Insuring the Wealth of Nations
REVIEW ESSAY
Underwriters of the United States:
How Insurance Shaped the American Founding
by Hannah Farber
University of North Carolina Press, 2021, 352 pages
Property insurance is everywhere, but it is rarely prominent in the public mind. Its internal workings are obscure, full of technical language, esoteric customs, and mind-numbing legalese. Most people give it little thought beyond what is absolutely necessary. Nonetheless, as Hannah Farber’s Underwriters of the United States makes clear, property insurance is a powerful social force in any complex economy. And surprisingly, this excellent academic analysis of underwriting in the American shipping industry, up until 1860, has much to say about America today. Most of all, it makes us consider how corporate entities, and more generally concentrations of private wealth and power, can and should interact, and be permitted to interact, with the rest of the nation.
Shipping goods has always been risky, as wrecks littering the floor of the seven seas attest. For colonial American seafaring merchants, insurance crucially aided their business, while enriching insurers. And as Farber narrates, insurers returned the favor, using their profits to support and strengthen their own society, first their cities, then their states, and finally their new country. This double role is reflected in the two meanings of the book’s title. In insurance parlance, an underwriter is simply the insurer. But Farber focuses more on a second, broader meaning—anyone who takes risks in order to help another entity succeed. In business, most often that help is getting access to needed capital, for which service the underwriter himself profits. Early insurance companies took risks to help the United States raise both financial and social capital, becoming a key element of the nation’s rapid growth in the nineteenth century.
The Lex Mercatoria
Every business with a single owner, or a small group of owners, revolves around a continuous balancing of existential risk and reward. This is something not viscerally understood by most people, but it is the central truth for owners. An employee does not really care about the risks facing a business, aside from not losing his job if the firm fails. Nor does he really care about business-level rewards—outsize success—because, after all, in that case the employee typically does not share, or share much, in the rewards. An owner cares about both a great deal, because he can easily be ruined by risk materializing, or he can be made rich by success. Thus, for an owner, mitigating risk at a reasonable cost is highly desirable. Only an expert in risk can do that, which is why property insurance exists.
Using fascinating original research into a variety of primary sources, Farber focuses on maritime insurance (with occasional compare-and-contrast discussion of fire insurance). This was no simple business. We think of business complexity as a modern phenomenon, and to some extent that is true, but colonial-era shipping involved a nearly infinite set of permutations on the core image we have from movies, of a ship with some bales of goods loaded into the hold in one place and unloaded in another. Multiple owners; multiple responsible parties; variations (many that could not be forecast) in cargo, destination, and ports of call; ongoing conflicts and wars; and much more made it very difficult to precisely tailor an insurance policy to any given maritime venture. Without some way of simplifying analysis, writing insurance would merely have become gambling, or more likely would not have been done at all.
The solution was for all parties to rely on, and to draft insurance contracts incorporating by reference, a massive compendium of pseudo-law: the lex mercatoria, the law of merchants. This was a lengthy set of rules, set down by this point in a few different print editions, that purported to embody the timeless and invariable laws governing shipping. It did no such thing; some of the rules were simply made up by the editors of the print editions, and the universal applicability of the laws, even before nation-states came fully of age, was exaggerated. Yet it worked, and in practice the widespread acceptance, even by courts in different countries, of the lex mercatoria acted as a collective, common suspension of disbelief, somewhat similar to how the Germans fixed their hyperinflation problem in 1923—by pretending a new currency, the rentenmark, had value. You can accomplish a lot if everyone agrees to believe in something that is notional and, most importantly, agrees to take the resulting bad with the good. That’s how the law of merchants worked in practice. An important element of this was evenhandedeness: the lex mercatoria imposed stiff obligations on both insurers and insured. A system designed to favor one party over another would never have lasted.
