Henry Simons, one of the founders of the first Chicago School of economics, was a vigorous libertarian. His political credo was the “laissez-faire”, but he thought that in the modern world this couldn’t be a ‘do-nothing’ policy. It requires instead a ‘positive program’: rules to avoid the discretionality of authorities, and to foster a real competition. Even in the economic field, he wrote, “the ultimate liberty obviously is that of men equal in power”.
“Men” (and, of course, women) is here the most important word. According to Simons a corporation is not a ‘legal person’, equal, in its ‘natural’ rights and liberties, to natural persons, but an artificial tool to get economic goals. Corporations can even harm competition and alter the structure of the economy when they accumulate too much power: “The corporation is simply running away with our economic (and political) system – by virtue merely of an absurd carelessness and extravagance on the part of the states in granting powers to these legal creatures”, he wrote. The Simons’ proposals, advanced during the Thirties and the Forties of the XX century, sound revolutionary, today: “There is simply no excuse, except with respect to a narrow and specialised class of enterprises, for allowing corporations to hold stock in other corporations – and no reasonable excuses (the utilities apart) for hundred-million-dollar corporations, no matter what form their property may take”, he wrote. According to him it would be better if investment corporations were allowed to hold stocks without voting rights, and in banking he advocated a strict division of labor, and some rules to avoid an excessive recourse of short-term debt. The Great depression and the free market liberalism were at the heart of his thought.
After Simons, students in economics and policymakers (from Ronald Reagan to Alan Greenspan) caught the ‘Ayn Rand disease’, the idea – advanced by the Russian-American novelist who wrote “Capitalism: The Unknown Ideal” – that the big business is the “American persecuted minority”, the view – totally new – that markets and competition are harmed only by governments and never by big corporations, oligopolies or monopolies, and the consequent confusion between individual and corporate powers. Even the second Chicago School, led by Milton Friedman, did not understand the Simons’ views.
Maibe today, after a crisis caused by big corporations, some of them government-sponsored, and a bailout that has created a financial oligopoly in U.S., we can wonder: is it legally and economically sound to give to entities with limited liability more powers that to individuals with full responsibility?