Guest Post: Why Corporations Matter, Part 1
Cynics view corporations as money-making machines. But that’s just stupid. Corporations—of whatever size—should be viewed as two things: One, productivity engines, designed to produce a specific good or service, while disregarding anything and everything else, so as to satisfy a demand in the society. And two, as repositories of assets, both tangible and intangible.
However, I argue that with the founding of the Dutch East India Company in 1602, such loss of technology stopped happening. Owners who lost interest in the business for whatever reason could sell their stock in the corporation—and thus the corporation lived on, continuing to preserve and accumulate knowledge through time with other, more interested owners. Thus was technological development out of Europe a geometric progression.
This also explains why other cultures and empires, more civilized and advanced than Europe in 1602, were left in the dust a mere two hundred years later, and have been struggling to catch up to the West ever since. Think Japan, China, and the Ottoman Empire in 1602: Far superior to Europe, one and all. Now think Japan, China, the Ottoman Empire in 1850: Far behind Europe technologically, struggling to compete, and only able to once they had imported the concept of the corporation.
Had the Greek manufacturer of the Antikythera clockwork been a corporation instead of (likely) a tradesman with a few apprentices, the technology of the Antikythera clockwork would not have been lost. In fact, that technology would have been built upon as subsequent owners of the Antikythera Clockworks Corporation would have added and expanded its business, before selling on their stock in the corporation to some other owners, who would themselves have improved the corporation.
That did not happen—because corporations did not exist. There was no efficient ownership transfer mechanism which would maximise the benefit for both the seller of the company, and for the company itself. But once corporations came into existence in 1602 in Europe, we have had the smooth uninterrupted material progress I spoke of earlier, and which we enjoy today.
This is why corporations matter. This is why they are an essential part of our current civilization—above any religion, second only to the individual and the state.
In fact, the relationship between that triumvirate is the main issue in our current society—how corporations, individuals and the state can and should interact.
And a new vocabulary word further down in the text:
monetizable
[edit] English
[edit] Adjectivemonetizable (comparative more monetizable, superlative most monetizable)
Able to be converted into cash with relative ease.
Stocks and bonds are monetizable assets.