That the lex mercatoria wasn’t based in statute law, that is, a law passed by a legislature, doesn’t mean it was not effectively law. Mostly, it was based on, and a generally accurate representation of, custom—what is called today “course of dealing.” Today, when the common law is dead and statute law is, even for the educated, viewed as the only type of “real law,” it makes it very difficult to understand a great deal of history if we do not grasp that custom was, until quite recently, effectively the supreme law of all Anglo-Saxon law, and of much continental law as well. William Murray, Lord Mansfield, perhaps the greatest expositor of the common law, explicitly viewed the lex mercatoria as part of the common law—that is, something to be applied by judges to individual cases in accordance with other custom and precedent, the spine and skeleton of the common law. In effect, the custom of acceptance by private parties created the law by which other private parties were bound, a type of bootstrapping that, on average, benefited everyone. (Lawyers will recognize that the lex mercatoria is a predecessor of today’s Uniform Commercial Code, a set of uniform laws created by academics and then passed by state legislatures to create broad default provisions for contracts, which allows parties to contract without endlessly complex negotiation.)
For maritime law, the key fact making the lex mercatoria truly useful was that it was viewed by insurance companies, and by seamen and their backers, as a transnational law, which could be cited in a French, Spanish, or English court as easily as in an American one. Yet as nation-states consolidated and centralized power in this time period, and projected that power beyond the nation’s borders, they cared less and less about a supposedly transnational set of laws, eroding the ability of merchants and insurance companies to rely on the lex mercatoria. Still, the law of the sea, whether ultimately governed by a transnational or national source, was necessarily largely international. Moreover, it had to, and did, contain provisions for many practices we find strange, such as a privateer who seized an enemy ship being able to take it to a neutral port and obtain a judgment from a local court awarding him ownership of the ship and its cargo—which all other courts, including those of the country of the original owner, would acknowledge.
The biggest spur for the ultimate sidelining of the lex mercatoria was the Napoleonic Wars, and in particular the English strategy to strangle Napoleon through complete control of the seas. In practice, this meant that the English took any action on the high seas they regarded as necessary to harm Napoleon, regardless of what the lex mercatoria might say—although they did provide that aggrieved foreigners could travel to London, or hire London lawyers, to attempt to recover ships and goods seized, or be remunerated for those destroyed. Those who went through the process were successful surprisingly often—but it was an English process, governed by English law, if sometimes informed by earlier custom. Throughout the nineteenth century, larger states, including Spain and France, also increasingly rejected the lex mercatoria as governing law. Quite often, they incorporated some of its principles into their own maritime laws, and in modern times, elements of the lex mercatoria have become part of international maritime law established by treaties, such as the United Nations Convention on the Law of the Sea. So in a sense, the lex mercatoria lives on.
Brokerage
But back to colonial times. This was an era before regulators, beyond a few very specific areas such as customs duties, and so insurance products in England, and then in America, developed organically—it was a natural evolution, tied to increasing complexity of trade. The original structure of property insurance was “brokerage,” meaning that a person or group of people held himself or themselves out as willing to insure risks. In practice, they usually did not do so only by themselves, but further spread the risk by syndicating it—that is, by assembling a group of men who collectively shared the risk under a contractual instrument. A brokerage is not a corporation, or what was originally called a “chartered joint-stock company,” but rather a type of partnership, typically a close-knit form of legal entity, with the risk concentrated in partners known to each other, not spread out among stockholders with no other connection.
A brokerage, though primarily a business, was thus a type of intermediary institution with an important secondary social function—creating and sustaining the web of relationships that constitute a robust community. Famously, as Robert Nisbet discussed in The Quest for Community, and Robert Putnam analyzed in Bowling Alone, intermediary institutions used to be a backbone of American society, and their multiplicity and strength something that distinguished America from Europe. Insurance brokerages, tightly rooted in and integrated into their local communities, were only one such institution; others were local governments, religious communities, affinity groups, trade guilds, societies such as the Freemasons, and simply “high society,” or the aristocracy of any given locality. All these formed a high-trust web that both dominated and supported the life of the citizenry in any local area, and served as a building block of the larger nation, something that comes through very clearly in these pages. Nowadays, this web of intermediary institutions, as suggested by the title of Putnam’s book, has essentially disappeared. As a result, we are currently finding out if a nation can survive as a low-trust society; so far, it’s not looking good—as Nisbet said, “rootless men always betray.”
