The Form of the Firm: A Normative

Political Theory of the Corporation

Abraham A. Singer
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The Form of the Firm
The Form of the Firm
A Normative Political Theory of the Corporation

ABR AHAM A . SINGER

1
 1
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Library of Congress Cataloging-​in-​Publication Data

Names: Singer, Abraham A., author.
Title: The form of the firm : a normative political theory of the corporation / Abraham A. Singer.
Description: New York, NY : Oxford University Press, [2019]
Identifiers: LCCN 2018003055 (print) | LCCN 2018005147 (ebook) |
ISBN 9780190698355 (updf) | ISBN 9780190698362 (epub) | ISBN 9780190698348 (hardcover)
Subjects: LCSH: Corporations. | Corporate governance.
Classification: LCC HD2731 (ebook) | LCC HD2731 .S56 2019 (print) | DDC 338.7—dc23
LC record available at https://lccn.loc.gov/2018003055

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Printed by Sheridan Books, Inc., United States of America
For Luisa
 CONTENTS

Acknowledgments ix

Introduction 1

1. A Framework for a Political Theory of the Corporation 20

THE ECONOMIC THEORY

PART I
OF CORPOR ATE EFFICIENCY AND JUSTICE

2. The Classical Theories of the Corporation 39

3. Ronald Coase and the Difference between Markets and Firms 52

4. The Managerial Challenge to Liberalism 73

5. The Chicago School’s Theory of the Corporation 84

6. From Market to Firm to Market Again: A Recap 110

PART II A NORMATIVE ACCOUNT

OF CORPOR ATE EFFICIENCY

7. The Concept of Norm-​Governed Productivity 117

8. Corporate Justice within Efficiency Horizons 136

vii
viii Contents

TOWARD A MORE JUST CORPOR ATE

PART III
REGIME: L AW, GOVERNANCE, AND ETHICS

9. Toward a Relational Corporate Law 163

10. Th
 e Architecture of Corporate Governance and Workplace
Democracy 190
11. Business Ethics and Efficiency: The Market Failures Approach 218

12. Business Ethics and Equality: The Concept of “Justice Failure” 237

Conclusion 261

Works Cited 271

Index 285
 ACKNOWLEDGMENTS

A word of caution that I got while working on this project was that the biggest
difference between a book and an essay is not really the length; the difference is
that with a book it is almost impossible to still be enthusiastic about your project
by the end of it, which is precisely when you need to put on the crucial last fin-
ishing touches. As time passes, and the years of work take their toll, the various
claims start to blur together, your eyes glaze over the sentences you’ve already
read dozens of times before, your arguments feel boring and staid. And your
confidence starts to fade: Will anybody find this interesting? Because you are no
longer sure you do.
The consequence has been that completing this book could not have hap-
pened without the help and support of many, many people: to help make sure
that it made sense when I found myself too deeply in the weeds, to encourage me
when working on this felt too overwhelming, and to make me feel at home and
grounded in the various places I have lived while bringing this book to comple-
tion. Whether they realized it or not (and whether they would want the credit
for it), they have been my collaborators in this project.
This butterfly of a book began its life as a caterpillar of a dissertation. To
begin with, then, I must thank my dissertation co-​supervisors, Joseph Heath and
Joseph Carens—​my “not-​so-​average Joes.” Joseph Heath first made me aware of
just how interesting this topic is; his intimidating breadth of knowledge spans
many disciplines and has kept me on my toes and opened me to ideas I might
not have encountered otherwise. I have no doubt that without his supervision
I would not have gotten to this point with this project. Joseph Carens has been
the personification of wisdom (and not only because of his kingly beard). He
exemplifies how rigorous argumentation can be balanced with a deep concern
for justice. Perhaps more importantly, both have given me incredible support
personally and professionally, offering me advice and help that extended well
beyond their function as supervisors of my dissertation. Peggy Kohn was also

ix
x Acknowledgments

a huge part of this project. She remains one of the smartest people I know; her
insights and criticism made this book much stronger than it otherwise would
have been, and her approval and encouragement always left me elated. I owe a
special thank you to Ed Andrew and Jacob Levy, who were early readers of the
dissertation, and provided crucial insights that helped make its transition into a
book much stronger.
Thank you to Michael Singer, Matt Lesch, Amit Ron, Kiran Banerjee, Zack
Medow, and the incorrigible Bill Cameron for reading over the penultimate draft
of the book and providing much-​needed feedback. Thank you also to Victoria
Presser for helping proofread the final draft of this book.
I am very grateful for the graduate students, faculty, and staff at the University
of Toronto Department of Political Science. Although not members of my com-
mittee, I learned a great deal from Simone Chambers, Clifford Orwin, Ryan
Balot, Daniel Lee, Jennifer Nedelsky, Ryan Hurl, and Melissa Williams. There
are too many graduate student colleagues to list here, but a few people require
special thanks: Steve Trochimchuk, Lindsay and Lincoln Rathnam, Hamish
Van der Ven, Matt Lesch, Marion Laurence, Heather Millar, Jessica Soedirgo,
Abe Nasirzadeh, Andrew McDougall, Noaman Ali, Mauricio Suchowlanski,
Stephanie Murphy, Emma Planinc, Lama Mourad, Kevin Edmonds, Simon
Lambek, Ella Street, Igor Shokheidbrod, Jaby Mathew, Craig Smith, and Omar
Sirri. I thank Luke Melchiorre for being a patient roommate and a constant
source of laughter and insight, and Kiran Banerjee for being a generous and
thoughtful neighbor with an ample supply of theoretical conversation and mid-
night whiskeys. And a special thank you to Carolynn Branton, who consistently
made the administrative and bureaucratic aspects of navigating graduate school
manageable and as stress-​free as possible.
Thank you to Chris MacDonald, who gave me feedback on drafts at the
Canadian Business Ethics Research Network PhD Workshops, and has con-
tinued to give me scholarly and professional advice. Thank you to Sareh
Pouryousefi, who helped and encouraged me early on in this endeavor. Thanks
to Andrew and the gang at the Emmet Ray, where a good chunk of the first
draft was hashed out and written, and Tim at the Brass Taps for putting on the
Rangers, Yankees, and Knicks games for a rootless New Yorker living in Toronto.
And I owe a special debt to the friends I made in CUPE 3902 for the various
things I learned about collective action while on strike in 2015.
I was lucky enough to have friends and support from outside the academy in
Toronto who kept me from falling into irredeemable nerdiness throughout this
process. Thank you to the expanding circle of lovely folks that first met in orbit
of the Lowther Bloc of CCRI: Kelli Korducki, Liz McLaughlin, Toby Bowers,
Kaitlyn Cinovskis, Lindsay Denise, Emma Lander, Suzanne DeWeese, Emily
O’Brian, Emmet Ferguson, and Astrid Idlewild. Our time together in CCRI first
 Acknowledgments xi

inspired my interest in economic organizations, and I am so proud of the family

we’ve built and continue to build for ourselves. Merci beaucoup, todah raba, and
thank you to Diane Eros, Patricia Mangeol, Andrew Budziak, Boaz Beeri, Jon
Medow, and Patrick Crummey. You guys are the dorks, though. Not me.
I wrote drafts of some chapters while a visiting student at the Normative
Orders cluster at Goethe University in Frankfurt. I thank Rainer Forst for that
opportunity, and the wonderful and intelligent people whom I met there, whose
insight has been invaluable for me: Daniel Callies, Beth Kahn, Lisa Herzog,
Esther Neuhann, Nate Adams, Julian Culp, Merten Reglitz, Max Hugendubel,
Laura Roth, Johannes Schulz, and Eszter Kollar. I also wrote a chapter while a
visiting scholar at the Quinlan School of Business at Loyola University Chicago,
where I now work as an assistant professor. I thank Alexei Marcoux for making
that initial opportunity possible, as well as Al Gini and John Boatright for the
help along the way.
Much work on this project happened while I was a visiting assistant professor
at Georgetown University. I thank John Hasnas at the Georgetown Institute for
the Study of Markets and Ethics for the opportunity, and for creating such a
welcoming and instructive scholarly environment. I received invaluable insights,
both professional and scholarly, from Jason Brennan, Peter Jaworski, Michael
Kates, David Faraci, Govind Persad, Heidi Hurd, Michael Moore, Andrew
Cohen, and Michael Douma. Thanks also to the folks I met in and through the
Georgetown political science department for feedback on chapter drafts and de-
veloping the book manuscript: Joshua Cherniss, Loubna El Amine, Benjamin
McKean, Richard Boyd, David Golemboski, and Gianna Englert. Thanks to
Matt Berry, Sara Bernstein, and the Benj for the pasta nights and the warm wel-
come upon arrival in a new city.
I spent a year as a postdoc at the University of Rochester Department of
Political Science, which proved crucial for both this book and my own devel-
opment as a scholar. Thank you to Jim Johnson for the opportunity and the
hospitality he showed Lu and me as we got settled. Jim is, simultaneously, a nu-
anced political theorist, an endearingly grumpy curmudgeon, and a deeply kind
and generous man; his support and advice have been crucial for my personal
and professional growth. Thanks to Hun Chung for being a normative theorist
amongst the formal theorists; Alison Peterman, Hayley Clatterbuck, and Will
Miller for making Rochester feel like home so quickly and deeply; and Jacob
Rakovan for the thoughtful conversation and stiff drinks while I plugged away at
this manuscript at the Daily Refresher.
Thanks to my Chicago crew for being in my corner after I moved: Vanessa
Guridy and Andres Cerritos (and Lucy!), Nawojka Lesinksi and Seth Mabbot
(and Zuza!), John French and Jennifer Lowe, Heidi Lawson, Jason Stodolka,
Sultan Tepe, Stephen Engelmann, Ike Balbus, and Norma Moruzzi. Thanks to
xii Acknowledgments

my old friends who have, at one point or another, helped keep me grounded
through this process, especially Claire Lobenfeld, Florence Noel, Alex Kondo,
Matt Bruno, Ben Rudow, and Lucas Frankel. Thank you to the Singers, the Frees,
the Pressers, and the Keenans for the love and unconditional support. A spe-
cial thank you to Em for being a cousin, a comrade in theory, and a friend, and
for giving us all a Penny for our thoughts. Thank you to my brothers, Sam and
Patrick, and my parents—​Mom, Dad, June, and Barry. The best way I can ac-
knowledge what you’ve given me is by simply pointing to the many people listed
above; you have given me the tools to build a community that has enabled me to
do things I wouldn’t have been able to do otherwise. At root, I owe their friend-
ship and support to you all.
Thanks to my partner, Luisa Rollins, for her encouragement, tenderness, and
patience throughout. Aside from her thoughtful input and her loving care, she
has also groaned, shook her head, and gritted her teeth through more bad jokes
and puns than any person should have to endure.
Some of the chapters in this book are based on work I have published pre-
viously. I would like to thank the editors and reviewers of these journals for
their contribution in making that work much stronger than it would have been
otherwise, and the publishers for the permission to reproduce those articles
(in part or in full) here. Parts of ­chapters 11 and 12 are from my 2016 “Justice
Failure: Efficiency and Equality in Business Ethics,” Journal of Business Ethics,
OnlineFirst, http://​doi.org/​10.1007/​s10551-​016-​3086-​x ; sections of c­ hapter 9
use material from my 2017 “The Corporation as a Relational Entity,” Polity
49(3): 328–​351; and parts of ­chapters 3, 7, and 8 are from my 2018 “The
Political Nature of the Firm and the Cost of Norms,” Journal of Politics, Ahead of
Print, https://doi.org/10.1086/697122.
Finally, some people’s influence on me has outlasted their time on this earth.
I take the space to remember Stanley Free, Frederick Singer, Cindy Bruno, Terry
Presser, Bernie Presser, Phil Eckstein, and Penny Bethke.
The Form of the Firm
 Introduction

Corporations are crucial institutions in modern liberal capitalist societies, con-

trolling a very large amount of wealth and, in turn, commanding a great degree
of social and political influence. For this reason, they also attract a very large
amount of attention and anxiety, occupying a great deal of our public dis-
course. Depending on people’s political orientations, corporations are invoked
as symbols or stand-​ins for some feature of modern society: commercial greed,
economic development, social inequality, consumer culture, technological in-
novation, the hollowing out of nonmaterial moral commitments, and so forth.
And yet, despite public and political fixation on corporations, for much of the
20th century mainstream political theory and political philosophy had little to
say about how they are and ought to be governed. Happily, in recent years this
has started to change. In political theory, scholars have taken on questions about
the corporation and the governance of firms head-​on, and business ethics and
management scholars now take the political nature of their field more seriously.
In this book, I contribute to this growing literature; I critically engage the theory
of the corporation developed by economic theorists to better understand how
political theory can speak to, and learn from, questions that arise when consid-
ering the modern business corporation, and the relationships that constitute it.
Is the power currently wielded within the modern business corporation legiti-
mate? With qualification, I answer no: extant relationships between employer
and employee, corporate executive and shareholder, and so on are currently
structured in unjustified and morally problematic ways. The consequence is that
modern enterprise subjects people to forms of rule and treatment that we ought
to reject, even on minimal liberal-democratic grounds. Could these institutions
be made to be legitimate? With qualification, I answer yes: contemporary firms
and corporations are likely necessary sorts of institutions in our modern soci-
eties, and they can be rendered morally justified and legitimate by transforming
the ways in which they are governed, the institutional context in which they op-
erate, and the moral frameworks we use to make and evaluate managerial deci-
sions. The qualifications make up the bulk of this book.

