Can Large Corporations Exist in a Free Market?

In this thread on mises.org, someone was asking about free markets and corporations. Can large corporations exist in a really free market?

The argument against corporations is that they receive massive direct and indirect State subsidies.

If I want to borrow $1M to start a business, I can't borrow at all or I'll pay extortionate interest rates.

If the CEO of a large corporation wants to borrow $1B, he can borrow on very favorable terms. This distorts the market in favor of large corporations.

A pro-State troll says "That's because FSK is uncreditworthy!", but it's more than that. Executives at a large corporation have a State-backed monopoly/oligopoly. That's collateral for the loan. As an individual, the loan is only backed by my own future labor.

Real interest rates are negative. The CEO of a large corporation receives a huge subsidy when he borrows $1B at a real interest rate of -10% or less. The central bank credit monopoly and paper money concentrate economic power in the hands of people who print and spend new money. I can't avoid subsidizing the CEO of a large corporation unless I also boycott the State's paper money.

Regulations also subsidize large corporations. The cost of regulation compliance is usually fixed rather than per-unit. Suppose it costs $1M to comply with a regulation. If I sell 1000 units, my regulation cost is $1000 each. If I sell 10M units, my regulation cost is $0.10 each. "Economies of scale" are an illusion. The "economy of scale" myth derives from "Larger businesses can more easily lobby the State for favors!" Large corporations squeeze out smaller competitors, because there's a terrorist organization that harasses all small business owners.

It'd be very hard to have a business larger than 100-200 without State restriction of the market. That's the natural maximum size of a human social group.

Suppose that someone is a brilliant manager and can oversee a 100 person factory. Why should he work for a large corporation? Instead, he should raise capital and start his own factory.

In a free market, anyone who's a really good worker would be able to start his own competing business, rather than work for a large corporation or work as an employee. Without a central bank credit monopoly, a skilled worker could raise money borrowing from friends. In the present, it's be foolish for a non-bank to lend me money. Either they would charge me an extortionate interest rate, or receive a return far less than true inflation.

In order to have large corporations, you need State restriction of the capital market, making it hard for individuals to start new businesses. You need State regulations, which impose extra costs on small business owners.

As another example, suppose a small business owner has $100k in revenue. He probably has to spend $5k on accountants, just to make sure he's in compliance with the tax laws. That's effectively a tax of 5%. A large corporation with $10B in revenue might spend $10M on accountants. That's a tax of only 0.1%.

Large corporations can most effectively lobby the State for favors. That's completely unrelated to any efficiency gains. If you own a $100k business, you can't afford to bribe a Congressman. If you control a $10B corporation, then a $10M lobbying budget is a negligible expense.

A large corporation is not genuinely efficient. A large corporation is most efficient at overcoming the overhead costs imposed by the State. A large corporation is most effective at lobbying the State for favors.

In a really free market, would a business be able to impose a "limited liability" clause on its customers? Suppose you sat down in a restaurant, and the waiter made you sign a limited liability agreement, waiving damages if you get food poisoning. Would you really sign it?

Suppose a bank required a "limited liability" clause in its deposit contract. Would you really deposit your savings there? If you got a higher interest rate than other banks, it would only be because you're risking the loss of your savings due to the "limited liability" clause.

Also, a fair free market court would probably not enforce a "limited liability" clause that is obviously misleading. A customer sitting in a restaurant doesn't expect to get food poisoning. Therefore, the restaurant has no right to demand the customer waive that liability.

As another example, suppose a business is incorporated. It pollutes and leaks oil into groundwater at a cost of $100M to cleanup. The business has only $1M in assets. The owners declare bankruptcy when the pollution is discovered. Even though the victims had no contractual relationship with the polluter, limited liability incorporation protected the polluter from his misconduct.

In the present, State incorporation allows business owners to force limited liability clauses on all customers. Limited liability incorporation protects management of a corporation from liability even by people who have no relationship with that corporation. When you limited liability incorporate, you're contracting with the State and not your customers.

"Corporations naturally exist in a really free market" is a mistake that pro-State (L)libertarians often make. Corporations are an artificial creation of the State. Large corporations only exist because of direct and indirect State subsidies. In a really free market, no customer would agree to a limited liability clause.

It's unlikely that you would see businesses larger than 100-200 people in a really free market. There may be several cooperating businesses, but no mega-conglomerates. "Limited liability incorporation is a necessary perk for doing business!" is a common pro-State troll mistake. All limited liability incorporation accomplishes is that it allows management to immune from the negative consequences of misconduct and failure. Limited liability incorporation gives management a free put option to declare bankruptcy and cheat their creditors.

Contrary to what most pro-State troll (L)libertarians say, limited liability incorporation won't occur in a really free market.