NCJ Number
115845
Journal
Georgetown Law Journal Volume: 76 Issue: 5 Dated: (June 1988) Pages: 1593-1689
Date Published
1988
Length
97 pages
Annotation
This article traces the rise and decline of classical corporate theory in the United States.
Abstract
Classical political economy in the United States was dedicated to the principle that the State could best encourage economic development by leaving entrepreneurs alone, free of regulation and subsidy. The development of classical economic policy in the United States dramatically changed the concept of the business corporation. Within the preclassical, mercantilist model, the corporation was a unique entity created by the state for a special purpose and enjoying a privileged relationship with the Sovereign. As classical theory replaced the mercantilist model, the business corporation evolved into a device for assembling large amounts of capital in a manner that could be controlled efficiently by a small number of managers. From the 1830's until the end of the 19th century, classical political economy dominated State economic policy, although neither legislators nor judges followed the classical model with complete consistency. By the end of the New Deal, little was left of the classical corporation. Its internal dealings with shareholders and its debtor-creditor relations were regulated by the Federal securities acts; its labor relations were regulated by the new Federal labor laws; and its relations in the general market with consumers and suppliers became increasingly regulated by the antitrust laws and the Federal Trade Commission. The postclassical corporation was not much like the preclassical corporation; Shareholders never regained the control they once had, limited liability remained the rule, and corporations remained 'persons' for the purposes of constitutional law. 610 footnotes.