williams writes:

I would like to see how Public Choice theorists would handle the idea of corporate government structures. My bet: shred it to pieces. You would really need an absolute monarchy with heritage for this to work well, otherwise I can't see long term equity being maximized. Voting and democracy in general would certainly screw up the incentive structure.

TGGP writes:

See Snow Crash, the novel by Neal Stephenson.
See The Logical Fallacy of Generalization from Fictional Evidence by Eliezer Yudkowsky.

TGGP writes:

I have never heard of the author before, but his claim to have studied Austrian economics was not showing up in this post. I really don't enjoy the Austrian-economics-as-a-stage-i-am-going-through-in-life-but-will-never-study-it-seriously crowd
I find it funny that he is so confident in his belief that the only economists that aren't quacks are non-GMU Austrians. I think a lot of those types are prone to exaggerating their differences with others, as I discussed in this thread at the Mises blog and this post at my blog.

tc writes:

Just how "corporate" are Singapore and Dubai? Seems to me they are a testament to the will and vision of extroardinary leaders - but a corporation is supposed to outlast any individual leader. Let's see how they handle a few transfers of power, real power, before proclaiming limited government obsolete.

jb writes:

TGGP's snark notwithstanding, the book that even more illustrates an example of this concept is The Diamond Age, also by Neal Stephenson, which can be thought of as a 100-year-later sequel to Snow Crash.

Randy writes:

I've been reading UR for awhile now. MM is thought provoking if nothing else. What I have found useful is the theory that the United States of America is a corporation - not that it could theoretically become one, but that it is one. The geographical region known as the USA is a property - with owners and tenants. So which is which and who is who? My belief is that if net rent collections exceed net rent payments, then one is an owner. And if not, then one is a renter. In fact, put all that public school propaganda to one side for a second and it seems obvious. Its a complicated process, but understanding it is relatively simple - follow the money.

Variable writes:


Rule number 1: fiction never proves anything. And I'm a big fan of Stephenson in general and Snow Crash in particular. Further, I generally agree with your conclusion. But I find fault in citing a novel. Fiction doesn't get anybody anywhere.

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