In his letter (June 1) regarding our editorial “The ‘Stakeholders’ War on Enlightenment” (May 24), Cambridge Professor Brian Cheffins provides the legal background to our claim that “Parliament abrogated the charters royalties, allowed businesses to incorporate simply by meeting predefined capital requirements, and established the rules of law governing private competition.
We’ve condensed 150 years of history into one sentence to explain how Parliament freed private corporations from government control. Mr. Cheffins correctly explains legal transformation but misses our point on economic transformation. The Bubble Act of 1720 effectively banned new corporations, but did not eliminate existing corporations. Without the predations of stakeholder capitalism, it grew in value by 48% over the next century. When resources were lacking, “big projects went to big partnerships,” according to Harvard professor David Landes. “In the 19th century, when things became more expensive and the risks greater,” Parliament turned to “the most effective device for raising capital.” . . , the chartered corporation.
Despite the bounty provided by shareholder capitalism, the royal charter has made a comeback with crony capitalism in which the government again co-opts private investment with grants and mandates.
Phil Gramm and Mike Solon
Helotes, Texas, and Alexandria, Va.
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