1
2 The Form of the Firm

I do not attempt to answer these questions ex novo, as if scrawling arguments

from first principles on a totally blank canvas. Instead, I begin by trying to un-
derstand previous and extant theories of the corporation, putting special em-
phasis on the theory developed in 20th century law-​and-​economics scholarship.
Whereas normative political philosophy since John Rawls has largely been con-
cerned with macro-​level questions about egalitarianism in society and the con-
tours of its “basic structure,” and normative business ethics has largely focused
on micro-​level concerns of managerial duties, questions about the institution of
the corporation and its organization have largely been dealt with in economics
departments and law schools. Again, recent developments have altered these
trends, and there are older exceptions to this as well (e.g., theories of workplace
democracy, which offer important critical evaluations of the corporation’s hier-
archical structure). Still, economic theorists, particularly in the Chicago school
tradition of law and economics, have developed the most well-​rounded theo-
retical accounts of the modern corporation’s institutional structure: the nature
of corporate hierarchy, the separation of ownership and control, the primacy of
the shareholder, managerial discretion, and government regulation. All of this
has been elegantly generated from a relatively simple theory of the corporation
as a nexus of contracts, a bundle of efficiency-​improving and freely-chosen ar-
rangements that individuals have imposed on themselves. The result has been a
parsimonious and powerful theoretical explanation and justification of the cor-
poration as it currently exists. Critics must take this influential theory seriously,
as it has much to teach us. Still, even given this theory’s power, my contention
in this book is that this theory has significant and morally-important weak-
nesses that which ought to be subject to critical scrutiny.
In the next chapter I clarify my methodological approach to this topic and
the precise nature of the questions I attempt to answer. I then move on to my
two-​stage argument. In Part I (­chapters 2 through 6), I attempt to articulate and
assess the economic justification of the corporation in normative terms. That is,
while economic theorists sometimes offer their theories as mere explanations of
why the corporation has emerged in its current form, their analyses also often
offer a justification and defense of a particular vision of the corporation. From
this perspective, the corporation as it currently exists is, overall, morally justifi-
able and therefore ought to be largely left alone by other social institutions, es-
pecially the state. By placing the development of the Chicago school’s theory of
the corporation in the context of economic and managerial intellectual history,
this part aims to illuminate the power, strength, and novelty of its contribution
and to better understand the nature of its claims.
In the second half (Parts II and III) of this book, I offer a critique of this
economic theory of the corporation and a limited counterproposal. In Part
II (­chapters 7 and 8), I concede the primary significance of efficiency for
 Int roduc tion 3

understanding what the corporation is and ought to be; indeed, I contend that
critical accounts of the corporation must take these economic concerns more
seriously than they do, lest their arguments turn into pure utopianism or science
fiction. However, I also contend that these dominant economic accounts of the
corporation make a crucial error; they overlook how the corporation’s contri-
bution to overall economic efficiency depends on the cultivation of norms and
social relationships within the corporation, an idea I refer to as “norm-​governed
productivity.” Thinking of firms purely in terms of contracts entered into volun-
tarily misunderstands the sort of phenomena such institutions are and the sorts
of practices they entail. Norm-​governed productivity suggests that power, social-
ization, and coercion play an inevitable role within the corporation because of
the functional importance of social norms and social pressure. The consequence
is that we cannot assume people’s preferences to be pregiven or unaffected by
the institutions with which they engage. Taken simply as a positive explanation
of the corporation, the Chicago school’s contractual account is wanting, severely
weakening its normative force. Instead, my theory of norm-​governed produc-
tivity claims that efficiency gains are achieved by corporations and firms through
an alteration of people’s preferences in favor of cooperation. In modern firms,
the sort of cooperation that people are encouraged to enter into entails morally
relevant imbalances and inequalities in power and decision-​making.
Contrary to the Chicago school’s theory of the corporation as merely a nexus
of contracts, I argue that we cannot assume such an institution is justified as the
outcome of free consent by all those involved in the corporation. The manner in
which corporate power is wielded requires a normative assessment other than
one grounded in choice and contract. This is true, I argue, even if we take ef-
ficiency to be an important social value. As I show in c­ hapter 8, a concern for
efficiency does not nip our normative reflection in the bud, but rather imposes
minimal and maximal “viability horizons” onto a normative theory of corporate
firms; we require a certain thickness or sociality of norms in order for firms to
organize cooperation in a way that outperforms market contracting (the min-
imal viability horizon), but the norms cannot be so thick or demanding that they
render the firm radically inefficient, leading people to choose alternate methods
of organizing economic activity (the maximal viability horizon). Within these
horizons is the conceptual space for normative assessment and prescription,
where moral and noneconomic values must be brought to bear on the internal
governance of the firm, allowing for alternative governance structures and or-
ganizational norms without trade​offs in efficiency.
The corporation therefore should be assessed not only in terms of efficiency
but also in terms of the kinds of relationships it establishes. While any particular
corporation must be efficient enough to warrant its existence in the marketplace,
I contend that it ought also to avoid cultivating relationships that undermine our
4 The Form of the Firm

core moral and normative commitments. To this end, in Part III, I offer three
different normative proposals for the contemporary corporation. In ­chapter 9
I offer an account of corporate law that focuses on the sorts of relational pat-
terns that the corporation structures, and which treats the corporation as an en-
tity distinct from both the individuals who contract with it and the government
that recognizes it. In c­ hapter 10 I offer an account of corporate governance that
shows why a range of background legal, regulatory, and financial institutions are
needed to render corporate relationships more legitimate. Finally, in ­chapters 11
and 12, I offer an account of business ethics that highlights managerial duties
beyond mere profit ​maximization; instead, I argue that corporations and their
patrons have an ethical responsibility to avoid profiting off market failures and
to avoid exacerbating extant structural social injustice.
The overarching goal is to show that economic theories of the firm are cru-
cial, but ultimately insufficient, for understanding the modern corporation. The
moral legitimacy of the corporation as an institution in a society committed to
liberal-democratic values depends on a range of regulatory, legal, and ethical
background conditions that can structure the organization and activity of cor-
porations. Only some of these conditions are even sporadically satisfied in con-
temporary liberal societies.
Throughout the book, one will detect a subplot involving the scholar Ronald
Coase. As we shall see, Coase is both a foundational figure in the development
of the transaction-cost account of the firm and the Chicago school of law and
economics; the former coming from his 1937 article “The Nature of the Firm”
and the latter coming from his 1960 article “The Problem of Social Cost.” Part of
my contention about the Chicago school is that it combines these two different
insights in ways that privilege the latter. In Part I, I try to disentangle the various
contributions of Coase in order to show that the Coasian insights with regard to
the firm are distinct from—​and actually at odds with—​his contributions to the
economic theory associated with the Chicago school. This rescuing of Coase
runs parallel to my engagement and criticism of the Chicago school: what I take
to be most laudable about the Chicago school approach is generally what is as-
sociated with the Coasian theory of transaction costs; what I take to be most
problematic about the Chicago school is associated with its misinterpretation or
misuse of his theory. As a result, in ­chapter 7, my critique of the Chicago school
also includes a novel reading of Coase’s work, highlighting his subtle views on
institutions and moral psychology. In addition to rehearsing, critiquing, and of-
fering my own theories of the corporation, my hope is to also draw attention to
the nuanced nature of Coase and his contributions to political thought.
For the remainder of this introductory chapter I summarize some basic ideas
that are important for the book: what a corporation is, the nature of the dis-
tinction between political and economic analysis, and the sorts of assumptions
 Int roduc tion 5

that attach to such disciplinary areas. Doing this now will not only clarify things
later in the book, but also help with understanding the intellectual backdrop that
informs this study.

The Corporation: Some Key Features

The first thing to note is that not all business firms are corporations (e.g., partner-
ships) and not all corporations are business firms (e.g., corporations sole, munic-
ipal corporations, and, arguably, churches and universities). For the most part, in
this book I am concerned with the modern business corporation, and business
firms more generally. Later in the book I will offer a more subtle account of what,
precisely, a firm is; for now we can simply think of firms as businesses or enter-
prises, and “corporations” as a specific structure of operating or governing such
firms. Corporations are distinct in that they are (a) established as a separate and
distinct legal entity, which is explicitly chartered by a government, and (b) gen-
erally characterized by a three-​tiered structure of shareholders, directors (natural
persons elected by the shareholders for overseeing the broad goals and direc-
tions of the company), and officers (natural persons elected by the directors to
run the day-​to-​day operations of the business). In their influential account of
corporate law Henry Hansmann and Reinier Kraakman have put forward five
basic features of the standard public corporation, which are essentially constant
across most legal jurisdictions.1 These features are worth explaining, as they paint
a basic picture of the corporation as it exists in most liberal market economies.

Legal Personality
“Legal personality” is probably the most infamous feature of the corporation.
It is also likely the most misunderstood. Legal personality does not mean that
the corporation is in fact a natural human person, or that it must have the same
rights and privileges as natural persons. As we will see in ­chapter 9, there are
various theories interpreting what the corporation’s legal personality implies,
theoretically and politically.2 However, at a minimum all legal personality means
is that a corporation is an entity that the law recognizes as capable of bearing
certain rights and responsibilities. In particular, corporations have the ability to
own property (including other corporations) and enter into binding contracts;
they also can be sued, taxed, and made to fulfill obligations of debt and contract.

  Hansmann and Kraakman (2004).

1

  This draws on an argument I have previously made elsewhere: see Singer (2017).
2
6 The Form of the Firm

The significance of this is that when we say the corporation can do, or be re-
quired to do, any of these things, we are drawing a distinction between the cor-
poration as an entity and those parties who work on its behalf (i.e., officers and
directors) or own shares in it (shareholders). If the corporation owns property,
then this property is not to be seen as jointly owned by its principals—​it literally
belongs to the corporation.3 A holder of 100% of the corporation’s shares does
not own any of the corporation’s property, nor does the CEO who directs the use
of corporate property, nor the workers who might use that property. Similarly,
when the corporation enters into a contract, agreeing, for instance, to pay a cer-
tain amount to some person, then it is the corporation that is bound by this con-
tract, and which then owes this person the money. This idea—​commonly called
“asset partitioning”—​is the key aspect of legal personality; corporate assets are
held to be distinct from the assets of the corporation’s patron groups.

Limited Liability
Though not a sufficient condition, the asset-​partitioning aspect of legal person-
ality is a very important enabling condition for shareholders to have limited
liability. If the corporation is a legal person capable of owning its own assets,
then this allows for the possibility of arranging things such that claims against
the corporation can be made on only those assets owned by the corporation.
Often it is said that corporations have limited liability, but this is misleading; it
is more accurate to say that the shareholders who invest in the corporation have
limited liability (as do, it should also be noted, most corporate employees). All
that shareholders can lose on claims made against the corporation is the money
initially invested in the corporation; because they have limited liability, their per-
sonal assets are safe from seizure.4 Shareholders are not liable for claims against

3
  I use the term “patron group,” following Hansmann (1996), to refer to any of the groups that
directly deal with the corporation (customers, shareholders, creditors, workers, raw goods suppliers,
etc.). The term is not meant to evoke the patron-​client relationship, and is similar to how many
scholars use the term “stakeholders.” I use the term “patron group” for two reasons. First, it differen-
tiates people who deal directly with the corporation in some formal way from those who are simply
affected by a corporation’s actions (the way “stakeholder” sometimes means). Second, it is a helpful
term because it forces us to explain why one particular group of contractual relationships ought to be
singled out as having a special role within the corporation; we start with the idea that, say, workers
and shareholders are both corporate patron groups, and then must explain why one or the other (or
both or neither) should be given special privileges and responsibilities.
4
  As always, caveats abound. There are instances where courts “pierce the corporate veil” and as-
sign liability for certain debts to patron groups. This, however, is the exceptional case, and there is no
clear consensus on whether a principled or doctrinal justification for veil-​piercing exists, and what it
is. See Jonathan Macey and Joshua Mitts (2014).
 Int roduc tion 7

the corporation, despite their ownership of the corporation’s shares. Only those
assets invested in the corporation are subject to claims by creditors.
Again, it is worth stressing that the legal personality of the corporation does
not require that limited liability be granted to its investors. Early corporate stat-
utes granted the corporation rights-​bearing status but still left shareholders
proportionately liable for the corporation’s debts. While the notion of limited
liability has existed for some time, it only began catching on as a general feature
of corporations in the 19th century as a means to stimulate the United States’ de-
veloping manufacturing base in response to the diminishing of British imports.5
Its effectiveness in this aim—​witnessed both by the spread of limited liability
throughout all the United States and the meteoric rise of the United States as an
economic power—​is due to its incentivizing investment by shifting risk. More
will be said about this in c­ hapter 9, but it is worth quickly explaining the eco-
nomic logic here.
Absent the stipulation of limited liability, would-​be entrepreneurs will be
hesitant to start their businesses, and would-​be shareholders will be hesitant to
invest, due to the possibility of being personally on the hook for significant cor-
porate losses. The result is that a significant amount of potential investment will
be foregone due to normal risk-​aversion. Limited liability reduces the risk for
shareholders by enabling them to invest without having to worry about complete
personal ruin. It also allows shareholders to further reduce their risk through
diversification, by investing in many different firms and sectors (without lim-
ited liability, this strategy would increase, rather than decrease, risk). While this
reduces risk for shareholders, it is not necessarily reduced generally. As David
Moss notes, limited liability actually implies a trade​off between the magnitude
of shareholder loss and the probability of creditor loss.6 That is, though share-
holders are protected from complete devastation of their private assets, parties
who loan money to the corporation, or have some other financial claim on it,
become more likely to suffer losses since limited liability restricts the extent of
their claims and therefore reduces the available assets that can be used to pay
back an obligation.
Given this trade​off, why does limited liability supposedly result in a net-​pos-
itive effect on investment? It would seem, after all, that we are merely freeing up
equity capital at the expense of debt capital. However, because people tend to
be disproportionately averse to large losses compared to small losses, the slight
decrease in debt capital (or its higher cost) will be outweighed by the increase
in shareholder investment. As Moss puts it, “Shareholders may well gain more

  Moss (2004, 54–​72).

