Corporatism versus governmentalism

Photo credit: Alan Cleaver via Foter.com / CC BY

Summary
Some people believe in property rights and see government interventions, like taxation and restrictive laws, as violations of those rights. I think government interventions are just a different kind of property right. The truth is that you don't own what you think you own, and you don't own it because of property rights that precede your own.

Just to be clear, this what I mean by property rights: If you own a piece of property then you have the right to use your property in any way you want. If you want, you can just let it sit, and not use it. You also have the to restrict others from using your property unless you give them permission. Permission might be granted in return for money or in return for anything else that you ask for and the other party agrees to.

Of course there are limits to your rights. If you have an axe, you can't chop down someone else's tree. If you own a hammer, you can't hit someone with it.Your right to use your property ends when it's used to injure another person or destroy someone else's property. More broadly, it ends when you use your in a way that violates someone else's rights.

What violates another's rights? Chopping down a tree violates the tree-owner's property rights. That's pretty clear. Hitting someone with a hammer violates some right that people have -- or should have -- to not be attacked and injured.

But this is life, and there are no bright line tests for what's a right and what is not. There are complex definitions, edge cases, and slippery slopes in the definition of rights, and I'm going to skip them. I'm also going to skip talking about what rights are and where they come from. Let's agree that rights do exist, and we can agree, in general, on what "using property without violating someone else's rights" might mean.

With that behind us, I'll define government intervention in property rights as anything that stands in the way of your full exercise of your remaining rights. For example, taxing someone for the property that they own is certainly such an intervention. Requiring that you get a license in order to use your own property might well be such an intervention.

Most people see governments as different form markets, but I've argued that governments arise as a consequence of violence markets. We see government interventions as an abridgment of property rights, but I'll argue that government intervention is a consequence of other property rights.

A thought experiment
Let's do a thought experiment to see how this works. To do that, I'm going to talk about the government of Arkansas, and I'm going to create a reasonable corporate entity that can behave almost identically to the government of Arkansas. The argument then is: if it's OK for a corporation to do, then it's also OK for a government.

The land that comprises the state of Arkansas is part of the Louisiana territory, purchased in 1803 by the United States Federal Government for $15,000,000, or about 319,000,000 in today's dollars. The territory is 828,000 square miles. Arkansas is 53,179 square miles, or a bout 6.5% of the area.  If we prorate the cost, then Arkansas might be worth about $20,744,000 in today's dollars.

I picked Arkansas because it is one of a number of states that were acquired by the Louisiana Purchase. After making the case for property rights in Arkansas, I'll make a similar case for rights in other states and other territories with different histories.

Since Arkansas was once bought by the Federal Government, it's not hard to imagine that it might have been bought by some other entity, or that it might have been sold by the Federal Government to a willing purchaser -- like me. In this thought experiment let's imagine that I've formed a corporation called ArkanCorp, raised the necessary funds, and I've bought Arkansas, on pretty much the same terms that the government of France sold it to the United States government. For simplicity, let me be the sole shareholder, and the CEO. And to make the argument just the tiniest bit more realistic, let's suppose that the rights I acquire in Arkansas are not the absolute rights that the United States, a fully independent nation, got, but rather the rights obtained by any property owner under the laws of of the United States.

Now let's see how ArkanCorp looks a lot like an ordinary corporate entity. Consider WalMart, a corporation like ArkanCorp. The fact that it is headquartered in Arkansas is an irrelevant, and amusing coincidence. WalMart is incorporated, as is ArkanCorp, under the laws of the state of Delaware. So both corporations are subject to United States and Delaware law.

WalMart owns properties. It hires people, called "employees" who work in those properties. It lets people called "customers" visit the stores and make purchases -- or not. It lets companies called "tenants" occupy defined spaces within its properties, subject to agreements between WalMart and those tenants. Employees must follow rules that WalMart has established for employees. Customers who visit WalMart must follow rules that WalMart has established for customers. Tenants must follow the rules that WalMart has established. Because WalMart is owner of its properties, then it can establish whatever rules it wants, subject to regulations imposed by the city, state, county, and country in which a particular property is found.

