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Could a culture have free-market capitalism that never (or at least rarely ever) results in corporations, large trusts, or other such groups? This culture is made up of a single alien species that evolved naturally and has a non-humanlike mind. They have a government that collects taxes and does things for their people. There are other different cultures, some of the same species, and some of the different species

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    $\begingroup$ It could but it kind of precludes any accomplishment that requires a large amount of capital investment under one organization's control. No large aircraft manufacturers (huge capital investment in factories), telecoms (huge investment in laying cable and infrastructure), modern chip makers (chip fabs cost tens of billions to build), etc. That would have to be replaced by government doing it or some other handwaving. $\endgroup$ – GrumpyYoungMan Jun 21 at 14:03
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    $\begingroup$ ? The modern kind of commercial corporations was invented ex nihilo by the British Parliament through the Joint Stock Companies Act 1844 and the Limited Liability Act 1855. This innovation was quite controversial at the time; see for example Gilbert and Sullivan's Utopia, Limited. So that if you consider the British economy before 1844 to be free-market capitalism then it is a direct example of what you are seeking. $\endgroup$ – AlexP Jun 21 at 14:43
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    $\begingroup$ @AlexP But there were large corporations in the UK well before 1844, in fact well before there was a UK — the East India Company was founded in 1600. $\endgroup$ – Mike Scott Jun 21 at 15:48
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    $\begingroup$ What is your definition of corporation? Can we call, for example, the Medici family a corporation? $\endgroup$ – Alexander Jun 21 at 16:49
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    $\begingroup$ I started to write an answer and realised that your question has too many unknowns. What is your definition of free-market capitalism? How much and in what areas your aliens differ from humans? Without this information an answer to your question would require endless 'if this then this, but if this then this'. Please edit your query to include additional details about your aliens, their society, and their economic system. $\endgroup$ – Otkin Jun 21 at 18:44

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The main reason why corporations tend to be dominant is because there are large economies of scale. It's a lot cheaper to be a big organization which makes stuff than a small organization. To prevent that, you need to have the race reduce economies of scale and increase diseconomies of scale.

One big one is specialism. Humans can get much much better at a single task, and so it makes sense to have lots of workers who are good at a small range of tasks. Your alien race may have the opposite situation. They have a wide working memory but a lower ability to focus, so they find it easier to learn a vast array of tasks than be an expert at a single task.

Another big one is negotiation. Big corporations can negotiate cheaper deals with their size. Your aliens could be very clingy, only agreeing to lower prices for close friends. The larger a group grew, the more expensive sourcing products would be.

Capital costs tend to be much cheaper for a big corporation. It's much cheaper to build one big building than many small buildings, or one big piece of equipment. You could give them some biotechnology like growing homes or equipment from trees or animals that can only work with a small number of people, not working for people who smell different.

All in all, these would make it a lot cheaper to have small groups than large groups, and discourage corporations.

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    $\begingroup$ Also: pre-industrial economy. Machines and factories require large investments and only work when the economy-of-scale aspect is present due to the heavy required setup costs. When everthing is handmade by artificers or tradesmen, there is little required setup cost (so no requirement for corporations to form to start stuff), AND the reduced production means that there are no goods available in such masses that bulk rebates become relevant $\endgroup$ – Hobbamok Jun 22 at 7:39
  • $\begingroup$ @Hobbamok : yet they still congregate into guilds, even before industrialization. $\endgroup$ – vsz Jun 22 at 12:24
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    $\begingroup$ @vsz, guilds aren't equivalent to corporations: they're more akin to unions or similar associations which cooperate with the goal to set some kind of standards or restrictions that benefit all members. $\endgroup$ – Keith Morrison Jun 22 at 17:23
  • $\begingroup$ This answer seems to ignore one of the biggest reasons: bigger = more money = more power. When you have a lot of money you can engage in all kinds of anti-competitive behavior unless there are laws to stop you like buying up any smaller companies that get too big, lowering prices in a specific area so smaller competitors can't compete and go under and then jacking prices back up, directly paying lawmakers (lobbying) to write laws specifically favorable to you, and whole host of other practices that are or used to be legal in the US. $\endgroup$ – Shufflepants Jun 22 at 19:01
  • $\begingroup$ The main reason corporations exist is so that people (often strangers to each other) can pool their resources together (money and labor) in a relatively safe manner because all of the members are bound by a specific code of conduct (corporation law) that provides recourse to members who are wronged by other members. So to answer the OP's question, this society could exist if there were other things in place to allow strangers to safely pool their resources or if the society itself simply didn't have dishonest people. $\endgroup$ – liquid Jun 22 at 20:52
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Some simple precedents, early on, when their impact isn't clear yet.