5

  Moss (2004, 74).

6
8 The Form of the Firm

satisfaction from the sharp reduction in their maximum possible loss than cred-
itors lose from the corresponding increase in their probability of a more limited
loss.”7 The historic economic success of limited liability to stimulate investment
and innovation seems to offer a prima facie reason to think that there is good ec-
onomic sense to such a legal innovation. Whether such a regime is fully justified
from the standpoint of justice, however, will be explored later on.

Transferable Shares
Asset partitioning is also an important enabling condition for there to exist the
transferability of shares. Because personal and corporate assets are distinct,
with the latter being owned by the corporate person, it is possible for the cor-
poration and its operations to remain relatively constant despite shareholders
changing. Shareholders can be understood simply as owning two distinct rights-​
claims upon the corporation: (1) the right to claim dividends when they are
distributed; and (2) voting rights on particular corporate decisions—​generally
for the board of directors, as well as major and extraordinary strategic deci-
sions like mergers and buyouts.8 That these shares are transferable means that
corporate management, operations, sales, and the like continue uninterrupted
despite these rights being transferred to other people. The actual identities of
shareholders normally have no effect on the ordinary business or day-​to-​day op-
erations of the corporation, and actual shareholders mostly have no authority to
weigh in on such affairs, though “activist” shareholders sometimes disrupt this
normal state of affairs. According to the standard economic story, this allows for
greater liquidity of shareholder capital, enabling greater diversification for share-
holders, and greater possibility to attract investment for corporate ventures.

Centralized Management with a Board of Directors

The previous three characteristics have dealt with how the corporate entity
and its assets are distinct from other patrons of the corporation. But there is
also a general pattern for how these various parties relate to one another and
the corporation. Essentially, the corporation is managed and governed by the
multimember board of directors. The main task of the board of directors is
to set the direction, strategies, and finances of the business, and then appoint
and monitor the corporation’s officers, who manage its day-​to-​day operations

  Moss (2004, 75).

7

  Though, as we will see in ­chapter 10, stock classes can be differentiated so that some stock-
8

holders have different claims on dividends or attenuated voting rights.

 Int roduc tion 9

and oversee the strategic direction set by the board. They are hired by and ac-
countable to the board of directors. The board of directors, on the other hand,
is elected by the corporation’s shareholders, generally at stipulated election
periods. The result is a structure defined both by formal linkages of accounta-
bility among shareholders, directors, and officers, and by a formal distinction of
identity and function among all three: shareholders elect the board of directors
but generally do not determine corporate direction by plebiscite; the board of
directors hires corporate management but does not generally engage in the or-
dinary business of the corporation; and neither management, directorship, nor
the shareholders are understood to be the corporation. Rather they relate to it as
governors (the board of directors), managers (officers and employees), or rights
claimants (shareholders).

Ownership by Capital Contributors

This last aspect of the corporation is perhaps the most characteristic and also the
one that needs some qualification. This trait in fact encompasses two distinct
claims: (1) the shareholders of the corporation are its owners; and (2) people
come to be shareholders by virtue of contributing capital (or, because of the
transferability of shares, by buying shares from those who have contributed
capital). The first claim has been challenged by many, from various ideological
stripes, who argue that the corporation in fact has no owners.9 The corporation
owns its assets and various parties have rights and duties relating to that entity,
but nobody can be said to own it. These claims are most likely correct, but for
now they are not terribly important. Whether shareholders are in fact owners
of the corporation might have moral consequences, depending on whether we
assign normative importance to ownership. For our purposes, all that matters is
that we recognize them as having rights commonly associated with ownership,
namely control rights and rights to residual profits. I generally refer to these as
ownership or shareholder rights to connote that the people who possess them
are not necessarily owners, but still have rights similar to owners.
The second claim—​that shareholder rights are to be allocated to those
who provide capital—​is an empirical trend and not a conceptual necessity. As
Hansmann notes, the ownership rights of the corporation can be allocated to
customers, workers, or raw goods suppliers just as easily—​we refer to such cor-
porations as cooperatives.10 Indeed, to break the aura of distinction between
corporations and cooperatives, Hansmann refers to corporations as “capital

9
  Ellerman (1975); Blair and Stout (1999); and Easterbrook and Fischel (1991, 36–​39).
  Hansmann (1996, 12–​16).
10
10 The Form of the Firm

coops”—​cooperatives that have simply allocated ownership rights to its capital

providers. As we will see in c­ hapter 10, this characterization is misleading. The
more general point, however, is accurate: while rights to control and to residual
profit in the corporation are generally assigned to those who invest capital, this
need not be the case. The corporation is much more open to organizational
variety than is generally thought—​since most think of cooperatives and cor-
porations as utterly distinct. Furthermore, it may be possible that such organ-
izational variety could exist to a greater degree than is reflected in the current
makeup of corporate structures. This will be revisited in ­chapter 10.
Although exceptions exist, these five traits make for a useful definition of the
business corporation:11 all business corporations will have these five traits, and
all entities that have these five traits will be business corporations. As I have al-
ready suggested, the commonly accepted justification for the corporation is that
it increases investment and economic productivity. I will argue in c­ hapter 1 that
such a justification is neither obvious nor sufficient. It is not obvious because
the organization of the corporation runs counter to the way the economic ad-
vantages of the market are conceived. We therefore need a more nuanced story
about the economic benefits of corporations than their mere ability to stimulate
investment. This justification is also insufficient because even the most efficient
and productive institutions might be immoral or unjust in some other respect.
The corporation therefore needs to be defended in terms of some value other
than efficiency, such as legitimacy, morality, or justice. My argument is struc-
tured around providing these two justificatory accounts: an account of corpo-
rate productivity and efficiency, and an account of the corporation’s normative
legitimacy (or lack thereof).

Economics, Politics, and the Corporation

It must be noted that the business corporation is not the only, or necessarily the
most politically important, kind of corporation. Recently Jacob Levy has offered
a political theoretic account of intermediary or “meso-​level” institutions more
generally, arguing that within liberal thought there are generally two ways of un-
derstanding them.12 “Rationalist liberalism” views these institutions suspiciously

11
  We must note here that there are various types of corporations—​nonprofit corporations, which
have no parties possessing ownership rights; professional corporations; and S corporations—​as well
as unincorporated firms that have some of these features (e.g., limited liability companies and part-
nerships). Except when noted, my usage of the terms “firm” and “corporation” are fairly general, re-
ferring to the broad swath of corporate and unincorporated entities that engage in business activities.
12
  Levy (2015).
 Int roduc tion 11

as potential sources of domination, and therefore contends that states must in-
tervene in the life of these institutions in order to protect individuals. “Pluralist
liberalism,” on the other hand, views such institutions as being important be-
cause they provide individuals with the ability to resist state overreach. Where
rationalists see the protection of liberty as residing within the state’s ability to
limit and affect the internal life of meso-​level institutions, pluralists see the pro-
tection of liberty as residing in the meso-​level institution’s ability to limit and
affect the reach of the state. Levy claims that these basic tendencies are irrecon-
cilable; the tension between the pluralist’s celebration of intermediary institu-
tion and the rationalist’s skepticism is a tension inherent in liberalism.
Levy’s account has been influential on my own, and I will discuss it in more
detail in ­chapter 9. I recount the argument here, however, because the distinc-
tion between viewing the corporation as an extension of individual liberty or as
something harmful to individual liberty maps on well to the distinction between
what we can think of as economic and political approaches to the business cor-
poration; the former sees the corporation as simply an extension of individual
endeavor, and the latter sees the corporation as an extension of state power.
The tension between these two approaches to the corporation—​and, in some
sense, to social phenomena more generally—​is a tension that I try to navigate
throughout. My general contention is that both the economic emphasis on in-
dividual incentives and the political emphasis on power and social structuring
are necessary for understanding most things and that neither on its own is suffi-
cient; we should be wary of approaches that attempt to subsume one fully into
the other.
I will note here that by virtue of focusing on the business corporation, I focus
on precisely the type of corporation that Levy excludes from his study,13 and
I do not engage with those that he does: the church, the university, the guild, or
the city. From a historical perspective the distinction between a business cor-
poration and other kinds of corporations is somewhat arbitrary. Prior to the
mid-​19th century the distinction between a business corporation and, say, a
municipal corporation was quite murky.14 While early American corporations
included familiar institutions like banks, insurance companies, and canal-​
digging companies, they also included Harvard College, the city of Philadelphia,
the Connecticut Medical Society, and the Massachusetts Charitable Mechanic
Association. There was legally little to no distinction between these corpor-
ations, and a similar lack of discrimination on the part of their critics. While
many were outraged by the granting of the corporate charter to the Bank of

13
  Levy (2015, 13–​14).
14
  Handlin and Handlin (1945).
12 The Form of the Firm

New York, this was not what Samuel Adams denounced as the “introduction of
aristocracy” and antithetical to republicanism. Adams was referring to the incor-
poration of the city of Boston.15
The point is that the idea of a business corporation distinct from other non-​
business corporations like cities or universities is a fairly new historic develop-
ment. This insight fits within a larger theme that has animated many critics of
capitalism: that the separation of politics from economics is not a given, but
is in itself a political project of recent vintage. Things that we think of as eco-
nomic and private, like the corporation, were once thought of as governmental
and more public in nature. Blaug notes that such rigid categorization was not
obvious or even possible in classical political economy due to the central place
that population management held in the postulates and purposes of economic
inquiry. The central question for economists under this paradigm was what
tends to cause or stifle the wealth and improvement of peoples, which meant
that the economic concerns were intrinsically linked to more “political” ques-
tions of governance and law, as well as normative political matters of distribu-
tion, equality, and dignity. As we will see in c­ hapters 2 and 3, it was not until the
so-​called marginalist revolution of the late 19th century that population as such
could become a variable, as opposed to the object, of economics. This allowed
for the previously unthinkable segregation of “political” questions about popu-
lation from “economic” questions about scarce resources and their uses.16 This
distinction was solidified by disciplinary lines in what Stark calls “Parsons’ pact,”
the literal and symbolic agreement between Talcott Parsons and Lionel Robbins
that served to distinguish the field of economics from sociology.17
Many see such conceptual distinctions between politics and economics as
morally and theoretically arbitrary, resulting in the overextension of economic
analysis to everything. The response has been an incredibly fruitful project of
attempting to overcome and transcend these sorts of disciplinary and analytic
divides. One method of doing so is historical in nature, focusing on various de-
velopments in the 19th and 20th centuries that demonstrate how the modern
capitalist economy was constructed and produced as a political and ideological
project. Polanyi’s famous work on the transformation to industrial capitalism illus-
trated that the market economy was a conscious large​scale social project, created
for the benefit of particular class interests, and decidedly not a natural phenom-
enon.18 Similarly, James Scott and David Graeber have historicized economic
concepts of property and exchange, showing that these practices are modern and

15
  Maier (1993).
16
  Blaug (1996, 295).
17
  Stark (2009, 7).
18
  Polanyi (2001).
 Int roduc tion 13

developed out of the large-​scale ambitions of powerful actors.19 Complementing

these critical accounts of market capitalism are studies of the historical develop-
ment of economic concepts. The most influential of these is surely Foucault’s
Lectures at the College de France, which stimulated interest in his genealogical
account of neoliberal economics and its relationship to particular practices of
government;20 other scholars have contributed similar rich historical and the-
oretical studies of how concepts like “the economy” were created,21 or on the
linkages between the rise of rational choice theory and the Cold War.22 These his-
torical accounts all serve to “breach the self-​evidence”23 of the distinctions among
economy and society, economics and politics, or economic science and political
science, and allow us to understand the distinction itself as a political construct.
While each of these writers places emphasis on a different part of the
story—​the political, the academic, the ideological, and so on—​they all share
an understanding of free-​market economics, and the ideologies used to justify
them, as constructed political projects. In a similar manner, I am arguing that
the common contemporary view of the corporation as merely an economic in-
stitution—​that is, an institution that is fully understandable and justifiable on
economic grounds—​does not preclude political theory from weighing in on the
topic; in fact, such a view is the result of a particular political project, namely
the Chicago school. Now, the fact that we can historicize something and show
it to be the result of political factors does not mean we have shown it to be bad
or unjust; contingency does not imply illegitimacy, and, just as Hume taught us
that we cannot derive an “ought” from an “is,”24 we cannot derive an “ought not”
from a “was.” However, it does raise the question of whether it is a good political
project, a question that is harder to ask if we take something for granted as nat-
ural. While historical analysis does not substitute for normative analysis, it does
pave the way for it. My project is distinct from the historical studies above in put-
ting the emphasis on this normative question by first presenting these economic
practices and theories in the most charitable manner, and then subjecting them
to normative, not genealogical, critique.

