Private property and the corporation
Markets and private property; Locke's liberal democracy; the corporation's rise.
Summary
The main problem humanity faces today is the concentration of private property by huge impersonal organizations. This essay in three parts has ten sections.[1] 1. Market economy and private property. 2. John Locke’s philosophy of liberal democracy. 3. States, business corporations and billionaires own the bulk of private property 4. Its ownership has evolved from individual persons to giant collectives, and from real to intellectual property (IP), that is, from material objects to ideas. 5. How this has affected my own writing and publishing strategies today. 6. A history of IP follows. 7. The United States enforces global IP now, but long ignored international copyright agreements. 8. The struggle over IP is the central contradiction of capitalism in the digital age. 9. The legal distinction between real and artificial persons for business must be restored. 10. The plutocracy consists of “monarchists and pseudo-aristocrats” (Thomas Jefferson) who are hostile to democracy, while hiding behind the slogans of early liberal democratic revolutions.
Market economy and private property
We experience the economy in modern societies as a network of exchange relations. Most often, these take place through the medium of money: the buyer hands over money in some form to the seller in return for goods or services. The total of these transactions is sometimes referred to as “the market”, an abstract entity whose extent is unknowable. In recent decades, people everywhere have become linked up in a single nexus of exchange, the “world market.” In ideology, modern markets can take place anytime and anywhere between individuals who are independent and unknown to each other. This assumption (“economic individualism”) enables economists to construct mathematical models of great generality, since they refer to behavior outside time, place and society. The institutional conditions that make this assumption plausible are quite abnormal, and were first won in a few countries after centuries of political struggle. The idea of buyers and sellers being free to make decisions about the price and volume of transfers between them is remarkable, even when only a pair of shoes or a hat is at stake; but imagine the complications when someone's ability to work or a place for a family to live is traded.
The idea of personal agency in markets is closely tied to private property. This is an individual owner’s ability to command exclusive rights against the world in something. Once we have bought an item, we can do what we like with it; the seller has even greater freedom to dispose of the money we paid for it. Look at your personal possessions—they are ‘yours’. How did you get them and what gives you the right to treat them as your own? Your watch, for example, is clearly your own. It feels that it is so by virtue of being worn next to your skin. You bought it, or someone who bought it gave it to you. Your right to claim the watch is based on market exchange. But what secures that? You then get mugged one dark night, and a violent stranger demands your watch. In your fear and anger, you now realize that the state underwrites your claim to own the watch, and promises to restrict violent assaults on persons and property. In time, you settle back into thinking of your possessions as your own, and forget the public organization that make it possible.
It has been rare in history for an anonymous state apparatus to secure private property independently. Ownership was typically based before on membership of concrete social groups who could stop others taking away what belongs to them. Individual claims to ownership were often modified by such groups asserting a collective over-right, unlike the absolute individual ownership characteristic of private property. Take a hypothetical example.
A Maasai warrior works as a nightwatchman in Kenya’s capital, Nairobi. The Maasai are famous for their traditional way of life based on cattle-herding; and young men form age sets of warriors whose task is to defend the herds against all-comers. Nowadays, many work temporarily for wages in jobs that require a watered-down version of their warrior training. This migrant saves some money and, before returning home, buys some things, including a watch that he wears on his wrist. On arriving back home, he meets an age mate who says, “I like your watch; give it to me,” and he must give it up. Why? Because all property in the village is held through the ability of young warriors to ward off predators, both animal and human. Their solidarity, essential in battle, is undermined by any tendency for some individuals to claim separate interests from the rest. They claim that a man’s wife belongs to all his age mates, although it is rare to demand sexual access as a right. Our ex-watchman must be reminded that village life rests on social principles very different from those obtaining in Nairobi; he hands over the watch.
In western legal history, the Romans invented private property. Before they established a strong state linked to extensive markets, property rights were based on local kin-groups defending themselves against similar groups. Ius in personam meant that rights over things were always mediated by specific personal ties. Ownership was in turn derived from production or consumption; something belonged to you because you made it or needed to use it. Traders, however, held property for another purpose; their ownership claim was to something they neither produced nor would use, but intended to sell. They were vulnerable to any group using their local monopoly of violence. The Roman Empire wanted to encourage long-distance trade; it offered military protection to these merchants. Ownership claims could now be granted as ius in rem, rights over things unmediated by personal or social relationships; in other words, the same private property that we take for granted.