First, assume that they never developed the concept of a corporation as a legal entity apart from the members. To them, the only possible "corporation" is a registered commercial partnership of named individuals. During their equivalent of classical or medieval times, there might have been judges and lawmakers who thought that only people could sign binding contracts, either in their own name or with a power of attorney from those for whom they sign.

Next, introduce the precedent that in a partnership, any one partner is liable for all acts or debts of the partnership, including those signed by their agents with a power of attorney (which would typically define a scope of this power, like a maximum amount for any one transaction or a geographical area).

This works reasonably well for a master craftsman who is supervising a few journeymen and apprentices, or a family trading house with the patriarch in the home office and trusted family members in some branch offices. It would allow two or three people who really trust each other to cooperate. It breaks down at the larger scale, but then it would be the law.

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The VOC (1600) was probably the first "corporation" on Earth. Merchants, trade, currency have existed long before that. The value of a corporation lies not in its scale, but the idea of limited liability, in that someone can take a lot of risk but not have it ruin their lives when they can't pay debts later. Many empires have existed before corporations that dealt with managing assets over long distances.

What is there in place instead of a corporation? It's legally referred to as a business in some places. A person owns Alien Cola. They buy sugar from Alien Sugar. They buy water from Alien Processed Water (APW), who buys water from Alien Unprocessed Water (AUW).

A drought hits and AUW is broke without delivering water to APW. APW sues Alien Urist of AUW for breach of contract, to sell all his homes and ships and himself into slavery. Alien Medici feels sorry for Alien Urist's poor luck and offers to loan money to him to pay off those debts. When the drought is over Alien Urist pays back Alien Medici's loans and continues selling unprocessed water.

It's not much different to modern capitalism, and you don't even need the slavery part - modern people still do go bankrupt for their businesses and simply get limited in their options until they get out of bankruptcy.

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  • $\begingroup$ The elephant in the room is liability insurance. Why can't Alien Urist buy drought insurance? It doesn't need to be directly codefied in law, it just needs some bright spark to think of the idea. $\endgroup$ – Mr Bullshit Jun 22 at 10:44
  • $\begingroup$ @MrBullshit, because in this example insurers open themselves to unlimited liability on top of the customer's own unlimited liability. Alien Medici in this example has covered a limited liability for his own profit and minimal relative risk, in this environment it's better to be a banker offering loans than an insurer covering risk. What Alien Urist should have done was got a better lawyer who could have told him to put a drought clause into the contract. $\endgroup$ – Separatrix Jun 22 at 11:15
  • $\begingroup$ @Separatrix Fair enough, if the contract is the liability-limiting factor then liability is pre-agreed by the parties. But Alien Insurance Co could make demands as to insurability, to include risk assessment of the contracts. It's possible that Alien Urist would have been considered uninsurable which would motivate him to change his contract terms. Current terrestrial insurance products can also insure a specific supply agreement & cover the liability of a specific contract - in this case the liability is not unlimited, it is limited by the value of the contract. $\endgroup$ – Mr Bullshit Jun 22 at 13:47
  • $\begingroup$ Upvoted for including the concept of limited liability, which is the crux of the matter. Limited liability is such an obvious benefit for economic actors to seek out that if corporations didn't exist people would experiment with different contract forms until they re-created it. Debt instruments and warrants could probably be employed to produce a pretty good facsimile. $\endgroup$ – tbrookside Jun 22 at 14:09
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Absolutely. There have been many cultures without corporations. However, they were dominated by individual crafts people and individual merchants. Look at a Medieval European town which had the crafts guilds and merchant houses and is surrounded by individual famers who supply sufficient food for the town.

As soon as there were masses of people to feed, larger organizations developed. So the Romans had "families" which controlled a larger organization that could bring in the food needed for a city. One could join a "family" and be part of their structure. (Certain organizations still preserve that Italian "family" structure.)

Once there was wealth to be protected, other organization structures developed, both protective and "acquiring". Armies and navies developed to try to get and protect wealth.

So, if you want to keep corporations out of the society, you will need a mortality rate to keep the population under the size that could be supported by individual farmers, crafts people, and merchants. That can be done with disease, war, drought, or famine.

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    $\begingroup$ Those cultures weren’t capitalist. They didn’t amass private capital to resource large projects that wouldn’t deliver their full value for many decades, with the expectation of making an eventual profit, which is what capitalism does. $\endgroup$ – Mike Scott Jun 21 at 15:45
  • $\begingroup$ @MikeScott I agree that they would not match today's definition of "capitalist", but they were definitely capitalistic. A crafts person needed to acquire a good amount of capital before they could open up, (Price what it takes to pull a good woodshop together.) That often took generations to gather. $\endgroup$ – David R Jun 21 at 17:55
  • $\begingroup$ @MikeScott how about the fugger family, or the templars with their banking-system that even kings owed money to? Both of these provided considerable capital in exchange for privileges that would be provided after the wars they financed. $\endgroup$ – Paul Jun 22 at 12:28
  • $\begingroup$ And sometimes, the "capital" is not monetary. I've heard that the wood that Stradivarius used to make his violins was wood his grandfather started curing. The French government started planting oaks in 1670 and paying for their upkeep so that they would have the timbers 200+ years in the future. (Now these are being used to rebuild Notre Dame.) $\endgroup$ – David R Jun 22 at 14:19
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Yes. In fact there have been attempts to formulate such an economic system on Earth in the recent past. The system is known as Distributism. The idea is that the means of production should not be owned by the state (socialism) or by capital (capitalism), but as widely as possible. In practical terms it means that there should be lots of small businesses freely trading with each other, rather than having a few large corporations. It still has a strong influence on the economic philosophy of Germany.