19
  Scott (1998); Graeber (2011).
20
  Foucault (2010). This is discussed in more detail in ­chapter 5.
21
  Mitchell (2005; 2008).
22
  Amadae (2003; 2015).
23
  Foucault (1991).
24
  Hume (1985).
14 The Form of the Firm

Not Purely Political

By emphasizing principled normative criticism and prescription of institutions
over historical or discursive critique, this study can be thought of as being within
the tradition of political philosophy influenced by the work of John Rawls. This
isn’t saying much: saying a work of political theory is influenced by John Rawls is
like saying a rock band is influenced by the Beatles, or a jazz bassist is influenced
by Mingus. More specifically, then, this study can generally be placed within a
particular reading of the Rawlsian project. Following others,25 I view Rawls as a
critical theorist whose key achievement was articulating the contours of a more
substantively egalitarian political order, using norms and ideas already imma-
nent in liberal-democratic societies. In terms of both the aim and the method of
critique, this study is very much influenced by the Rawlsian project. As I explain
in ­chapter 1, I build my political theory of the corporation on normative com-
mitments that I take to be implicit in our own liberal social orders, to show how
contemporary corporate governance fails on those terms. I therefore take my
approach to the corporation as roughly Rawlsian in that it critically appraises
a key institution in liberal democracy on the grounds of egalitarian values and
principles inherent to contemporary liberalism.
Despite Rawls’s influence, it is important to note that he was relatively si-
lent regarding questions of corporate governance, corporate law, and business
ethics, as well as on a host of other questions about the internal dynamics of the
corporation. Furthermore, as I have argued elsewhere, the corporation cannot
be brought under the purview of Rawls’s famous two principles of justice.26 As
we will see in c­ hapter 8, there have been attempts to assimilate the corpora-
tion within Rawlsian theory, some of which are nuanced and sophisticated, but
which I nevertheless contend ultimately fail. In the end, Rawls casts his critical
net too narrowly for our purposes by focusing on the “basic structure” of society,
leaving institutions like the corporation outside of his analysis. Insofar as my
argument offers compelling critical and normative accounts of the corporation,
we may see it as a friendly critique of the Rawlsian paradigm: in order to bring
philosophical critique to bear on all of the relevant institutions and practices of
our social order, we must abandon the methodological focus on the “basic struc-
ture,” and look to meso-​level institutions as distinctive sources of legitimacy or
potential domination. The challenge is doing this in a way that respects Rawls’s

  Chambers (2012); Laden (2003); Ron (2006); Forst (2014, 31–​33).

25

  Singer (2015; 2018a). For contrary views see Blanc (2016); Martins (2016); Welch and Ly
26

(2017).
 Int roduc tion 15

correct concerns for reasonable pluralism, the burdens of judgment, and the
limits to political justice.
By rejecting the straightforward application of Rawlsian principles to the cor-
poration, I mean to signal my resistance to a more general impulse of responding
to the overreach of economic methodology by trying to fold everything back
into politics and government, to the exclusion of other considerations. As
I noted earlier, this is akin to the rationalist impulse that Levy discusses; if we
see the corporation as simply an extension of government, we can easily jus-
tify government intervention into corporate affairs. This impulse has shown it-
self most strongly in recent literature on normative business and management
studies. One view characteristic of this impulse sees the corporation simply as
equivalent to a governmental agency and treats corporate executives as some-
thing very much like governmental officials or holders of public office.27 Another
view contends that, given the transnational condition in which the state has re-
ceded in importance, corporations now operate like states in many instances,
and therefore must take on the moral constraints of political legitimacy.28 As a
countervailing force to the mainstream emphasis on profit maximization, these
normative theorists assert the primacy of social and political values in order to
bring the corporation within the purview of theoretical reflection.
In political science, this impulse is exemplified by David Ciepley’s ground-
breaking work.29 Ciepley’s overarching claim is a welcome one: despite their
dominant place in liberal orders, corporations are not in fact liberal institutions
“and cannot be satisfactorily assimilated to its categories. Instead, they need to
be placed in a legal and policy category of their own—​neither public, nor pri-
vate, but ‘corporate’—​to be governed by distinct norms and rules, so as to render
them more intelligible, more accountable, more responsible, and more produc-
tive.”30 On its face Ciepley’s project and my own seem well-aligned. I also want
to argue that corporations should be dealt with as corporations, as a distinctive
(not a derivative) category of social institution. Yet, although Ciepley wants to
contend that corporations are something distinct from both state and market, he
does this by playing down their private or contractual elements and describing
them as, primarily, “governing entities.” On Ciepley’s own terms it is not clear
why the corporation could not be understood in purely public terms, as some
sort of autonomous governmental entity that pursues ends on its own terms in
a bounded manner.

27
  McMahon (2012).
28
  Scherer and Palazzo (2006; 2007).
29
  Ciepley (2013a).
30
  Ciepley (2013a, 140).
16 The Form of the Firm

Much closer to what I am aiming for is the recent work of Elizabeth Anderson
and Isabelle Ferreras. Also drawing on the economic theory of the firm, Anderson
argues that the hierarchies we find within markets—​that is, corporations and
firms—​are not simply of governments, but that they actually are governments
in themselves; firms, for Anderson, are “communist dictatorships in our midst,”
unaccountable governments that we allow to rule because we don’t see them as
such.31 In a similar manner, Ferreras contends that firms cannot be made sense
of in purely economic or instrumental terms; the inherently “expressive” nature
of modern work requires that we treat firms politically, and that they should be
subject to democratic control. While our arguments are similar in this regard,
Anderson and Ferreras undersell the subtle nature of Coase’s insights regarding
efficiency, and in so doing do not fully illustrate why individuals choose to
join firms, nor the necessary efficiency constraints such firms must face. While
Ciepley, Anderson, and Ferreras tell crucial political parts of the story, they re-
main incomplete; insofar as voluntary individual action is crucial to the creation
of enterprises, we also require a private and economic story about firms and cor-
porations to complement the political story.
To put it differently, the corporate entity cannot be understood solely in ra-
tionalist or political terms as an extension of government, nor in pluralist or ec-
onomic terms as merely an extension of individuals. The former cannot account
for individual initiative in the corporation’s development, and the latter cannot
account for the kinds of power, authority, and compulsion that develop in these
kinds of institutions. The way to react to the imperialism of economic method-
ology is not to respond in kind. We must understand corporations as distinct
from both states and individuals, and we can do this only by understanding how
corporations have both political and economic facets.
This is why, in giving an account of the particularly corporate nature of the
business corporation, I first attend to this economic story. In c­ hapter 3, I expli-
cate the Coasian theory of the firm, which goes a long way in explaining why
individuals would choose to incorporate for purely economic reasons—​or why
corporations continue to exist in the market despite their noncompulsory na-
ture. The crucial point here is that corporations continue to exist and survive in
the market because they provide important efficiency gains over markets in coor-
dinating production. On the other hand, the problem with the Chicago school’s
theory of the corporation is that it makes this economic story the entire story,
as I argue in c­ hapter 7. My goal is to articulate a political theory of the corpo-
ration that takes both sets of concerns seriously—​the private, contractual, and
economic on the one hand, and the public, legal, and governmental on the other.

31
  Anderson (2017); Ferreras (2017).
 Int roduc tion 17

Addressing the Problem as It Presents Itself

When I tell people about this project, that my research considers the corpora-
tion from the perspective of political theory, I often get a follow-​up question
about whether my aim is to criticize capitalism: am I a cheerleader for capitalism,
trying to vindicate and normalize one of its central institutions, or a critic of cap-
italism, trying to demonstrate the immorality of one of its central institutions?
In fact, this book has little to say explicitly or particularly about capitalism per se.
In the next chapter I clarify my methodological approach and discuss markets in
more detail. As I explain there, part of my approach requires that we accept this
feature of a capitalist system as a background assumption. While relatively free
markets are not the same thing as “capitalism,” the two often go hand-in-hand.
Thus I often take the existence of capitalist societies as something of a given
throughout this book, though it also does not require or imply a full-​throated
embrace of capitalism.
This will likely be underwhelming to both zealous critics and zealous de-
fenders of capitalism. For the zealous critic, taking markets as a given will seem
purely ideological, arbitrarily closing off more radical and emancipatory alter-
natives in favor of the status quo. In fact, it’s worse than that: not only do I take
them as a given, I assume markets have a normative or moral basis. (How bour-
geois!) For the zealous defender of capitalism, my assumptions about the moral
basis of markets will likely seem overly mealy-​mouthed and halfhearted. In fact,
it’s worse than that: the moral basis I attribute to markets is not held as catego-
rical or universally true, but simply as the moral basis that happens to hold at this
moment in time. (How historicist! How relativist!)
There is methodological reason for this seeming ambivalence, informed
by a certain understanding of the sort of work that theory and philosophy do.
Concepts and puzzles in political theory aren’t purely deductive propositions
and dilemmas that are stumbled on by secluded thinkers reasoning in the ab-
stract; they come about because of actual problems or questions that arise in
the world. When we ask about “justice” or “democracy” or “racism” or whatever,
these are questions that arise because actual political disagreement: about how
social advantages and burdens ought to be distributed, how collective decision-​
making ought to be conducted, how and whether people ought to be differen-
tiated based on social categories, and so forth. What this means, however, is
that when answering these questions, one is not entitled to assume away the
conditions that make it a question in the first place. If we are asking questions
about justice and politics, we can’t assume away the problems of scarcity, bad
actors, or vehement disagreement as part of our answer, since if any of those
conditions existed, there wouldn’t be any need for “justice” or “politics” in the
18 The Form of the Firm

first place.32 Put generally, the nature of a problem or puzzle inherently poses a
constraint on how one can answer and what sorts of conceptual resources one
can draw on.
Thus, for the questions I am asking about the legitimacy of corporate ar-
rangements, we cannot assume away the things that make this a puzzle in the
first place. The privileging and institutionalization of relatively free markets fa-
miliar to us from capitalism, then, must be a starting assumption; in a socialist
nonmarket system, where the economy is fully controlled (however realized)
by the people (however understood), the questions we are interested in would
likely not arise in the first place because corporations as we know them would
not exist. To assume otherwise would be, in some sense, to assume the problem
away. Of course, something similar to corporations would likely exist in such a
society, and so other questions would present themselves, which would be very
interesting and pressing, no doubt. However, given our concern with the modern
business corporation, we must start with the assumption of the basic conditions of
modern business—​namely competitive markets, relatively free contracting, and
private property rights, as well as general features about modern society like the
division of labor, complexity, scarcity, and so forth.
However, precisely because these features of capitalism function as some-
thing like an unavoidable empirical assumption for how we go about answering
the questions, we should also not treat them as an unavoidable moral fact; that
our societies are generally organized as capitalist societies ought to be treated as
a contingent fact of our shifting social landscape, not a fixed point on our moral
compasses. This is because we want to ensure that we can be critical, that the
status quo doesn’t impose arbitrary constraints on our moral imagination even
if it must impose constraints on our assumptions about the world as presently
structured. Our assessment of the corporation may lead us to puzzles that put
capitalism into moral question. We also might want to address questions about
the corporation by reference to structural reforms of capitalism; we may dis-
cover that there are certain features of capitalism that we want to radically alter
given the way they enable problematic features of corporations. This is a strategy
that is easier if we don’t begin with an enthusiastic acceptance of capitalism.
In other words, while the existence of capitalism is not really questioned
in this book, I don’t mean to signal that a more radical reimagining is be-
yond the pale; far from it. It is just simply beyond the purview of this book.