Today, a slew of “nonprofit” entities is often the closest substitute available to the older networks of intermediary institutions. But these are not organic intermediary institutions at all, but mostly planned political pressure groups of one sort or another, funded by wealthy individuals or institutions with a specific agenda, usually a left-leaning one. Even those nonprofits that have no agenda, and truly exist for a neutral charitable purpose, are almost never the same as the older type of institution that binds elements of society together. Rather, they are (as their alternative name, “nongovernmental organization,” or NGO implies) extensions of the government, in the sense of carrying out top-down functions. Nisbet was explicit in predicting, way back in 1953, that as real intermediary institutions died, people would turn to the government to fulfill the need for belonging, or rather to receive an ersatz form of that basic human need—and that this would be corrosive, rather than beneficial, for society.
We have been trained to associate the word “nonprofit” with “virtue,” but that is a totally false equivalence. Colonial insurance brokerages, on the other hand, acted as traditional, real intermediary institutions because they formed an integral part of their community, even as they sought profits. Most obviously, they provided a needed service, but as Farber narrates, the men who held themselves out as adequately trustworthy to provide insurance also used that same trust to support not only other businesses, but their churches, charities, and other organizations of their towns. The life of a town had little, in the colonial age, to do with the government, even the city government—it was all an organic outgrowth of innumerable small actions, usually taken with a mix of motives, including commercial opportunity, but all tending to strengthen the tight-knit societies of the day, and insurance companies were a key part of this. It should be acknowledged that these societies were often far from internally harmonious—most obviously, though this is not mentioned by Farber, the split between those who supported independence and the Loyalists caused many fractures. The point of intermediary institutions, however, is to carry a society through such fractures.
Risk pooling is an ancient practice; brokerages were a formalization of this process, and a way for those who lacked adequate personal connections to access risk pools. Different brokerages (and syndicates) specialized in different risks (as with any business or industry, which appears more or less monolithic to an outsider, the closer one examines it, the more segmented and granular it appears). Those bearing risk relied on their personal knowledge and experience in deciding whether to take on a risk and how much to charge. There was a great deal of “feel” in this—at this point, insurance was not a science, governed by actuarial tables. In most cases, this feel was obtained by the insurers being experienced merchants themselves. Thus insurance also tended to have a strong local flavor, as both sides of the transaction valued personal knowledge of others involved. With the ocean separating England from her North American colonies, it was therefore inevitable that local brokerages would arise in America. So beginning in the 1760s and 1770s, colonial merchants insured with both English and American brokers, and due to the consistency across contracts provided by the lex mercatoria, were able to comparison shop as well.
Lloyd’s of London, the original Anglosphere insurance entity and one frequently used by colonial merchants, was (and is, more or less) a brokerage. From the Crown’s perspective, Lloyd’s (and other insurers) were helpful in smoothing the path for expanding English trade, and when they sold insurance to foreigners, brought specie into the country, an important consideration in a mercantilist system. But Lloyd’s happily sold insurance to anyone, including those working for Britain’s enemies, such as French merchants, which might become the source of an insurance claim if they were seized by British warships or privateers. The British government wasn’t sure about this; it seemed contrary to the interests of England. But the insurers argued, prefiguring modern American libertarians, that if the French didn’t buy insurance from the English, they’d get it somewhere else, so what was the problem? Alternatively, the insurers argued that because this was all so complex, the agents of the Crown should not worry their pretty little heads about it. There was truth to both arguments, and for whatever reason, selling insurance to England’s enemies remained both legal and regular practice.
Farber shows how Lloyd’s was central to English maritime trade during the eighteenth century. Yet insurance was not a prestige business. There was a certain social opprobrium associated with it; it was often seen as a form of gambling (not helped by the existence of tontines, insured partnerships in which the last surviving partner got all the money, though probably by that time he was too old to enjoy it). But it was a profitable business, a rapidly growing one, and one that became central to the English economy. Farber points out that, gradually, Lloyd’s therefore became part of England’s public sphere, its civil society, not just another business with an office and some well-connected rich men behind it. Lloyd’s, and those intertwined with it, constituted a political community with significant impact beyond its statements of profit and loss. The Crown also benefited, not only from stability and smoothness for merchants doing business on the seas, but because insurance companies naturally had incentives to stay ahead of the latest news, and the government could use this information. Insurance companies maintained their own informant networks, as well as tight connections with local newspapers. This reinforced the symbiotic relationship between the larger society and insurance companies.