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A very bad experience with large corporation in the past could result in extremely strict anti monopoly laws preventing business expanding beyond ~500 people. But if going to a smaller amount such as 10-20 people maximum per business you will either have:

  • A country that either has almost all heavy industry owned by the government to allow the necessary concentration of people to do many tasks.
  • Foreign corporations establishing a large amount of small subsidiaries and dominating the economy.
  • or have technology not advance beyond a WW1 level for this nation with extreme inefficiency of metals production. With most companies being either Production companies that make one or two things, design companies that licence their designs to multiple production companies each & companies such as restaurants, plumbers & grocery stores that don't need that much in the way of employees in the first place.
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  • $\begingroup$ In this scenario what would stop corporations from forming business unions in order to manipulate the market and policy to circumvent anti-trust laws? In much the same way that corporations are treated as a legally distinct entity and individual entities band together to form a corporation, corporations could band together to form...whatever this would be. $\endgroup$ – user2352714 Jun 22 at 3:59
  • $\begingroup$ @user2352714 Anti-trust laws can deal with that, if too many companies work together the government can force them to pay a fine and stop them from working with each other. $\endgroup$ – OT-64 SKOT Jun 22 at 4:16
  • $\begingroup$ But at what point does that stop? Are unions a labor trust? Successful unions in most of human history worked by monopolizing the labor pools of a given business (often a monopoly in and of itself), but at the same time they were very clearly just a bunch of individuals who happened to be in agreement in order to force business leadership to change than a corporation. Do we ban the voluntary association of people? $\endgroup$ – user2352714 Jun 22 at 4:18
  • $\begingroup$ @user2352714 Do governments break up unions for violating antitrust laws in real life? Unions are generally legally distinct type of entity from corporations. Even if it would classify as a monopoly the government can just not bring it up and things can go on as normal. $\endgroup$ – OT-64 SKOT Jun 22 at 4:37
  • $\begingroup$ More subcontractors and subsidiary companies to hide the size of the business. Businesses already do that to hide the discrepancy between the highest (old white men) and lowest paid (often immigrant women) employees and make the stats look better. $\endgroup$ – Separatrix Jun 22 at 11:18
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The aliens could be a culture with an aversion to hierarchy and authority.

Human society is based on hierarchies. Every organisation in human society has multiple layers of leadership with each layer receiving orders from above and relaying them to those below. This is also how big corporations operate. That's just how human society works.

But such a system could be completely aliens to those aliens. Having someone who is "above" them and who can tell them what to do and what not to do in exchange for a monthly salary or some other long-term benefit is just something that feels inherently humiliating and unnatural to them.

So all their economic cooperation happens on a deal-by-deal basis. There are no permanent employment relationships, just people one regularly does business with.

Their manufacturing industry could function on a co-working system. Factory owners rent workplaces at assembly lines to workers by the hour. Then they buy the products the workers made while working there. Their navy could work by crewpeople renting a place on board of a vessel. Then the captain (owner of the ship) pays them for each individual chore they perform throughout the journey. Any task which just doesn't work without someone coordinating people - like some larger-scale construction project - works by hiring a manager to complete the whole project, who then sub-contracts people for performing all the sub-tasks.

A prerequisite for such a culture would be a way to negotiate and make financial transactions in a very efficient manner. In the ideal case, there could be some mechanism for storing and transferring some form of currency in their biology. Perhaps their currency is some protein they store in their body which they can exchange with others.

This could in fact start the moment they are born. Each member of the species is born with a certain amount of "currency-protein" stored in an organ in their body. The primal instinct a newborn baby isn't crying. It's the instinct to offer some of that protein to adult members of the species (who might not even be their biological parents) in exchange for them taking care of their basic needs. That basic social contract - currency-protein in exchange for services and resources - continues throughout their life.

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Yes, and it wouldn't need to be that different from ours.