32
  Moderate scarcity is part of what Rawls, following Hume, called the “circumstances of justice.”
Knight and Johnson (2011) refer to the fact of disagreement as the “circumstances of politics.” For
a similar sort of formulation see Levy (2016) and Mills’s (2008) charge that Rawlsian liberalism’s
starting assumptions erase the initial problem of white supremacy, making the resulting conception
of justice unable to address the real question of how to address racial injustice.
 Int roduc tion 19

Methodologically, a normative and critical assessment of the business corpora-

tion requires that we accept many features of capitalism, but that we do so be-
grudgingly, like a neighbor’s dog that we’ve agreed to look after even if we don’t
fully trust it and never take our eyes off it. Capitalism is accepted as a premise not
with some grand moral conviction, but with shrugged shoulders and a sigh. This
assumption has the benefit, I imagine, of comporting with many people’s basic
intuitions. Many of us think capitalism is riddled with large moral problems but
also worry that pursuing some wholesale alternative may not be any better, or
might be considerably worse. I imagine even the zealous defender or critic of
capitalism, while not sharing these intuitions, would not be surprised or totally
outraged by some sympathetic friend admitting to either of these sentiments.
Put differently, many of us are in a good position, or can sympathize with such
a position, to think about the problem of the corporation on the terrain that the
problem presents itself on, and without reaching for easy short-​circuits.
More could likely be said, but I’d rather not belabor or prolong these intro-
ductory remarks. The aim of this book is to articulate a normative theory of the
corporation that synthesizes economic and political insights, and which tries to
thread the needle between a sober assessment of the social system we inhabit
and an ideal depiction of the world we want to inhabit. This necessarily involves
engaging with and taking seriously economic theories of the corporation, and
then subjecting them to normative critique. The hope is that such a study will
contribute to our normative understanding of this central institution and per-
haps serve to inspire some change toward a better and more just economic order.
In the process, if I can make the economic theories of the corporation legible
and interesting to political theorists—​or, more improbably, make the moral con-
cerns of political theorists legible and interesting to economists—​then this will
seem to me no small feat.
 1

A Framework for a Political Theory

of the Corporation
There is a crack, a crack in everything
That’s how the light gets in

As I noted in the introduction, the aim of this book is to subject the corporation
to criticism and moral reflection. This raises questions: how, exactly, do we go
about doing this type of criticism? What exactly are we doing when we engage
in philosophical criticism of something like the corporation? One intuitive and
attractive way of doing this is to start with a moral theory of what is good, how
we ought to act, or what a just order looks like, and then show how existing in-
stitutions fall short of that more exacting standard. Many interesting and smart
pieces of criticism do something like this. However, they ultimately run into a
problem, namely that their conclusions are dependent on the correctness or ac-
ceptance of their initial theories. If we start with an Aristotelian theory of the
good, a Kantian theory of how we ought to act, a Marxist theory of exploitation,
or a Platonic theory of the state, and then try to apply it to the corporation, we
not only assume that such a theory can be applied to such an institution, we
also commit our interlocutors to buy into our least obvious claims (the golden
mean, the categorical imperative, the labor theory of value, the idealness of the
callipolis) in order to motivate a criticism that might have done without such
weighty assumptions. This problem is exacerbated when we consider the fact
that disagreement over such fundamental things is a relatively intractable feature
of our societies, part of what Knight and Johnson refer to as “the circumstances
of politics.”1
I use a contrasting approach. In this approach, the critic first seeks to under-
stand why the institutions and practices under investigation exist and persist and
seeks to do so without appeal to malevolent actors, flawed ideology, or powerful

  Knight and Johnson (2011).

1

20
 A Framework for a Political Theor y o f the C or porati on 21

interests. The idea is to then use this implicit justification and rationale for an
institution as a basis for appraisal and critique. The aim is to engage in criticism,
but not a kind of criticism that rejects the world in favor of a more ideal or uto-
pian vision that we think up and apply from some outside, detached position;
instead, we use the critical standards that our current practices and institutions
supply. What are the moral commitments implicit to our society, and does the corpo-
ration live up to them? This is the question I want to ask.
In order to do this I first set out some basic assumptions that, I hold, are pre-
supposed by the liberal-democratic order in which we live. I start with them not
so much because I think they are correct (though I do think there is much to be
said in their favor) but because I take them to represent the moral framework
implicit to our social order. By holding these norms and institutions constant we
will be able to understand more precisely the types of puzzles the corporation
raises and, hopefully, new ideas of how corporations ought to be structured in
liberal democracy.2 This approach may strike some as unnecessarily conserva-
tive, since we begin with the norms of the current world, and not those of some
potential better world. But beginning with the world, practices, and ideas that
we find existing before us—​and not with a more radical or utopian vision—​is
a style of critique that goes back to Karl Marx. As he wrote in “For a Ruthless
Critique of Everything Existing”: “We shall confront the world not as doctrin-
aires with a new principle: Here is the truth, bow down before it! . . . We develop
new principles to the world out of its own principles.”3 Our social practices and
our moral convictions and self-​understandings will not be perfectly matched—​
often our practices will fall short of the normative standards they seem to imply;
other times we discover that our moral convictions need updating because they
don’t match our social practices. Thus, to engage in this sort of criticism will
rarely result in an apologia for the status quo, but generally in prescriptions to
move beyond our current institutions. By focusing on the implicit norms of our
institutions, we show that they are cracked and, as the introductory epigraph
suggests, that such cracks are “how the light gets in.”4
By first laying out these normative presuppositions of our current order as
clearly as possible, I will be able to establish what these principles must demand
of the corporation and its organization, and whether it lives up to them. While
there are perhaps many presuppositions, for now we can restrict these supposi-
tions to two: (1) liberal-democratic institutions and norms—​individual liberty,

2
  Here I am deeply influenced by Carens’s (2000, 4; 2013, 297–​314) “contextual” approach to
political theory.
3
  Marx (1978a, 14).
4
  W hile always a fan of Leonard Cohen, I owe my appreciation for the depth of this particular
lyric to Rainer Forst.
22 The Form of the Firm

formal equality, and democratic decision-​making—​are to be preferred to other

alternatives; and (2) the market should function as a basic institution for co-
ordinating economic activity. In the two sections that follow I will unpack and
explain these presuppositions respectively. After this I explain how these pre-
suppositions create something of a puzzle for understanding the corporation,
and then delineate the main questions needing answers in order to resolve this
puzzle. A coherent answer to all of these questions, I argue, constitutes a political
theory of the corporation, and is the subject of the remainder of the book.

Presupposition 1: Liberal-democratic norms and

institutions are preferable to other alternatives
This first presupposition is meant to articulate the normative basis for the
liberal-democratic approach to the relationship between individual and society.
Now, the canons on liberalism and democracy are long and complex and I don’t
pretend to do them justice here. Primarily what I wish to do is provide work-
able understandings of what I consider to be the three main pillars of liberal
democracy—​individual liberty, formal equality, and democratic procedures for
collective decision-​making—​and the moral intuitions I take to underlie them.
These are not meant to be defenses of liberal-democratic norms against other
norms—​I am not here trying to vindicate a Mill or a Kant against a Nietzsche
or a Marx—​but brief statements about the basic and minimal moral intuitions,
norms, and practices underlying liberal democracy.

Individuality
There are two components to this individuality. On the one hand, there is the
normative approach to politics whereby political society is seen as justifiable in-
sofar as it protects the moral primacy of the individual and her liberty. On the
other hand, there is the empirical and methodological approach to social sci-
ences whereby “all social phenomena are in principle explicable only in terms
of individuals—​their properties, goals, and beliefs.”5 For both reasons, liberal
democracy has generally grounded its legitimacy in the consent of rational indi-
viduals (whether real or hypothetical) for the purpose of preserving the plural
values and ends individuals will wish to pursue.6

  Elster (1982, 453).

5

  I am particularly fond of Ian Shapiro’s (1986) articulation of this idea.

6
 A Framework for a Political Theor y o f the C or porati on 23

The Rawlsian articulation of liberalism can be seen as doing precisely this.

By presenting a stylized account of how individuals would choose a certain
scheme of social cooperation based on a particular articulation of their “prop-
erties, goals, and beliefs,” Rawls argues that our liberal institutions and norms
can be seen as the result of a hypothetical social contract to which we as indi-
viduals would consent were we properly positioned to do so. Furthermore, he
argues that this agreement is in harmony with the diverse ends and reasonable
pluralism that characterize a free and modern society. Where the contractarian
original position of Theory of Justice gives way to the overlapping consensus of
Political Liberalism, we find an emphasis less on the hypothetical consent of in-
dividuals than on how the content of such a doctrine can be endorsed by people
holding radically different understandings of the good. Presenting people as
both rational and reasonable, Rawls claims that we are best able to pursue our
various goods in a liberal society governed by a political conception of justice
that does not rely on metaphysical doctrines.
As I have said in the introduction, Rawls’s theory is not suited to the task of
dealing normatively with the corporation. Still, for articulating the normative
ideas implicit in current practices and institutions, Rawls is quite helpful, partic-
ularly because he claimed his theory to be doing precisely this.7 There are two
features of the Rawlsian project to which I want to draw attention. The first is
that our understanding of liberal political institutions like rights and constitu-
tions are grounded in the acknowledgment that society is a scheme of cooper-
ation made up of distinct individuals. Because cooperation benefits everyone
involved, everyone must in principle be able to consent to the particular scheme
of cooperation at hand; in arguing that behind the veil of ignorance we would
agree to the liberty principle, Rawls contends that there are certain dimensions
of ourselves that we would want protected, regardless of the benefits and harms
particular states of the world would bring us. We reject approaching the prob-
lems of liberal society with a utilitarian calculus because the interpersonal com-
parisons of utility such a calculation requires would be empirically fraught and
morally unpalatable, due to its blindness to the distinction between persons.8
As a result, the normative defense of liberal institutions like rights presented
here is distinct from something like Mill’s defense, which argues that we should
understand rights as those conventions we adopt because their general accept-
ance tends to increase overall utility.9 Whereas Rawls’s is based on a concept of
the individual and what the individual seeks (albeit a highly abstract concept),
Mill’s account of rights is not from the perspective of the individual but from the

7
  Rawls (2005, 14).
8
  Rawls (1971, 27).
9
  Mill (2001, 52–​53).
24 The Form of the Firm

perspective of what increases the welfare of a society taken in the aggregate. It is

not clear why a right, once defended on consequentialist grounds, could not be
trespassed or made trivial in the face of a utilitarian calculus that showed it to be
in the general interest to do so.
The second feature of the Rawlsian perspective that I emphasize here is that
the privileging of particular individual interests above some aggregate notion of
social welfare leads to the acceptance of reasonable value-​pluralism. That is, be-
cause we view certain things like freedom of conscience, expression, and religion
as protected individual rights, political society must be such that people who use
these freedoms for different ends can coexist and cooperate with one another.
Just as there can be no one metric according to which the rights and liberties of
citizens may be subject, the liberal political project aims for the ideal that there
is no one right way to live one’s life or to pursue the good.10

Formal Equality
While the permissibility of different forms of material inequality is debated
among adherents of various forms of liberalism, I take it as a given that liber-
alism endorses the formal equality of persons in both the legal and the moral
sense. This idea is perhaps best captured in the phrase that all are “equal before
the law,” which implies that all citizens11 within a state are, or ought to be, subject
to the same laws to the same extent, and that the same due process of law will,
or should, be applied to all in the same manner. In the eyes of the law, and to the
extent that persons are affected by the law, all are equal as citizens.
More than this, however, I take the liberal project to also imply a kind of
moral equality among persons. Here the contrast with the legal equality of cit-
izens draws our attention to the more fundamental idea of liberalism, namely
that there is no basis according to which we ought to treat one person as being
of greater moral worth, or being of greater dignity, than any other. While there
are many ways of justifying this—​by reference to people’s abilities (as Hobbes
claims), by divine provenance (as Locke claims), common rational capacities (as
Kant claims), or for want of some religious or metaphysical agreement on which
cooperation can be based (à la Habermas or Sen)—​it is impossible to imagine a
concept of liberal democracy that does not contain the basic notion that people
are deserving of equal treatment from others.

  Of course, whether it can actually succeed in this aim is highly questionable. See Beiner (1992).
10

  Some also argue that liberalism also implies the equal recognition of noncitizens as well as citi-
11

zens (Carens 2013). I am friendly to this argument but bracket this question here.
 A Framework for a Political Theor y o f the C or porati on 25

This follows from what was said above regarding the protection of individu-
ality. If the individual has moral primacy, and this moral primacy is articulated
in a discourse of rights, then this means that people must approach all other
people with the same restraints such rights imply, thus necessitating an idea of
legal equality. Furthermore, if such protection of individuality necessitates the
preservation of value pluralism, then our cooperative social endeavors cannot
be grounded on one particular notion of the good; instead we must presume
some notion of equal worth to exist prior to political convention, at least as a
pragmatic matter, thus requiring some notion of moral equality. Now it should
be made clear that I am not claiming that liberalism cannot entail a commitment
to a more robust notion of equality, either of resources, of utility, of capabilities,
or some other equalisandum. Many (including myself) think that liberalism, in
order to be coherent, must also entail a commitment to a certain level of mate-
rial equality. However, certainly not all liberals do, and even those who do still
seek to defend such a claim with respect to formal equality and individual rights.