Corporate Capital
Farber estimates that by the early 1770s, there were fifteen to twenty brokers in North America, although this does not include informal syndicates among neighbors and business partners. Brokers in America found it easier than might be expected to start doing business. By claiming the umbrella of lex mercatoria, and by being men of trustworthy reputation in a given town, much of the hesitation toward a newly formed brokerage was headed off at the pass. When the Revolutionary War broke out, American brokers quickly became the preferred choice of most American merchants—even though, as in England, some questioned whether Americans should make a profit if that profit involved loss for other Americans, especially when very often the same merchants buying insurance were part of syndicates selling insurance. Yet as in England, it was generally recognized that insurance brokerages performed an essential service, and they also acted as places to buy state and federal debt, and sometimes also land, so no action was taken to curb their activities (though no direct subsidies were provided either). Thus during the Revolutionary War, trade continued, as did the insurance companies—with increased risk, but also with increased premiums. And merchants were happy to pay premiums, sometimes as much as 50 percent of insured value, because they could sell scarce manufactured goods for very high prices. As always, wars created both opportunity and risk for everyone involved—but undeniably, trade suffered overall, which was not good for the new country.
But once the war was over, trade rebounded, and the young country expanded rapidly on the back of that trade (though with some hiccups caused by ongoing continental conflicts). Insurance companies changed, too. With a brokerage, the existing capital of the individual members was expected to be adequate to cover liabilities. Very soon, however, insurance companies began raising larger pools of capital from outside their inner circle, and moved away from brokerages and became chartered as corporations. Only after the Revolutionary War did state legislatures begin granting charters to insurance companies (as well as banks and other such entities viewed as having a public purpose). Charters were not only a regulatory device to control daily behavior, though they did serve that function; they were also a way to assure the public, to create confidence in the entity due to government recognition, and to obtain certain rights, including sometimes monopoly rights. The corporate form allowed recognition as an entity with independent existence from its owners, granting perpetual life, the right to act in court, and similar rights. Unlike today, limited liability for owners was not the focus; in practice, many brokerages already had somewhat limited liability by contract, and it was only in the nineteenth century that automatic corporate limited liability became the norm.
Success in the war, and then some years later the signing of the Constitution, made investment less risky, so insurance companies had little difficulty raising capital through sale of shares, a more reliable and less risky path for the principals than acting as partners. Some of the capital raised was notional; practices regarding actual payment, and forms of payment, for shares varied widely, resulting in a number of scandals that ultimately created tighter legal obligations. Farber profiles Jacob Barker, a distant cousin of Benjamin Franklin, whose career spanned decades in the early nineteenth century, ranging from New York to New Orleans. He relied heavily on “paper capitals”—innovative, but dubious, maneuvers used to pump up the notional capital of insurance (and other) companies, including the “pyramiding” of stock, in which one company would use its own undercapitalized stock to purchase the stock of another company, which would reflect this as full-value capital on their own books. When a financial panic arrived in 1826, along with multiple failures of undercapitalized businesses, Barker ended up being indicted for various forms of fraud, though he was never convicted (nor did he end up in the poorhouse). His influence fell sharply thereafter, and laws were put into place to limit the use of such paper capitals.
Yet the companies did hold large pools of real capital, which they needed as a reserve in case of claims. And they had few places to deploy this capital in the meantime; their charters forbade entering most other lines of business (one of the control devices included in corporate charters). Sometimes they lent money, and they also invested in banks. In fact, a close, even blurred, relationship existed between banks and insurance companies—banks, for example, discounted (converted to cash) merchants’ notes tendered to insurance companies, and such entities commonly had interlocking directorates. Most of the time, however, insurance capital was used to buy government debt (usually federal, because there was little state debt at the time).
