John Micklethwait Explains the History of the Joint Stock Company | Big Think

John Micklethwait Explains the History of the Joint Stock Company

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How thinking about companies will change with the economic crisis.

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John Micklethwait:

John Micklethwait is Editor-in-Chief of The Economist. Before that he edited the US section of the newspaper (1999 - 2006) and ran the New York Bureau for two years, having edited the Business Section of the newspaper for the previous four years. His other roles have included setting up The Economist's office in Los Angeles, where he worked from 1990 - 1993 and being Media Correspondent. He has covered business and politics from the United States, Latin America, Continental Europe, Southern Africa and most of Asia. He is a frequent broadcaster and has appeared on CNN, ABC News, BBC and NPR. He is the co-author of "The Witch Doctors", "A Future Perfect: the Challenge and Hidden Promise of Globalisation" and "The Company: A Short History of a Revolutionary Idea" and "The Right Nation", a study of conservatism in America, with Adrian Wooldridge, also an Economist journalist.

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TRANSCRIPT:

Question: What was the thesis of your book The Company?

Micklethwait: No, I think the basic… It always changes about things but in terms of the basic idea. What was called “The Company - A Short History of a Revolutionary Idea,” and the basic idea behind it was that actually this boring institution, the company, the joint stock company, actually was a revolutionary technology. It took an idea about a way to run businesses and ways to bring in outside capital and above all the idea of limited liability and that actually completely transformed the world. If you want an example going back to what we originally said, you know, when the joint stock company first appeared back in, I think, Elizabethan England and then it helped, in many ways, colonized America. At that precise time, you would argue that the Islamic world had much, much more advanced commercial structures than the European world did, what happened in fact is that Islam got left behind and one big reason for that was they were unable to come up with a structure partly to do with actual reasons to it, religion and inheritance and stuff like that which can actually deal with joint stock companies. And that made a big difference. I think the company is still an amazing organization, what comes after the current crisis about it is harder. I mean, you could argue that to some extent when you look at banks, the concept of limited liability hasn’t gone… it has been very limited liability for the people who are on top of them that they… the full way in which capitalism was supposed to work whereby people who did very well were then supposed to lose huge amounts when they went is true, people on top of banks have lost quite a lot of money but there’s still a general feeling out there that people have got a lot for nothing and what intrigues me on that is a particular thing to do with the company with the way we argue is a revolutionary organization, but it’s always relied on some degree of a franchise from society, whenever companies, whenever corporate Catholicism is seen to go too far, in some direction or other, there’s usually, not always for the better, but there’s always been some degree of backlash. There’s always been some degree of we want this back, it’s worth remembering actually. The companies exist because of the state. They exist because the state decides to give uniquely to a company the concept of limited liability. If you get bust or I get bust then it’s us personally. A company has that ability just to keep all its debts within itself and the people behind it, not to be hit for the full bill and that is a privilege given by the state and although in general, I’m much more frightened about there being far too much regulation after the particular… this particular episode, we’re still going through… there’s a reason, at least conceptually, to imagine why people might want to re-examine that relationship.