Democratic Procedures
From the foregoing we get the liberal idea that when we approach the question
of social cooperation, we must begin with the baseline assumption of equality
among individuals. Yet the institutions necessary for coordinating cooperation
and collective action require some forms of hierarchy that will inevitably confer
status on some so as to create inequality both in terms of status and in terms of
obligation. What is a liberal to do? For this reason, democratic procedures are
also a key component of liberal democracy (as the name would imply).
Now, again, there are various strains of democratic thought ranging from the
substantive, to the participatory, to the market-oriented. I take Robert Dahl’s
understanding of democracy to be a helpful basic model of democracy, one
endorsed as a minimum, whatever other features we might demand of demo-
cratic institutions. Dahl and Charles Lindblom describe democracy in terms of
both a goal and a principle.12 The goal of democracy is the “condition of political
equality,” the political actualization of liberal formal equality wherein “control
over governmental decisions is shared so that the preferences of no one citizen are
weighted more heavily than the preferences of any other one citizen.” This leads
to the principle of majority rule: “Governmental decisions should be controlled
by the greater number expressing their preferences in the ‘last say.’ ” As Dahl later
clarified, the moral bases of this democratic goal are the liberal ideas of “equal
moral dignity,” “autonomy,” and “strong personal equality”; affirming these ideas

12
  Dahl and Lindblom (1953, 41).
26 The Form of the Firm

moves us to strive for democracy, even if in the last analysis we fail to meet its
high standards.13
Importantly for Dahl, the fulfillment of this goal is cast in terms of institutions
and procedures, not in terms of discourse conditions or policy substance. The
intuition here is that institutional and procedural standards are better for ana-
lyzing real-​world democracies than more substantive measures of democracy;
these provide a more realistic goal toward which democratizing communities
can aspire, while not necessarily contradicting the goals of advocates desiring
more substantive or discursive visions of democracy. Perhaps more importantly,
the emphasis on procedure and institution takes seriously the prior claim that
protection of the individual must also be a protection of value pluralism. Maria
Paula Saffon and Nadia Urbinati have argued that due to liberalism’s “diverse, at
times irreconcilable, opinions, imposing a substantive standard to democratic
decisions may threaten freedom.” This necessitates a minimal set of procedures
that can be appealed to in inevitable instances of conflict.14 These minimal pro-
cedures ensure that citizens have the ability to formulate preferences, signal their
preferences to fellow citizens and the government, and “have their preferences
weighed equally in the conduct of the government, that is, weighted with no
discrimination because of the content or source of the preference.”15 Procedural
democracy thus allows for different ideas and policies to compete for public sup-
port while also being sensitive to issues of individual freedom and equality.
The liberal affirmation of democracy is therefore not born from a concern
for solidarity, or giving voice to a “general will,” but from the protection of indi-
vidual freedom and equality. The basic impulse is that when individuals are sub-
ject to a situation in which their freedoms might be trespassed upon or in which
inequality obtains, there ought to be procedures that can effectively allow them
to communicate their preferred ends and have those preferences count as equal
to others in the formulation of collective decisions. Whatever else liberals might
demand of democracy—​for instance, a particular idea of justification or delib-
eration, which, again, is something to which I am sympathetic16—​there must
be procedures in place that can protect against infringement upon individual
freedom and equality.

13
  Dahl (1989). Famously, Dahl offered the term “polyarchy” for those states that approached,
but failed to reach, the ideal institutional fulfillment of democracy. This term has not caught on in the
same way that the rest of his ideas have.
14
  Saffon and Urbinati (2013, 442).
15
  Dahl (1972, 2).
16
  Cohen (1989).
 A Framework for a Political Theor y o f the C or porati on 27

Presupposition 2: The market should function as

a basic institution for coordinating
economic activity
The first presupposition is meant to articulate the basic moral intuitions under-
lying our political institutions that protect individual rights, legal equality, and
democratic control through participation and competitive elections. This second
presupposition is meant to articulate the moral intuitions underlying the insti-
tutions through which we allocate, produce, and distribute goods—​namely the
competitive market. The way that I have stated this presupposition will probably
seem unsatisfactory for at least two reasons. First, this presupposition is vague
with regards to what precisely is taken to be the good that markets achieve: why
should markets be so prioritized? Second, beyond merely claiming that there is
a good that markets can achieve, one would want to know why markets are par-
ticularly well suited to promoting this good. Here, I address these two concerns.

What Is the Good Promoted by Markets?

To this normative question I answer simply that the good toward which markets
strive is the good of efficiency. That is, markets emphasize the moral nature of
satisfying individuals’ preferences—​maximizing their utility—​by maximizing
the productive use of resources. The implicit moral argument is that because
the human condition is one of scarcity, and because the ability to lead a good
life (however defined) requires a material basis, a political and economic order
that does not concern itself with the effective use of material resources will fail to
allow people to pursue good lives in the ways they wish. Put another way, to be
relatively indifferent to efficiency is to be relatively indifferent to human welfare;
this is to be indifferent to the degree to which people can pursue the good life.
This is something, I contend, that any critic of capitalism must take seriously, as
notable 20th-​century socialists Oskar Lange and Abba Lerner implored in the
1930s.17
Note that I said “satisfying individuals’ preferences” and not satisfying more
preferences generally. Against an aggregationist approach, I take the norma-
tive standard of efficiency to which the market aspires to be something like the

17
  Oskar Lange (1936, 53) claimed that socialists were indebted to the Austrian economist
Ludwig von Mises for forcing them to recognize the “importance of an adequate system of economic
accounting to guide the allocation of resources.” For this reason, Lange added as a joke, “a statue of
Professor Mises ought to occupy an honourable place in the great hall of the Ministry of Socialization
or the Central Planning Board of the socialist state.”
28 The Form of the Firm

Pareto standard, which says that a state of affairs can be ranked as preferable if,
all things being equal, one person considers herself better off than she was be-
fore, and no one else considers herself worse off than she did before.18 Where
one person is made better off and another is made worse off, the Pareto principle
of efficiency remains silent. What makes the Pareto principle significant is that
it is generally satisfied by exchange. If, without being coerced, two people ex-
change some good or service for another, each of them must prefer or at least be
indifferent to the state of affairs they believe will exist after the exchange in com-
parison to the one before it. Therefore, there is good reason to think that every
freely-engaged exchange of goods entails an efficiency gain and results in an al-
location superior to that existing prior to the exchange. Market exchanges have a
strong implicit argument from efficiency in their favor, granted the assumption
that such exchanges are done freely and without being compelled by another
(that is, without coercion).
An acceptance of markets, then, should be understood in terms of a respect for
the distinctiveness of persons, and an affirmation of the basic good in improving
people’s material welfare. Insofar as we think that political society ought to pro-
tect and advance human welfare, we must be committed to efficiency as a social
end. Obviously, this does not mean that efficiency is the only social commit-
ment, or even the most important commitment, as I will argue throughout the
book. But it must be an important one.
I want to draw attention here to another important contrast. I have argued
that the normative defense of markets lies in its efficiency-​advancing properties
and not in its liberty-​advancing properties. This isn’t to say that we ought not be
concerned with liberty; as the first presupposition made clear, we should be and
are concerned with individual liberty. However, I stated the preference for indi-
vidual liberty as a separate presupposition precisely because I do not think that
this liberty is the good of markets for two reasons: first, because a nonmarket
regime might place an equally high regard on individual liberty; and second, be-
cause markets may not be terribly good at promoting this liberty, but still might
be redeemable on welfarist grounds. This is precisely why the good of liberalism
was stated separate from, and prior to, that of markets; liberal institutions are
necessary to protect these rights from many things, one of which just might be
the effects of markets.
This is in contrast with some libertarians, who support markets as the way
of promoting social cooperation and cohesion most in line with liberty.19 For

  Rawls (1971, 58).

18

  Here I refer to libertarianism as a philosophical perspective that uses the maximization of neg-
19

ative liberty as the metric by which social arrangements and institutions are judged, and thus not
simply a political project regarding the size of the state.
 A Framework for a Political Theor y o f the C or porati on 29

Nozick, for example, this is embodied in his narrow definition of justice in

terms of just acquisition and just exchange and not in terms of how distribu-
tions match a preconceived notion of desert or obligation—​what he refers to
as “patterned conceptions” of justice. Capitalism is therefore preferred not for
its welfare-​related benefits but because it allows people to pursue the goods
they want with minimal constraint. That is, by not restricting “capitalist acts be-
tween consenting adults,” the capitalist market best secures Nozick’s maxim of
justice: “From each as they choose, to each as they are chosen.”20 For Nozick,
liberty is always justice-​preserving, and because markets enable the most liberty
in economic affairs, they are the most just economic institution.
Endorsing either the welfarist or libertarian defenses of markets has direct
political and practical consequences. When presented with a question about the
welfare state, for instance, the coercive taxation involved will be greeted with
distrust if not straightforward hostility by a more libertarian-​minded defender
of markets, while potential efficiency gains of universal social insurance schemes
or universal basic income programs are more likely to be embraced by welfarist
defenders; for the libertarian, the improvement in welfare does not justify the
violation of individual liberty. The welfarist understanding of markets therefore
better captures the variation in capitalist market regimes we observe empiri-
cally,21 as well as other institutional features that are almost universally accepted
in market societies (e.g., the protection of third parties against externalities) but
which seem to be more geared toward welfare than liberty.
However, more importantly for our purposes here, I also believe the wel-
farist account to be more coherent than a purely libertarian account. This is
because the libertarian is not able to explain why we should have a coercive
state enforcing and protecting the property rights necessary for a market-​based
society in the first place. Indeed, the libertarian must explain from where these
property rights come in the first place; absent a religious or natural rights foun-
dation (of which a modern libertarian ought to be wary), the question of how
and why property rights arise looms large. The best answer to this question,
ultimately, is that private property rights are the most efficient way to protect
productive endeavor and allow people to trade, buy, and sell. Indeed, even
Locke, who presents his argument for private property as grounded in natural
rights, ultimately makes a more pragmatic appeal to the gains in productivity
that result from granting such rights.22 However, once this is conceded, it is not
obvious why we should cease to be concerned with efficiency after the setup
of property rights, and strive to achieve efficiency through a variety of other

20
  Nozick (1974, 160).
21
  Hall and Soskice (2001).
22
  Locke (1980, ch. 5, sects. 36–​37).
30 The Form of the Firm

mechanisms like state action. Indeed it seems that enabling the trade and sale
of property would just be an extension of this. In the end, a libertarian cannot
get away from welfarist stances in order to justify the foundational element of
their liberty-​enhancing scheme.

How and Why Do Markets Promote This Good?

If the good of markets is welfare or efficiency, then the question becomes why
we should believe that markets are particularly efficient and welfare-​enhancing.
Here I take Friedrich Hayek’s criticism of planned economies and analysis of
the role played by “knowledge” in political economy as the best account of the
welfare-​enhancing qualities of markets. For Hayek, the problem to be solved in
political economy is the question of “how to secure the best use of resources
known to any of the members of society, for ends whose relative importance
only these individuals know. . . . It is a problem of the utilization of knowledge
not given to anyone in its totality.”23 The virtue of markets is the set of competi-
tively determined prices they generate, which conveys information about what
consumers want and what producers have in more effective ways than other al-
ternatives. Instead of requiring an individual or a group to do the Herculean task
of figuring out how best to produce and for what ends, the prices produced by
markets have the effect of conveying this information spontaneously. Price in-
formation allows producers to ascertain the relative demand for a given product,
and to adjust their production accordingly; similarly, prices signal to consumers
the relative scarcity of a given good, which allows them to alter their consump-
tion habits accordingly.
Because of this, more efficiency gains can be achieved given a certain set of
resources and preferences in an economy coordinated by a price mechanism
than by a planning committee or directly democratic procedures. Effective
transmission of accurate information in the form of prices allows for the greatest
number of possible Pareto-​improving transactions to occur. Arthur Pigou
captured this insight in a slightly different but helpful way. For Pigou, prices
convey information that allows the marginal personal interest of any particular
economic action to equal marginal gain to social welfare. We can say that the
cost of a good is the price I must pay to obtain it. The virtue of the market’s
competitive price mechanism is that, by reflecting the relative scarcity of a par-
ticular good, the cost it imposes on the purchaser is equal to the marginal so-
cial cost she imposes on society by removing that good from the general stock;
similarly, the benefit one gets by selling a good is equivalent to the marginal