For the free circulation of commodities in exchange for money, the connection between persons and objects and that between persons in groups were weakened in law. Yet English-speakers still assume a strong physical association between persons and objects—“possession is nine-tenths of the law”—even though social ties making private property possible are invisible. This was why markets were important for liberal democracy.
2. John Locke’s philosophy of liberal democracy
In 1683, at the age of 51, Locke was an unpublished Oxford academic and the client of a discredited politician. He fled for his life to Holland and was sacked by his college. He returned to England six years later when Prince William of Orange had -established Protestant monarchy in the Glorious Revolution of 1688. He published Two Treatises of Government a year later. Locke was appointed to the Board of Trade and wrote influential pamphlets on money that played a major part in restoring national currency. He became so famous that he was sometimes described without irony as “the greatest man in the world.” An architect of the middle-class revolution, he was the leading public intellectual when the United Kingdom was formed—along with the Bank of England, the national debt, and other durable economic institutions. The European Enlightenment was largely a response to his work. The Americans based their revolutionary constitution on his ideas. Now he is often regarded as an apologist for capitalism, and author of the “possessive individualism” on which neoclassical economics is founded.
I did not find the story of our “economic individualism” in Locke’s Two Treatises of Government. The aim of his “Commonwealth” was to preserve all citizens’ property in themselves and their possessions: “The end of law is to preserve and enlarge freedom.” This is “a liberty to dispose and order as he lists his person, actions, possessions, and whole property within the allowance of those laws under which he is, and therein not to be subject to the arbitrary will of another, but freely follow his own.” His emphasis was on the political conditions of personal autonomy. Both treatises are extended essays on parent-child relations. In the first, Locke denies the right of monarchs to claim to be the father of their subjects. In the second, the only exception to citizen autonomy is childhood. He asked how we can protect children to grow up independent. No society has yet solved this problem; in eighteenth-century England, he was best-known not for political theories or epistemology, but for Some Thoughts Concerning Education where, among other things, he pioneered advocacy of potty training.
Locke also asked how one Commonwealth acting alone can protect the property of foreigners passing through it; who or what secures the property of the Dutchman in London? This opened the issue of a cosmopolitan society beyond the boundaries of states taken up by Kant later. He invented and saw the limitations of national capitalism—the aspiration to manage markets and money through central bureaucracy in the interests of the citizen body—long before Hegel, List and Bismarck did the same for nineteenth-century Germans.
John Locke’s main purpose was to establish the infrastructure of global trade with Britain at its center. He wanted to stabilize the means of communication and exchange, words and money, by confronting semantic and economic criminals. The state can hang counterfeiters of currency; but how do you punish politicians who never say what they mean? Each undermines confidence in civil society. Only perverse hindsight, warped by what capitalism later became, would represent this urgent and far-sighted project as masking class inequality in the rhetoric of market democracy and natural rights.
The classical liberal revolutions of the seventeenth to mid-nineteenth centuries—the English Civil War and Glorious Revolution, the American War of Independence, the French Revolution, Britain’s Abolition and Anti-Corn Law movements, Italy’s Risorgimento, and German unification—aimed to transfer power from the traditional rulers (aristocratic warrior landowners) to owners of capital who claimed to represent their workers. They wanted to secure their commercial gains that had been subject to robbery by the King’s thugs and freelance local despots. Workers now had to be disciplined for the impersonal regime of factory production. Except for the East India Company and the Bank of England, capitalist businesses were owned and run by individual entrepreneurs who were personally exposed to erratic market swings. The addition of machines on a large scale by the industrial revolution drew millions of workers into burgeoning cities. They agitated there for improvements in factories and society, while criminal gangs took over swathes of the main cities. This led to linked revolutions of the mid-nineteenth century, ushering in national capitalism led by an alliance of the traditional enforcers and money men. Karl Marx wrote and published Capital in this decade, but it was too late for inclusion in magnum opus, even though he wrote newspaper articles claiming that the American Civil War had ushered in a new stage of capital accumulation. Globalization of national capitalism in the last century and its failure are the main cause of today’s world crisis.
