This website is my private project. You can contribute by giving your feedback.

Subdue the greedy giants!

We have a bug in our legal system. Our problem is that we grant private corporations unlimited rights to profit while demanding only limited responsibility for the risks. We grant limited liability without demanding limited profit.

On this page I explain that bug and how we might fix it.

A screaming injustice

Every human activity bears a potential risk. No investor would dare to engage in any bigger project if they wouldn’t be protected from the risk. The limited liability concept makes sure that the worst case scenario for an investor is that they loose the invested capital, i.e. the money they invested into that particular project. And no wise investor puts all their capital into a single project. This is one of the basic principles of capitalism.

But what happens when it turns out, sometimes decades later, that some activity has dramatically negative effects? For example by causing health issues? 1 Or, more difficult to detect, indirectly contributes to complex world-wide climate changes or pandemics, resulting in damage that goes beyond anything we can reasonably account for?

When something goes wrong, the investors lose their capital, that’s part of the game. But what if the damage is far bigger than the capital? Who is going to pay the bill?

Answer: the victims. Sometimes the victim is Earth in general, humanity as a whole. Sometimes it is only a group of humans. Sometimes those who caused the damage are not part of this group.

If the victims are lucky, they get help from their governments or some charitable organization (all of which are public corporations).

But don’t expect those who made the profit to lend a helping hand! Because that’s not part of the game. After all they are private corporations. It might happen that they help (1) if they can use it for increasing their profit or (2) if they are forced to help because their direct responsibility can be undeniably proven 2. But basically it is not their business.

This is a screaming injustice, a collective sin.

Where is the sin?

How to change it? Where is the bug? Where is the sin?

It is not a conspiracy. A conspiracy means that a group of humans “conspire”, unite their spirits in order to plan something. We are standing in face of something far bigger and far more dangerous than a conspiracy.

We cannot blame the private corporations for being greedy because that’s their reason of being. We cannot even blame the responsible managers because if a courageous manager would feel guilty and “waste” some capital of the owners for “useless” purposes, this manager would soon get replaced by somebody who knows their duty.

We can’t blame capitalism, money or the free market. Capitalism is important because it provides a way to transform ideas from mere words of a written text into money, which gives them substance and power. Money turns ideas into reality, a door between the invisible world and the visible world.

We can’t blame the limited liability concept. Limited liability is important because humans should get protected from carrying more responsibility for their mistakes than they can reasonably bear. Humans need mercy. Mercy is an unwritten human right.

We cannot blame anybody. There is no guilt. It is simply a bug in our system. A systemic sin. This bug was hidden as long as corporations remained relatively small. The bug is has become active and dangerous only in the digital era where corporations have at their disposal new ways of communication and data processing, giving them a chance to become more powerful than the national government that controls them.

How to fix it

Here is my suggestion for fixing the bug. We just need to make clear by law that every private corporation will get nationalized when certain conditions are met:

  • when it has generated enough profit (i.e. when its investment to profit ratio exceeds a certain threshold),

  • when it has gone out of control (i.e. when its size has become bigger or more powerful than its government),

  • when it deserves death for ethical reasons. We are allowed to “kill” a legal person without mercy. Mercy is a reserved right for humans, it does not apply to legal persons.

Theoretically it is easy because private corporations are neither a natural law nor tangible objects, but legal persons, i.e. a product of our own law systems. Since we developed these laws, we are responsible for upgrading and changing them. We must learn to subdue private corporations.

Nationalization is a form of expropriation. Expropriation is justified when some public interest becomes more important than the private interest. The public interest of subduing a private corporation is more important than the private interest of its owners.

Nationalization won’t stop the corporation’s activity. It just changes the recipient of the profit. It is just a new strategy of distributing the profit.

There are private corporations who did an equivalent step by their own decision and with success. For example The Salt Lake Tribune went nonprofit in 2019 (via Sarah Scire).

This measure is inspired by the Bible, which describes laws like the Sabbatical year and the Jubilee, designed to limit wealth hypertrophy and balances between liberty and equality (compare Liberty vs. Equality)

Challenges

Of course owners of an expanding business won’t like to get expropriated because –of course– nobody wants to give away what they consider their property. But they will have no choice. Nationalization is imposed by the state. It is a simple obligation, as obvious as a yearly tax declaration. Failing to do it in time simply leads to increasing fines and ultimately criminal prosecution of the responsible managers.

Of course the gory details are to be regulated by clear legal rules. For example who decides when the investors have made “enough profit”? There must be a balance between giving to investors what they deserve and keeping the corporation’s activity alive.

We don’t want to stop private corporations –most of them are doing good work most of the time–, but we must subdue them. We must remind them that we are the masters, not they.

The effect will be yet another example of beating swords into ploughshares. Nothing new, but still a revolution each time it happens.

Why we don’t do it

Reality, of course, is less easy than theory.

If the solution is theoretically simple, why don’t we start doing it? Why don’t we repent at least in theory, at political level, i.e. decide that we change our direction and want to start moving towards a new horizon?

First obstacle: maybe I am wrong. My explanations above are obviously naive and simplified. After all it is a fundamental change in a complex system. It needs feedback and help from experts. Who would pay such experts? Definitively not a private corporation.

Second obstacle: Most of those who understand it have no reasonable motivation to fix it because that would deprive them from a convenient source of income. And most of those who would benefit from it have neither the competence nor the power to defend it.

These two obstacles form a vicious circle. But as with any vicious circle there is hope to break out of it. My hope is that the present call gets enough attention so that a significant number of individual humans find the courage to unite with those who are ready to make the first step.

Implementation note: Google, Amazon, Microsoft and Facebook are registered in the United States. But only the parts that actually exist in the US will go to the US. The Belgian headquarter remains private as long as the Belgian government doesn’t decide to nationalize it in turn.

History of limited liability

The world’s first modern limited liability law was enacted by the state of New York in 1811. The modern world is built on two centuries of industrialisation. Much of that was built by equity finance, which is built on limited liability. Limited liability corporations are the key to industrial capitalism. (economist.com, Wikipedia)

Footnotes

1

As an example, consider how much profit has been generated since the mid 19th century thanks to the discovery of asbestos for construction and fireproofing and compare this to the costs generated after discoverying its toxicity

2

Where the proof itself usually demands considerable administrative costs, usually coming from the victim or their helper