23
  Hayek (1945, 520).
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European War. Their Anglia Irridenta lay in the football fields and
factories, the music-halls and seaside excursions that they talked of,
and now hoped to see once again. Their Alsace Lorraine lay in the
skilled occupations or soft jobs that women or neutrals had invaded.
When he listened to their talk in billets, and occasionally caught
some real glimpse of them, between their mouth-organ concerts, and
their everlasting gamble at cards, it was of the keen Trades Unionists
who were already talking of purging this, that or the other skilled
industry from all the non-union elements that had been allowed to
flow into it, behind their backs, while they were chasing Fritz across
this b—— country, where Belgium, France, or Luxembourg were
simply “billets,” and the goal was “dear old Blighty”—behind them,
over the Channel, not in front, still ringed about by German trenches.
There were elements of hesitation, he noticed, in all the Allies. The
French felt they had done much too much, and wanted to be back at
their farms and little shops. The Belgians wanted to march into their
country without the tragic necessity of knocking flat all its solidly built,
hard-working little towns. All three nations shared the inevitable
sense that grew upon men with the passage of years, of the
mechanical nature of the War. Thus the cavalry, where the greatest
proportion of regular soldiers lingered, were still keen on exploiting
their one chance. The artillery, buoyed up by the facilities that their
command of transport gave them, fired away their now all abundant
ammunition. The machine gunners, containing some proportion of
picked men, and able to feel that they could easily produce some
noticeable effect with their weapon, were still game. But the mass of
infantry, tired enough of the bomb and the rifle, and probably unfitted
by generations of peace, for any effective use of the bayonet, were
rapidly adopting the attitude, unexpressed as always with the
humbler Englishman, of “Let the gunners go on if they like. We don’t
mind!”
On a grey November morning, Dormer went to his billet in the suburb
of a manufacturing town. It was the most English place he had set
eyes on in all his three years. It was not really suburban, very nearly,
not quite. There was no garden before the door, it was close to the
factories and workshops where the wealth that had built it was made,
instead of being removed a decent mile or so. In fact, it just lacked
the proper pretentiousness. Its owner had made money and was not
in the least ashamed of admitting it, was rather prone to display the
fact and his house looked like it. It was a villa, not a château. It was
the home of a successful manufacturer who did not want in the least
to be taken for a country gentleman. He, poor fellow, had been called
up and promptly killed, and his home, with its stained-glass windows,
expensive draping and papering, clumsy if efficient sanitation, was
inhabited only by his widow.
Dormer thought there could not be in the world any person so utterly
beaten. Broken-hearted, exposed during four years to considerable
bodily privation, being in the occupied area, she was no
Mademoiselle Vanderlynden of the Army zone that Dormer knew,
making a bold front against things. She was a delicate—had been
probably a pretty woman—but it was not from any of her half-audible
monosyllabic replies that Dormer was able to discover to what sort of
a country he had come. A little farther down the street was the
factory, long gutted by the Germans and used as a forage store,
where his company were billeted. The old caretaker in the time-
keeper’s cottage told Dormer all that was necessary, and left him
astonished at the moderation of tone and statement, compared with
the accounts of German occupation given by the Propagandist
Press. Possibly, it was because he addressed the old man in French
—or because he had never parted with his English middle-class
manners—or because the old fellow was nearly wild with delight at
being liberated. This was what Dormer heard:
“Enter, my Captain. It is a Captain, is it not, with three stars? The
insignia of Charles Martell!” (Here wife and daughter joined in the
laugh at what was obviously one of the best jokes in father’s
repertory.) “You will find that the Bosches removed everything, but
that makes less difficulty in the workshop. You have only to divide
the floor space between your men. I know. I was a corporal in the
War of ’Seventy. Ah! a bad business, that, but nothing to what we
have now supported. You will do well to make a recommendation to
your men not to drink the water of the cistern. The Bosches have
made beastliness therein. Ah! You have your own watercart? That is
well done, much better than we others used to have, in Algeria. It is
always wise to provide against the simple soldier, his thoughts have
no connection. You say you are accustomed to Germans and their
mannerisms? I do not wonder. We too, as you may judge, have had
cause to study them. I will tell you this, my Captain, the German is
no worse than any other man, but he has this mania for Deutschland
über Alles. It comes from having been a little people and weak, and
so often conquered by us others. So that to give him some idea of
himself, since he cannot invent a culture like us other French, he
must go to put all above below, and make a glory of having a worse
one. That shows itself in his three great faults—he has no sentiment
of private property—what is others’, is his. He must be dirtier than a
dog in his habits—witness our court-yard—and he has to make
himself more brute than he really is. You see, therefore, he has
stripped the factory, and even our little lodging, down to my
daughter’s sewing-machine, and the conjugal bed of mother and
myself. You see also, that we had our grandchildren, our dog Azor,
our cat Titi. Now many of the Bosches who lodged here were
certainly married and had their little ones and domestic animals. Yet
if they found a child or a beast playing in the entry when they entered
or left, they must give a kick of the foot, a cut with the riding-whip.
Not from bad thoughts, I assure you. It is in their code, as it is in that
of us others, English and French, to lift the hat, to make a salutation.
The officers are the worst, because in them the code is stronger. For
the German simple soldier, I have respect. They sang like angels!”
(Here the old man quavered out the first bars of:
“Ein feste Bourg ist unser Gott.”)
Dormer wanted to get away, but could scarcely forbear to listen
when the daughter broke in:
“But, Papa, recount to the officer the droll trick you played upon
those who came to demolish the factory!”
“Ah, yes. Place yourself upon a chair, my officer, and I will tell you
that. Figure to yourself that these Bosches, as I have explained,
were not so bad as one says in the papers. They had orders to do it.
I know what it is. I have had orders, in Algeria, to shoot Arabs. It was
not my dream, but I did it. I will explain to you this.
“It was the day on which they lost the ridge. One heard the English
guns, nearer and nearer. Already there were no troops in the factory,
nothing but machine gunners, always retreating. A party of three
came here with machinery in a box. One knew them slightly, since
they also had billeted here. They were not dirty types; on the
contrary, honest people. Sapper-miners, they were; but this time one
saw well that they had something they did not wish to say. They
deposit their box and proceed to render account of the place. They
spoke low, and since we have found it better to avoid all appearance
of wishing to know their affairs, we did not follow them. Only, my
daughter had a presentiment. Woman, you know, my officer, it is
sometimes very subtle. She put it in her head that these would blow
up the factory. She was so sure that I lifted the cover of their box and
looked in. It was an electric battery and some liquids in phials. I had
no time to lose. I placed myself at the gate and ran as fast as I can to
where they were, in the big workshop. I am already aged more than
sixty. My days for the race are over. Given also that I was
experiencing terrible sentiments—for you see, while we keep the
factory there is some hope we may be able to work when the War is
finished, but if it is blown up, what shall we others go and do—I was
all in a palpitation, by the time I reached them. I cried: ‘There they
go!’
“‘Who goes?’ they asked.
“‘The cavalry,’ I cried.
“They ran to the entry, and seeing no one, they feared that they were
already surrounded. I saw them serpentine themselves from one
doorway to another all down the street. The moment they were lost
to sight I flung their box into the big sewer!”

Dormer billeted his company in the factory. He did not fear shell-fire
that night. He himself slept in a bed at the villa. It was the first time
he had left the night guard to a junior officer. In the morning, he
paraded his company, and proceeded, according to plan, to await
the order to move. The days were long gone by when a battalion
was a recognizable entity, with a Mess at which all the officers saw
each other once a day. Depleted to form Machine Gun Companies,
the truncated battalions of the end of the War usually worked by
separate companies, moving independently. There was some
desultory firing in front, but his own posts had seen and heard
nothing of the enemy. About nine he sent a runner to see if his
orders had miscarried. Reply came, stand to, and await
developments. He let his men sit on the pavement, and himself
stood at the head of the column, talking with the two youngsters who
commanded platoons under him. Nothing happened. He let the men
smoke. At last came the order: “Cease fire.”
When he read out the pink slip to his subordinates, they almost
groaned. Late products of the at last up-to-date O.T.C.’s of England,
they had only been out a few months and although they had seen
shell-fire and heavy casualties, yet there had always been a
retreating enemy, and fresh ground won every week. The endless-
seeming years of Trench Warfare they had missed entirely. The slow
attrition that left one alone, with all one’s friends wounded or killed,
dispersed to distant commands or remote jobs, meant nothing to
them. They had been schoolboys when Paschendaele was being
contested, Cadets when the Germans burst through the Fifth Army.
They wanted a victorious march to Berlin.
Dormer read the message out to the company. The men received the
news with ironical silence. He had the guards changed, and the
parade dismissed, but confined to billets. He heard one of his
N.C.O.’s say to another: “Cease fire! We’ve got the same amount of
stuff on us as we had two days ago!”
It made him thoughtful. Ought he to crime the chap? Why should he?
Had the Armistice come just in time? If it hadn’t come, would he have
been faced with the spectacle of two armies making peace by
themselves, without orders, against orders, sections and platoons
and companies simply not reloading their rifles, machine gunners
and Trench Mortars not unpacking their gear, finally even the artillery
keeping teams by the guns, and the inertia gradually spreading
upwards, until the few at the top who really wanted to go on, would
have found the dead weight of unwillingness impossible to drag?
The prospect, though curious, was not alarming. In a country so
denuded and starved, one could keep discipline by the simple
expedient of withholding rations. He had already seen, a year before
at Étaples, the leaderless plight of all those millions of armed men,
once they were unofficered. He was not stampeded by panic, and
his inherited, inbred honesty bade him ask himself: “Why shouldn’t
they make Peace themselves?” The object that had drawn all these
men together was achieved. The invasion of France was at an end,
that of Belgium a matter of evacuation only. “Cease fire.” It almost
began to look like an attempt to save face. Was it the same on the
German side too?
In the afternoon he proposed to walk over to Battalion H.Q. and have
a word with the Colonel. He knew quite well he should find the other
company commanders there. Naturally every one would want to get
some idea of what was to be expected under these totally
unprecedented circumstances. He was met at the door of his billet
by a message from the youngster he had left in charge. He had got a
hundred and forty prisoners.
Dormer went at once. He could see it all before he got there. All
along the opposite side of the street, faultlessly aligned and properly
“at ease” were men in field grey. At either end of the line stood a
guard of his own company, and not all Dormer’s pride in the men he
had led with very fair success, with whose training and appearance
he had taken great pains, could prevent his admitting to himself that
the only point at which his lot could claim superiority was in a sort of
grumpy humour. The machinery of War had conquered them less
entirely than it had conquered the Germans.
In the little time-keeper’s box, turned into the company office, he
found a tall, good-looking man, who immediately addressed him in
perfect English, giving the rank of Feld Webel, the quantity and
regiment of his party and adding: “I surrender to you, sir.” Dormer
gave instructions that the party should be marched to Brigade Head-
quarters. He wanted to send some report as to the capture, but his
subordinate replied: “We didn’t capture ’em. They just marched up
the street. The post at the bridge let ’em through.” Dormer let it go at
that, and having seen the street cleared, he walked over to see his
Colonel, who was billeted in a big school in a public park. His story
was heard with that sort of amusement that goes with the last bottle
of whisky, and the doubt as to when any more will be obtainable. The
Adjutant said: “Simply gave ’emselves up, did they?”
But the Captain commanding C Company, a man of about Dormer’s
own sort and service, voiced Dormer’s thought.
“I believe, in another week, we’d have had both sides simply laying
down their arms.”
“Oh, nonsense, soon stop that!” The Colonel spoke without real
conviction. He had to say that officially.
With regard to the object for which he had come, Dormer found
every one in his own difficulty. No one knew what was to happen,
except that arrangements were already on foot for enormous
demobilization camps. But the immediate steps were not even
known at Brigade. Every one, of course, aired some pet idea, and
were interrupted by noise outside, shouts and cries, the sound of
marching, and orders given in German. The room emptied in a
moment. The park was at one end of the town, and abutted on the
smaller streets of artisans’ dwellings that, in every town of the sort,
goes by the name of Le Nouveau Monde. This quarter had
apparently emptied itself into the park, to the number of some
hundreds, mostly people of over military age, or children, but one
and all with those thin white faces that showed the long years of
insufficient and unsuitable food, and the spiritual oppression that lay
on “occupied” territory. They were shouting and shaking their fists
round the compact formation of Dormer’s prisoners, who had just
been halted, in front of the house. The N.C.O. in charge had been
ordered by Brigade to bring them back. A chit explained the matter:
“Prisoners taken after 11.0 a.m. to be sent back to their own units, on
the line of retreat.”
The Feld Webel enlightened the Colonel’s mystification: “We refuse
to obey the order, sir. Our regiment is twenty miles away. All the
peasants have arms concealed. We shall just be shot down.”
It was a dilemma. Dormer could not help thinking how much better
the Feld Webel showed up, than his own Colonel. The latter could
not shoot the men where they stood. Nor could he leave them to the
mercies of the natives. How difficult War became with the burden of
civilization clogging its heels. The first thing to do was obviously to
telephone to the A.P.M. for police. In the meantime a French Liaison
Officer made a speech, and Dormer grinned to hear him. Fancying
apologizing for the War. But what else could the fellow do. He did it
well, considering. The crowd quieted, thinned, dispersed. The police
arrived, and had a discussion with the Adjutant. Still no conclusion.
The Feld Webel strode up and down in front of his men, master of
the situation. At length, some one had an idea. Six lorries rolled up in
the dark, an interpreter was put on board, and the party moved off in
the November dusk. The Commander of C Company and Dormer
left H.Q. together. Parting at the corner that separated their scattered
companies, they both exclaimed together:
“What a War!” and burst out laughing.