3. The rise of the corporation
What has happened to private property in the last century and a half? Huge social entities—national governments and corporations operating on a transnational scale—have acquired the rights of individual citizens to manage the agglomerations of machines and money that run our world. Far from shoring up liberal democracy, private property in this form favors its totalitarian opposite, where personal identity is made to conform to impersonal institutions.
In the old days, if a sole proprietorship or partnership owed more money than its assets were worth, investors were fully responsible for debts incurred by their losses. In 1580, Queen Elizabeth of England granted “limited freedom from liability” to The Golden Hind, Sir Francis Drake’s ship, of which she was the largest shareholder. Now, if an enterprise incurred large losses, investors had to repay only their initial investment, leaving creditors to absorb the remaining debts. Returns on this investment were 5,000 per cent, and the queen was well-pleased. Drake was a national hero, but the world called him a pirate. The model she invented underlies the modern business corporation. World trade was then dominated by the Dutch; in 1600, Queen Elizabeth granted a charter to the East India Company, a group of merchants and aristocrats based in the City of London’s financial center. This grew considerably in two centuries while keeping its ties to the British government.
Apart from India, the Company financed James Cook’s explorations of the Pacific, and controlled international trade with the American colonies. By 1770, it was on the brink of bankruptcy. Dutch traders and American smugglers—called “pirates” just like today—evaded the company’s monopoly to sell cheaper tea to the lucrative American market. The 1773 British Tea Act confirmed that exclusive right, exempted the company from taxes on exports to the American colonies, and granted a tax refund on 17 million pounds of tea stored unsold in England. This greatly increased the company’s profitability, and allowed it to undercut the prices charged by retailers in America. The Boston tea party was fueled by resentment of this corporate monopoly, as well as by having to pay for Britain’s wars overseas with their taxes.
After independence, American businessmen fought to win the constitutional rights of individual citizens for their corporation. After the Civil War, railroads acquired enough wealth and power to convert this push into legal privilege. The 1868 Fourteenth Amendment to the constitution guaranteed former slaves equal protection in law, for example by making discriminatory provision of education illegal. This precedent was used by the railroads to sue states and local authorities that enacted regulations specific to them, since it created “different classes of persons.” Corporate personality was hotly debated in the newspapers. The corporations could keep coming back to the courts until they won, and eventually they did. A Supreme Court judgment of 1886 involved Santa Clara County vs. the Southern Pacific Railroad. The latter was being sued by the county for back taxes; but its lawyers argued that the company was a person entitled to equal rights under the Fourteenth Amendment. The Supreme Court’s written judgment says: “The defendant corporations are persons within the intent of the clause in section of the Fourteenth Amendment of the Constitution of the United States, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws.”
It is widely believed by scholars that this was not Chief Justice Waite’s actual conclusion, but one inserted into the case’s head notes—which are not legally binding—by J.C. Bancroft Davis, the Supreme Court’s reporter. Davis was not a low-level hack: a Harvard-educated lawyer, he had been a judge, Assistant Secretary of State, and Minister to the German Empire, where he met Karl Marx. He wrote a dozen books, was once president of a railroad company, and worked closely with other barons like Jay Cooke.
This judgment opened the floodgates. Of 300 Fourteenth Amendment cases considered by the Supreme Court in the next three decades, only nineteen involved African Americans; the rest were business corporations claiming the rights of individual citizens. If a town in upper New York State today wants to protect small shopkeepers by denying Walmart a license to open a superstore, it risks an expensive lawsuit defending Walmart’s constitutional rights as a person.
William Jennings Bryan—twice the losing Democrat presidential candidate around 1900—said about corporations and living people: “[They] differ in the purpose for which they were created, in the strength which they possess, and in the restraints under which they act. Man is the handiwork of God, and was placed upon earth to carry out a Divine purpose; the corporation is the handiwork of man created to carry out a moneymaking policy. There is comparatively little difference in the strength of men; a corporation may be one hundred, one thousand or even one million times stronger than the average man. Man acts under the restraints of conscience, and is influenced also by a belief in a future life. A corporation has no soul and cares nothing about the hereafter.” God’s purpose is now routinely invoked to justify a Congress beholden to the corporations to an extent that would surprise even the East India Company’s shareholders, whose excesses did so much to provoke the American Revolution.
[1] The essay lacks scholarly apparatus for the benefit of general readers and beginning students. My Self in the World: Connecting life’s extremes (2022) has a plethora of references and a full index. See commentary