For insurers, as Farber discusses at length, buying debt was seen as the right thing to do, to support the country; all these men cared very deeply about the nation, as did the entire ruling class of the time. They even referred to federal debt as “United States stock,” suggesting a direct ownership interest. That ownership interest often represented much of an insurer’s capital. The Insurance Company of North America (founded in 1797, and still in operation), for example, had 50 percent of its entire capital in U.S. debt, and the Essex Fire and Marine Insurance Company had 84 percent thus invested. While the individuals who comprised brokerages were, as any public man was in that time, political partisans for one or another political faction, they generally separated that factionalism from their broader willingness to assist the government. And buying government debt was viewed as politically useful as well, no matter which party was ascendant at the time, because insurers were then seen by the citizenry as a whole as supporting the country as America grew.
As insurance grew in importance and size, however, not everyone liked the increase in the financial and political power of a relatively small group of men. Similar arguments as those surrounding a national bank accompanied the growth of chartered insurance companies (and principals in insurance companies were very often also principals in local banks, further fueling criticism, especially by those left outside of the upper crust). Barker, for example, was forced to create a wholly private bank when New York State refused to charter a bank as he desired. Other critics complained that, unlike manufacturers or others closely tied to the new United States, insurance companies faced outward, making their loyalties suspect. Yet more sophisticated observers realized that insurance companies benefited the country as a whole—in large part because of the public-spirited nature of those who operated them, which was undeniable. Farber profiles several important figures in the industry, who, while devoted to profit, sacrificed a great deal for the nation, sometimes dying poor—such as John Morgan, once one of Hartford’s wealthiest men. “It is worth recalling that wealthy American merchants already considered themselves to be public-minded citizens, whose wealth entailed responsibility and whose expertise entitled them to lead. They already played financial roles in the nation’s public life, for they were outfitters of privateer ships, subscribers to public loans, and payers of import taxes,” Farber writes. Those made wealthy by insurance (and its cousin, banking) built many of the iconic structures in colonial towns, such as the first Greek Revival–style building in America, the Bank of Pennsylvania.
The universal availability of insurance even affected the way the federal government thought about international relations. Farber argues that one reason payment to the Barbary pirates, 16 percent of the federal government’s 1795 revenue, kept being made for several years was that it was seen as not that different from any other type of insurance, which was something the citizenry had become accustomed to. But as everyone knows, or used to know back when history was taught in American schools, the more common, and more accurate, view was that being in thrall to pirates was a national humiliation, so the problem was solved with shot and shell, and no more “premiums” were paid.
Insurance companies were not loathe to press their luck, perhaps as a result of the close relationship with the federal government resulting from holding government debt. When, from 1776 to the War of 1812, insurance companies had to pay out on ships captured by the British or the French, they pursued remedies in foreign courts to regain the property (the merchants’ claims having been subrogated, that is, taken over after payment) and simultaneously petitioned the federal government to indemnify them, often successfully. This bred a more aggressive stance among some insurers. After the War of 1812, as trade expanded and competition for capital and business increased, insurance companies began to take on more risk, in order to obtain the same high returns. Some companies skirted legal requirements, and a number of fraud cases again ensued. Intermittent economic crises also roiled the relatively sedate insurance world, which further changed as the federal government developed other sources of capital and information. Pools of investable capital were raised for many other large-scale enterprises, and from foreigners as well, making insurers only one among many possible buyers of government debt. Meanwhile, the expanding American military and diplomatic corps, as well as civilians hired directly to gather information, made the federal government no longer dependent on insurance companies for the latest news. And there Farber leaves the story; this is not a complete history of insurance in America, but an excellent and extremely interesting history of how insurance helped to found America.
Past and Present
So what does all this tell us about today? Quite a bit, and none of it good, because the balance exemplified by early American insurance companies (and business more generally), working cooperatively with the American nation, has long since disappeared. Large corporate entities, or more precisely their managers and significant owners, have not worked to advance America for a long time, and more recently, and very dangerously, have been directly enlisted in political movements tearing apart the American body politic, rather than building it up.