Now compare with ArkanCorp. ArkanCorp owns a single, really, really big property, coextensive with the modern state of Arkansas. ArkanCorp does many things similar to things that WalMart does, only we at ArkanCorp sometimes use different words than WalMart uses.

WalMart deals with "customers", "employees", and "tenants." Decisions within WalMart are made by "management." ArkanCorp deals with "residents," "citizens and non-citizens." Decisions within ArkanCorp are made by "government."

WalMart tenants can't just occupy any unoccupied space in a WalMart store. They have to pay to be allowed to do so. What they pay is called "rent." In some cases a third party might acquire the rights to some space and the tenant pays the rent that's set by the third party, which then pays WalMart.

ArkanCorp customers must likewise pay to occupy space in Arkansas. What they pay we call "property tax." If a third party has acquired the space then they might pay the third party. In that case, the payment is called "rent" and the third party pays the "property tax."

WalMart customers get some things for free -- like heat, light and the use of toilets -- but must pay to get other products and services from WalMart. We call the amount paid a "price." ArkanCorp "residents" get some things for free, but must pay to get other products and services from ArkcanCorp. We call the payments a "tax."

WalMart charges rent to tenants based on the space that's used, but there's no reason that they could not  charge rents based on gross sales, or the number of customers who walk by the property, or anything else. As long as it's legal, they can do it.

People can't legally have jobs in Arkansas unless they are citizens (of the United States). They can't legally have jobs in WalMart unless they are employees of WalMart, or of a tenant. WalMart employees have rights, responsibilities, and benefits that are different than those of visitors. In that sense, they are much like citizens of Arkansas. Likewise ArkanCorp "citizens" have rights, responsibilities, and benefits that ordinary visitors don't have.

Since in a free market system, the owner of a property is allowed to make up rules, set conditions, and charge fees for people use the property that's owned, ArkanCorp can make up laws and charge taxes for what it owns or controls. The only difference between ArkanCorp and some other corporate entity is the terms that ArkanCorp uses: rules versus laws; fees versus taxes.

If you don't like WalMart's rules, either as a "customer" or a "tenant" you are free to go somewhere else. If you insist on going to WalMart and playing by your own rules you will be restrained -- either by WalMart security, or by the police forces of a larger entity in which a particular WalMart property is located.

Similarly, if you don't like ArkanCorp's rules, either as a "citizen" or a "resident" or a "visitor" you are free to go somewhere else. If you insist on going onto ArkanCorp proprety and playing by your own rules you will be retrained -- either by ArkanCorp security or the police forces of a larger entity in which the ArkcanCorp property is located.

Maine Isn't Arkansas
OK, so if you buy the idea that Arkansas could be owned by an individual or company and a company could do exactly what that state government does, that doesn't hold for every state. Maine was never sold, so it couldn't be bought. Nor was Massachusetts, New York of Texas. The government of Arkansas might have the right to do whatever they want because Arkansas owns everything in Arkansas. But if you've got a house in Maine, then it's yours, right? What gives the state the right to charge you for something you own? What gives the Federal Government the right to make you pay taxes.

The answer, I will offer, is essentially the same as in the case of Arkansas. When England settled the Colonies, people who occupied the colonies were subject to whatever conditions that the Crown might have earlier or might later impose. Whatever the conditions were, they were conditions established by the Crown as part of its property rights.

The Crown chartered companies, like the Massachusetts Bay Company, and private owners, like William Pitt, and granted them rights over certain geographic areas under charters, issued by the Crown. Never did the Crown surrender its right to revoke charters, and never did the Crown relinquish its right to make new rules for those who occupied the territories that it owned when and as it saw fit. The charters of the original colonies and later the states have been collected here.

The American Revolution resulted in successive forms of government that replaced the Crown and those powers established by the Crown: first the Confederation and later the United States Government as defined by the Constitution and the various states which constituted themselves after the end of the war. But the Crown's over-arching property rights were never surrendered entirely. Rather they were transferred from the old government to the new.

One goal of the Revolution: "No taxation without representation" was met. There was still taxation, but it was taxation with representation.

How did England get the right to tax? How did it gain the ability to control the lives of people who resided (or merely transited) geographic areas to which it laid claim? Those are stories for another time. But I'll give you a hint: violence.