Muz said it best:

"The value of a corporation lies not in its scale, but the idea of limited liability, in that someone can take a lot of risk but not have it ruin their lives when they can't pay debts later." https://worldbuilding.stackexchange.com/a/205962/581

You (yes, you!) could buy stock in any corporation and hope to profit from its activities. There's a risk that it'll screw up massively and go bankrupt, reducing the value of your investment to zero. But crucially, not below zero. You (yes, you!) could also buy a share of a non-incorporated company. That's more dangerous, if it goes bankrupt, its creditors can come after your other assets. That would make the value of your investment negative, and capped only by your personal bankruptcy. Might still be worthy investment, but you're more exposed to risk.

If corporations did not exist, companies could still get huge and operate similarly as today. But expect more conservatism all around, as each shareholder is completely exposed to all of the company's risk. Also expect less diversification, as rich people will have more to lose by investing a bit in a company they know little about. So, probably the economy would grow more slowly all else equal.

If we're postulating aliens, there's all sorts of unrelated factors that could compensate for it, adding up to an economy growing about as fast as ours.

Critics of limited liability argue that it's immoral, particularly when one makes a gamble and causes massive damages that can't be paid back, but shareholders can walk away with all their other assets and maybe even old profit distributed from that company. So, it's easy to imagine a society choosing to go without it even after knowing the gains it brings.

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Alien Maoism

The current phase of development is called preliminary socialism

https://en.m.wikipedia.org/wiki/Primary_stage_of_socialism

According to Mao's theory, this phase will be superseded once China has achieved the state of being a fully developed country. Assuming that this theory turns out to be practicable (it is still far too early to tell) then this will result in a state-directed planned economy with few to no private corporations.

One key implication of this theory is that if no corporations existed anywhere to begin with then the preliminary socialism stage would not be necessary.

So perhaps a culture with a different historical basis would move from the final stage, to the capitalistic stage, in a similar way with some constructs of capitalism being accepted within society but with extensive legal / social restrictions on the formation of powerful corporate entities which can directly challenge the power of the state.

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All of the answers so far have made one common assumption: that the culture is founded on materialistic values and consumerism.

As hinted above, within the current economic system of perpetual growth, we risk being locked into a mode of development that is:

destructive, in the long run, to the environment a contributing factor to poverty around the world a contributing factor to hunger amongst such immense wealth and numerous other social and ecological problems

There is no need to anthropomorphise this culture - to assign our materialistic human value system to it.

Imagine a culture where the acquisition of objects is irrelevant. Rather, their values are based on artistic and philosophical endeavors, not production and 'stuff'. A society that is not interested in nor even has any concept of the development and building of bigger, better, more spritzy 'toys'. A society very much in line with being populated by the likes of Socrates, Plato, Rembrandt, Picasso.

The extent of their materialistic interests begins and ends with the providing of the necessities of life. An agrarian society. Now place this society in a very lush world, where food is plentiful and requires very little labor to produce. Nutrition is universally available, and so abundant that food storage is un-necessary. Daily requirements could be sourced daily, and no heat or cold is required for preparation. A very temperate world where simple structures are all that is necessary to provide accommodation. No need for heating systems, air conditioning, protection from violent storms, no need to go 'vertical', or to have walls of any thickness. Think in terms of a world where tent-like structures are all that is necessary. Every need is provided for with minimal effort. The primary energy requirement is supplied by the 'sun', and what limited manufacturing is done, could be powered by water and naturally-sourced electricity - chemical batteries - and fossil fuels.

A society where individual craftsmanship is all that is necessary to produce all of the consumer goods desired. Where mass production is not only irrelevant, but rejected by a culture that cherished individuality and uniqueness in their belongings.

Indeed, we would be in a society much like very early human societies, where there were no businesses except the individual proprietor, who made stuff and traded it directly to the public. There was no such thing as an employee, and the concept of payment for human labor was unknown. Any 'helper' would either be family (and would receive and share 'benefit' communally from the collective 'wealth' of the family), as part of the 'family enterprise', or an apprentice, who was 'reimbursed' through room and board. The only mass 'employer' would be the state, in the provision of services - the 'court' and 'courtesans'. Again, they would 'work' for room and board.

The monetary system would be very basic, at best. The barter system would be the main method of exchange, since food, energy, and all necessities would be free to everyone. Perhaps there would be neighbourhood 'markets' where goods were exchanged.

Since 'wealth accumulation' would be a concept so absolutely strange and weird, there would be no financial system. When every individual could have whatever they needed for free, what would be the attraction of 'wealth hoarding'? The individual could not really DO anything with it.

Progress would be measured, not in how much better the 'stuff' was, but in how advanced the knowledge and artistic creations became. Poetry, music, art, esthetics, dance, cultural refinements (think: the early court royalty 'refinements' of Elizabethan times only ingrained in all of society, not just an elite segment).

Such a culture would have absolutely no need for large corporations or consolidated industries. In fact, without a concept of 'paid labor' (the concept that one person could 'own' the labor of another), they would be impossible.

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