Some of this is baked into the corporate cake. It is in the nature of all profit-seekers to be self-interested. Farber makes clear that insurance brokers and others involved in the industry invested in America both from conviction and from self-interest, and the two are impossible to untangle. To some extent, the founding was a unique time, and perhaps we should not today demand complete adherence to its ideals. Yet today, every single industry engages in nothing but naked self-interest, often in the form of the rankest rent seeking through manipulation of governmental force. Whatever the balance between virtue and greed 250 years ago, it is quite clear that the balance today is tilted too far toward greed. A significant company today would never consider acting in the interests of the nation, except if those incidentally lined up with its own interests (or rather, with the interests of those with managerial control, though the agency problem, the conflict between managers and owners, is an entire topic of its own). No such company would absorb risks or costs to benefit the country, as colonial insurers did. True, it may appear that companies sometimes act against their own economic interests when they choose instead to virtue signal, as is the case among innumerable films that leave audiences cold but satisfy Left dogmas, or very recently by ostentatiously cutting Russian ties as a result of the war in Ukraine (portrayed as acts of moral virtue rather than as a response to financial sanctions). But most of those costs are, again, borne by shareholders, not managers (and in the case of Russia, there is little evidence of actual net costs). Regardless, in no case is the prime goal helping the country as a whole. Rather, usually it is to advance Left causes (and thereby to gain social praise for managers).
In other words, some aspects of corporate self-dealing are not new. Nor are their solutions new—but we have forgotten, or failed to exercise, those solutions as a nation, for the benefit of the nation. For example, all businesses tend to seek monopoly, and monopoly profits, or if that is not feasible, to reduce competition as much as possible. This problem was recognized long before the Revolutionary War, and various devices were used to address the social ills resulting from monopoly. Sometimes this was the grant of limited monopolies by the government itself, common in early charters, thereby directly regulating the extent of monopoly. Later, it was legislation such as the Sherman Anti-Trust Act, in 1890, an explicit attempt to curb corporate self-dealing at the expense of society. For a longer discussion of this, one cannot do better than to read Columbia law professor Tim Wu’s 2018 The Curse of Bigness. He showed how the mere accumulation of wealth and power has long been viewed with suspicion in America, but also how resulting curbs on behalf of the citizenry have completely disappeared in the twenty-first century, resulting in a wide variety of social ills. (Wu is now working for the Biden administration, as special assistant to the president for technology and competition policy; nothing yet seems to have come of this, but Wu is certainly the man for the job.)
But even with this long history of balancing business greed with both self-imposed and externally enforced limits, most of today’s corporate corrosion of our national health is new. We have come a long way from an America where corporations, such as early American insurance companies, grateful for state recognition, supported the nation and recognized that doing business is a privilege, voluntarily taking actions necessary to make themselves an integrated, beneficial part of larger society. Part of this is the infection of libertarian thinking into business law, but a much bigger part is the simple disloyalty of the managerial class, which views itself mostly as a transnational global elite. Quite a few executives are very open about how they are “global citizens” and their companies are not loyal in any way to America, the country that enabled their companies to exist. You don’t have to believe that the World Economic Forum’s Klaus Schwab is a puppeteer of the global elite to recognize that the elite feel no loyalty to America.
No longer are corporations regulated, nor do they regulate themselves, for the greater good. Of course, most businesses are heavily regulated for other reasons—usually in cooperation with regulators in order to reduce competition and capture rents, aided by the revolving door connecting government and most industries. In effect, the only regulations businesses face that are for the supposed broader benefit of society are ones that advance left-wing goals, such as restricting freedom of association and advancing the leftist project of unlimited emancipation from supposed oppression. Aside from these, all the corporations that dictate our lives are subject to no real nation-state regulation at all—certainly, for example, no requirement for those who control speech on the internet to be regulated as common carriers, to offer service without discrimination. What is worse, many crucial businesses are now openly used, and are glad to be used, as tools of extra-democratic control, as weapons in the political wars that grow ever more fraught in America. The Biden administration, for example, has openly bragged of cooperating with Facebook, and in effect dictating to Facebook, what speech is allowed on that platform. As more than one person has pointed out, this is one of the textbook definitions of fascism—an overused word, and perhaps corporatism would be a better word, but in either case, a constriction of basic freedom for ordinary Americans. Why corporate entities switched from a focus on combining personal benefit with national benefit to a focus on combining personal benefit with advancing the Left is something Farber does not discuss (or mention). The change is no doubt tied to the global ascendancy of the Left among our ruling classes over the past fifty years, combined with the separation of ownership and control inherent in firms no longer being tight-knit brokerages with deep local roots, but rather vast entities in which the managers are “global citizens” seeking membership in that ruling class.
