Subdue the greedy giants!¶
We have a bug in our legal system. On this page I explain that bug, in Limited Liability – Limited Profit I will describe how I would suggest to fix it.
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?  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 exceeds 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.
Usually the wealthier ones pay less than the poorer ones.
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. Basically, and by law, it is not their business. After all they are private corporations.
This way of governing the earth is a screaming injustice, a collective sin.
It can happen that they help (1) if they can use it for increasing their profit or (2) if their government forces them to to help, which usually demands considerable administrative costs.
How to change it? Where is the bug? Where is the sin? Who is guilty?
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 blame their managers for doing their job. If a courageous manager would listen to God, feel guilty and “waste” some capital of the owners for “useless” purposes, this manager would soon get replaced by somebody who “knows” their “duty”.
Neither can we 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, money is a door between the invisible world and the visible world.
Neither can we blame the limited liability concept as such. 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 culprit. It is simply a bug in our system, a systemic sin. We need to fix it all together. This bug was hidden as long as corporations remained relatively small. The bug 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 nation state that controls them.
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 the government who regulates it),
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 able and 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.
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)
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.
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.
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)
An example of how governments can force private corporations to help are windfall taxes.
A windfall tax is a higher tax rate on profits that result from a sudden “windfall gain” to a particular company or industry, often as the result of a geo-political disturbance, war or natural disaster that creates unusual spikes in demand or interruptions to supply. (via Wikipedia)
Example: Financial Times: EU targets €140bn from windfall taxes on energy companies <https://www.ft.com/content/c936d529-4223-4983-980c-0e4251ed1297>