It was perhaps, to a certain degree, Dormer’s fault, that during the

remainder of November he became conscious of a dreary sense of
anti-climax. No doubt he was that sort of person. The emergencies
of the War had considerably overstrained his normal powers, which
he had forced to meet the need. The need had ceased, and he had
great difficulty in goading himself up to doing the bare necessary
routine of Company office parades. He managed to avoid being sent
up to the Rhine, and even secured a reasonable priority in
demobilization, but beyond this there was nothing for it but to
“continue the motion” of waiting for the next thing to happen.
His principal job was to extract from an unwilling peasantry, enough
ground for football. How often did he go to this farm and that village
shop, with his best manner, his most indirect approach, liberal orders
for any of the many commodities that could be bought, and in the
last resort, cheerful payment of ready money out of his own pocket in
order to obtain a grudging leave to use this or that unsuitable
meadow, not to the extent that the game of football demanded, but to
the extent that the small proprietors considered to be the least they
could make him accept for the most money that he could possibly be
made to pay.
Then, in the long dark evenings, there was the job of keeping the
men away from the worse sorts of estaminet. His own abilities,
limited to singing correctly the baritone part of Mendelssohn’s
Sacred Works, or Sullivan’s humorous ones, was not of any practical
service. What was wanted was the real star comic, the red-nosed
man with improbable umbrella, the stage clergyman with his stage
double-life and voice that recalled with such unintentional
faithfulness, the affected mock-culture of the closed and stereotyped
mind. Any deformity was welcome, not, Dormer observed, that they
wanted to laugh at the helplessness of the bandy leg or the stutterer,
the dwarf or the feeble-minded. On the contrary, the sentimentality of
the poorer English had never stood out in brighter relief than on the
edge of those devastated battlefields, where in their useless khaki,
the men who had perpetuated the social system that had so blindly
and wantonly used so many of them, waited patiently enough for the
order of release from the servitude that few of them had chosen or
any of them deserved. No, they liked to see the cunning and
prowess of the old lady, or the innocent boy, applauded the way in
which all those characters portrayed as having been born with less
than normal capabilities showed more than normal acquisitiveness
or perspicacity.
Dormer could not help reflecting how different they were from the
New Army in which he had enlisted. In the squad of which, at the
end of three months’ violent training and keenly contested
examinations, he had become the Corporal, there had been one or
two labourers, several clerks from the humbler warehouses and
railways, others in ascending scale from Insurance Offices and
Banks, one gorgeous individual who signed himself a Civil Servant,
three persons of private means, who drove up to the parade ground
in motor-cars. He well remembered one of these latter going
surreptitiously to the Colonel and applying for a commission, and
being indignantly refused, on the grounds that the Colonel didn’t
know who (socially) he (the applicant) was. But when the news got
out, the section were even more disrespectful to that unfortunate
individual because they considered he had committed a breach of
some sort of unwritten code that they had undertaken to observe. So
they went on together, the immense disparity of taste and outlook
cloaked by shoddy blue uniforms and dummy rifles, equal rations
and common fatigues.
But the first offensive of the spring of 1915 had brought new
conditions. The loss in infantry officers had been nothing short of
catastrophic. Very soon hints, and then public recommendation to
take commissions reached them. The section meanwhile had
altered. Two of the more skilled labourers had got themselves “asked
for” by munition works. Of the remainder Dormer and four others
applied and got commissions. He could see nothing like it now.
There was more of a mix-up than ever. For some men had been
exempted from the earlier “combings out” of the unenlisted for skill,
and others for ill-health. There was now only one really common
bond, the imperative necessity to forget the War and all that had to
do with it. This was the general impetus that had replaced the
volunteering spirit, and it was this that Dormer had to contend with.
He mastered the business of amusing the men pretty well, and his
subordinates helped him. A more serious difficulty was with the
skilled mechanics. Fortunately, an infantry battalion demanded little
skill, and except for a few miners who had been out no time at all,
and were at present making no fuss, there was plenty of grumbling
but no organized obstruction.
He found a more advanced state of affairs when he went at the
appointed time, to supervise a football match between a team
representing his own Brigade and that of a neighbouring Brigade of
Heavy Artillery. Crossing the Grand’ Place of the village to call on the
Gunner Mess he found a khaki crowd, but it took him some minutes
to realize that a full-dress protest meeting was in progress. Senior
N.C.O.’s were mounted upon a G.S. wagon. These, he gathered,
were the Chairman and speakers. Another soldier, whose rank he
could not see, was addressing the meeting. More shocked than he
had ever been in his life, he hastily circled the square, and got to the
Mess. He found most of the officers in; there was silence, they were
all reading and writing. After the usual politenesses came a pause.
He felt obliged to mention the object of his visit. Silence again.
Eventually the Captain with whom he had arranged the preliminaries
of the match said rather reluctantly:
“I’m afraid we shan’t be able to meet you this afternoon.”
Dormer forebore to ask the reason, but not knowing what else to do,
rose and prepared to take his leave. Possibly he spoke brusquely, he
was nervous in the atmosphere of constraint, but whatever may have
prompted the Gunner Captain, what he said was a confession:
“Our fellows are airing their views about demob.”
“Really!”
“Yes, perhaps you noticed it, as you came along?”
“Well, I did see a bit of a crowd.”
“You didn’t hear the speeches?” The other smiled.
“I heard nothing definitely objectionable, but it’s rather out of order,
isn’t it?”
“Well, I suppose so, but we get no help from up-atop!” The Captain
nodded in the direction of the Local Command.
“No, I suppose not,” Dormer sympathized.
The young Colonel interposed. “It’s very difficult to deal with the
matter. There’s a high percentage of skilled men in our formation.
They want to be getting back to their jobs.”
“It’s really rather natural,” agreed the Captain.
Dormer tried to help him. “We all do, don’t we?”
There was a sympathetic murmur in the Mess which evidently
displeased the Colonel.
“I’m not accustomed to all this going home after the battle. Time-
expired men I understand, but the New Army enlistments——” He
left it at that, and Dormer felt for him, probably, with the exception of
a few servants and N.C.O.’s, the only pre-War soldier in the Mess,
uncertain of himself and trying not to see the ill-suppressed
sympathy if not envy with which most of the officers around him
regarded the affair.
“Awfully sorry, Dormer,” the Captain concluded, “we simply can’t get
our crowd together. You see how it is. When this has blown over I’ll
come across and see you, and we will fix something up.”
Dormer went.
The Gunner Captain came that evening. In Dormer’s smaller Mess, it
needed only a hint to the youngsters to clear out for a few minutes.
Dormer admired the good humour with which the other approached
him. It was obviously the only thing to do.
Over drinks he asked, modelling himself on the other’s attitude:
“So that business blew over, did it?”
“It did, thank goodness. Awfully decent of you to take it as you did. I
hated letting you down.”
“Don’t mention it. I saw how you were placed.”
“The Colonel very much appreciated the way you spoke. I hope you
had no trouble with your chaps?”
“They were all right. I pitched them a yarn. They didn’t believe it, of
course. Some of them were at the—er——”
“The bloomin’ Parliament. Don’t mind saying it. It’s a dreadful shock
to a regular like our old man.”
“Naturally.”
“He spoke the plain unvarnished truth when he said he was unused
to all this demobbing.”
“Well, well, you can comfort him, I suppose, by pointing out that it
isn’t likely to occur again.”
“He’s a good old tough ’un. Splendid man in action, that’s what
makes one so sorry about it. Otherwise, of course, one knows what
the men mean. It’s only natural.”
“Perfectly.”
“His trouble is not only the newness of it. It’s his utter helplessness.”
“Quite so. Absolutely nothing to be done. The—er—meeting was as
orderly as possible. I walked right through it. They simply ignored
me.”
“Oh yes, there’s no personal feeling. They all paraded this morning
complete and regular.”
“That’s the end of it, I hope.”
“I think so. They came up to the Mess—three N.C.O.’s—a
deputation, if you please. They brought a copy of the resolution that
was passed.”
Neither could keep a straight face, but laughter did not matter
because it was simultaneous. The Captain went on, finishing his
drink:
“I believe the old man had a momentary feeling that he ought to
crime some one—but our Adjutant—topping chap—met them in the
passage and gave them a soft answer, and cooked up some sort of
report, and sent it up. It pacified ’em.”
“Did they need it?”
“Not really. ’Pon me word, never saw anything more reasonable in
my life, than what they had written out. It’s too bad, hanging ’em up
for months and months, while other people get their jobs. They know
what they want so much better than anyone else.”
“It’s impossible to please every one.”
“Yes. But when you think of what the men have done.”
Dormer did not reply. He was thinking of the Infantry, with their whole
possessions on their backs, always in front in the advance, last in
the retreat. The Gunner took his leave. Like everything else, either
because of the incident, or more probably without any relation to it,
the slow but steady progress of demobilization went on, those men
who had the more real grievance, or the greater power of
expression, got drafted off. The composition of units was always
changing. Even where it did not, what could “other ranks” do? To the
last Dormer felt his recurrent nightmare of the Headless Man to be
the last word on the subject. But it was becoming fainter and fainter
as the violence of the first impression dimmed, keeping pace with the
actuality of the dispersal of that khaki nation that lay spread across
France, Germany, Italy, the Balkans, and the East. The Headless
Man was fading out.

It was mid-April, the first fine weather of the year, when his own turn
came. Of course the Mess gave him a little dinner, for although
nothing on earth, not even four years of War, could make him a
soldier, his length of service, varied experience, and neat adaptability
had made him invaluable; again no one had ever found it possible to
quarrel with him; further, his preoccupation with games had made
him perhaps the most sought-for person in the Brigade.
Had it not been for these reasons, there was little else to which he
had a farewell to say; casualty, change, and now demobilization
removed friends, then chance acquaintances, until there was no one
with whom he was in the slightest degree intimate. He might almost
have been some attached officer staying in the Mess, instead of its
President, for all he knew of the officers composing it. There was
nothing in the village that lay on the edge of the battlefield that he
wanted to see again. It was not a place where he had trained or
fought, it was not even the place at which the news of the Armistice
had reached him. It was just a place where the Brigade of which his
battalion had formed a part had been dumped, so as to be out of the
way, but sufficiently within reach of rail, for the gradual attrition of
demobilization to work smoothly. An unkind person might have
wondered if the mild festival that took place in the estaminet of that
obscure commune was not so much a farewell dinner to old Dormer,
as an eagerly sought opportunity for a little extra food and drink that
might help to pass the empty days. Slightly bleary-eyed in the
morning, Dormer boarded the train, waved his hand to the little group
of officers on the platform, and sat down to smoke until he might
arrive at Dunkirk.
On a mild April evening, he paced the port side of the deck of the
steamer that was taking him home. He was aware that he might
have to spend a night in dispersal station, but it did not matter in the
least. The real end of the business to such an essential Englishman
as Dormer was here and now, watching the calm leaden sea-space
widen between him and the pier-head of Calais. Prophets might talk
about the obliteration of England’s island defences, but the
sentiment that the Channel evoked was untouched. After years of
effort and sacrifice, Dormer remained a stranger in France. He might
know parts of it tolerably well, speak its language fairly, fight beside
its soldiers, could feel a good deal of intelligent admiration for its
people and institutions, but nothing would ever make him French. It
would perhaps have been easier to assimilate him into Germany. But
on the whole, in spite of his unprovocative manner, he was difficult to
assimilate, a marked national type. Lengthier developments and
slower, more permanent revolutions were in his inherited mental
make-up, than in that of any of the other belligerents. In a Europe
where such thrones as were left were tottering and crashing, nothing
violent was in his mind, or in the minds of ninety per cent of those
men who covered the lower deck, singing together, with precisely the
same lugubrious humour, as in the days of defeat, of stalemate, or of
victory:
“Old soldiers never die,
They only fade away.”
He turned to look at them, packed like sardines, so that even the sea
breeze could hardly dissipate the clouds of cigarette smoke, just as
no disaster and no triumph could alter their island characteristics,
however much talk there might be about town life sapping the race.
As he looked at them, herded and stalled like animals, but cheerful in
their queer way as no animal can ever be, he remembered that
somewhere among all those thousands that were being poured back
into England day by day (unless of course he were buried in one of
those graveyards that marked so clearly the hundred miles from
Ypres to St. Quentin) was a private soldier, whom he had been told
to discover and bring to justice for the Crime at Vanderlynden’s, as
Kavanagh had called it. He had never even got the fellow’s name
and number, and he did not care. He never wanted the job, nothing
but his punctilious New Army spirit, that had made him take the War
as seriously as if it had been business, had kept him at it. Now he
had done with it, the man would never be found. But in Dormer’s
mind would always remain that phantom that he had pursued for so
many months—years even, over all those miles, in and out of so
many units and formations. It had come to stand for all that mass
whose minds were as drab as their uniform, so inarticulate, so
decent and likable in their humility and good temper. Theirs was the
true Republicanism, and no written constitution could add anything to
it. He had not thought of that affair, during all these last months that
had seen so many Empires fall, so many nations set upon their feet,
but he thought of it now.
He turned once again and surveyed that coastline, somewhere
behind which he had made that pilgrimage; there it lay, newly freed
Belgium on the left, on the right the chalky downs that ran from Gris-
Nez far out of sight, down to Arras. Between the two, on those
marshes so like any of South-Eastern England, had taken place that
Crime at Vanderlynden’s, that typified the whole War. There, on
those flat valleys of the Yser and the Lys, the English army had
come to rest after its first few weeks of romantic march and counter-
march. There had the long struggle of endurance been the longest
and least spectacular. It was there that the English Effort, as they
called it, had played its real part, far more than on the greater
battlefields farther south, or away on other continents. The Crime at
Vanderlynden’s showed the whole thing in miniature. The English
had been welcomed as Allies, resented as intruders, but never had
they become homogeneous with the soil and its natives, nor could
they ever leave any lasting mark on the body or spirit of the place.
They were still incomprehensible to Vanderlynden’s, and
Vanderlynden’s to them. Dormer was of all men most unwilling and
perhaps unable to seek for ultimate results of the phenomena that
passed before his eyes. To him, at that moment, it seemed that the
English Effort was fading out, leaving nothing but graveyards. And
when he found this moving him, his horror of the expression of any
emotion asserted itself, and he elbowed his way down the
companion, to get a drink.
When he came up again, that low shore had passed out of sight, but
ahead was visible the moderately white cliffs of England, beyond
which lay his occupation and his home, his true mental environment,
and native aspiration. He experienced now in all its fullness the
feeling that had been with him with such tragic brevity from time to
time during those years. This last passage of the Channel was, this
time, real escape. The Crime at Vanderlynden’s was behind him. He
had got away from it at last.
Printed in Great Britain by Butler & Tanner Ltd., Frome and London
 TRANSCRIBER’S NOTES:
Obvious typographical errors have been corrected.
Inconsistencies in hyphenation have been
standardized.
Archaic or variant spelling has been retained.
New original cover art included with this eBook is
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