These trends should be a real concern for all Americans, and back to the subject of this book, insurance is again becoming a political football. Now, though, the focus is not on whether insurance companies support America, but how they can be used by the currently dominant political clique to divide the nation. As Farber’s entire book shows, insurance is, and always has been, a political business. Part of this involves using the government to privatize benefits and socialize risks (most famously in the 2008 bailouts, including of the giant insurance company AIG), something colonial insurance companies did as well. But insurance companies have now begun to be explicitly targeted by the Left as manipulable to prevent activities the Left does not desire, something easy to accomplish because most executives lean left, or are at least terrified of being publicly criticized by those who control our nation’s discourse. Great pressure has been put on insurance companies, for example, to refuse to insure firearms manufacturers, and just this past February, the Canadian government worked with not-unwilling insurance companies (and banks) to destroy the livelihoods of truckers peacefully protesting by canceling their (legally required) insurance policies (and bank accounts). We can easily see how our present state authorities will use this tool more and more to discourage or encourage a particular activity—especially because corporate managers, all members of the professional-managerial elite, are more reliable servants of the state than, it appears, the soldiers and policemen, as the Swedish renegade leftist Malcolm Kyeyune has often noted. Already large index and hedge funds, such as the investment management firm BlackRock under CEO Larry Fink, openly use their massive power to pursue interests contrary to those of America. This trend will continue and become far, far worse, if it is not stopped first by the use of power. Wishing and op-eds in obscure webzines aren’t going to do it.
We should restore aggressive regulation of all corporations, and all large business entities, for national ends. Libertarians would hate this, but look around—if you won’t use the weapons at hand, the weapons that your enemies are using against you, you are a fool. Corporate managers would, of course, scream that this is bad for business. Echoing Charlie Wilson’s line about “what’s good for General Motors is good for America,” they would claim—falsely—that what’s good for Microsoft, or Apple, or Google, is good for America. The right attitude, however, is that of Luigi Zingales, professor at the University of Chicago’s Booth School of Business and author of A Capitalism for the People:
When Treasury Secretary Paulson went to Congress in the fall of 2008 arguing that the world as we know it would end if Congress did not approve the $700 billion bailout, he was serious. And to an extent he was right: his world—the world he lived and worked in—would have ended had there not been a bailout. Goldman Sachs would have gone bankrupt, and the repercussions for everyone he knew would have been enormous. But Henry Paulson’s world is not the world in which most Americans live or even the world in which the economy as a whole exists.
How can we return to a time when concentrations of corporate power were used to advance our nation—our national development and, dare we say it, American nationalism? Many excellent suggestions have been made, and many others spring easily to mind. We could restore restrictive corporate charters. We could implement an aggressive industrial policy and punish and reward businesses as they complied with it. We could simply cap the size of businesses; large entities create a corrosive imbalance of power. We could attack private equity abuses (well covered by Brian Gossett in his book Glass House, about the destruction of the Ohio glass company Anchor Hocking). And much more.
But none of these will happen, because there is neither the will nor power to make them happen. And even if there were, solutions will not work as long as our managerial class lacks any loyalty to America, outside, perhaps, of loyalty to their own faction, to a small but powerful slice of America, the professional-managerial elite. (Elon Musk is arguably the exception, which is why the Lilliputians are increasingly turning their little cannons on him, because he does not toe their line, and shows signs of working for America as a whole.) There is, as the kids say, no political solution. But there are many extra-political solutions, which incidentally is how the present order was mostly constructed. Perhaps after that, the virtue shown by colonial insurance companies can again spread through owners and managers, and therefore through business enterprises. In the meantime, we can contribute to this future rectification by remembering what once was, and holding it up as the future ideal.