Corporations, Unions, and the State

When left-libertarians discuss right-to-work laws they claim to discern a pro-employer — specifically, pro-corporation — tilt on the part of government. I will not play the futile and foolish game of trying to disentangle the effects of decades’ worth of pro/anti/corporation/union enactments. My modest objective is to ask whether the corporation or the union (or both or neither) is inherently antilibertarian.

The question that libertarians (and pseudolibertarians) ought to address are these:

  • Does corporate status per se enable an employer to coerce employees or prospective employees?
  • Does state-enforced recognition of labor unions by employers amount to coercion?

The obvious answer to the second question is “yes.” Apologists for labor unions will nevertheless assert that coercion by the state, which enables coercion by labor unions, is necessary to offset an “unnatural” advantage that accrues to an employer if the employer is a corporation?

What is that “unnatural” advantage? What power is bestowed by corporate status that is lacking in a sole proprietorship, partnership, or other non-corporate form of organization? It is said that corporate status involves two unique characteristics: perpetual existence and limited liability.  Non-corporate organizations can enjoy the former easily enough, through bequests, property transfers, agreements that allow for the admission of new and/or replacement partners, and so on. These are simply contractual arrangements that do not require the state’s existence, except as a neutral enforcer of voluntary, non-fraudulent contracts between compos mentis adults. In sum, perpetual existence does not confer upon the corporation an “unnatural” advantage when it comes to dealing with employees and prospective employees.

What about limited liability? The key artificiality of limited liability is that it shifts the responsibility for debts from the directors, officers, and owners of the corporation to the corporation itself. But I fail to see how that artificiality plays into dealings with employees and prospective employees. In fact, the artificiality lends stability to the corporation, which is advantageous to employees and attractive to prospective employees.

Nor is it clear to me that the corporation could not exist in the absence of statutory approval. The corporation is usually considered a creature of the state — as if it could not exist absent statutory authority — simply because the earliest corporations were creatures  of the state and often were instruments of state power. But there are other beneficial and “artificial” commercial arrangements (e.g., banking and credit) that began and thrived before the state injected itself into such arrangements. The advantages of corporate status — as a way of fostering commercial expansion — would, I think, be recognized in a common-law regime.

The bottom line on the corporation: It would exist in the absence of the state (or recognition by the state), and its essential features do not give it an “unnatural” advantage in dealings with employees and prospective employees.

I cannot say the same for the labor union, which exists by and for coercion. A union can exist without coercion, in certain limited circumstances, for example, an unskilled, fungible labor force whose members lack the means to uproot themselves from a relatively isolated location. (Think “Welsh coal miners,” for instance.)

But where there is a diverse labor force and diverse employment opportunities, it is not in the interest of the more skilled (or independent-minded) workers to cast their lot with their less-skilled brethren. Their interest is served by the ability to bargain for the best available combination of compensation and working conditions. The submission of highly skilled workers to unionization comes about mainly because (a) they have no legal option (in jurisdictions that back the union shop) and/or (b) “scabs” face threats ranging from harassment to ostracism to violence, directed not only at “scabs” but also at their families.

Employers, for the most part, view unionization as coercion. Yes, there is the occasional business that chooses to recognize a union, even if the business is not compelled to do so by statute. But recognition, in such cases, is the the free choice of the businesses in question. Most other businesses make the opposite choice, where they are allowed to do so. Nothing more need be said on that point.

In summary: The corporation is not a coercive institution; the labor union is. Right-to-work laws are justified on libertarian grounds because they eliminate the coercion of workers and employers.

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