Don’t limit the revolution

THE limited-liability company is one of man’s greatest inventions. The company encourages co-operation by allowing people to join together under the same organisational roof, regardless of race, creed or nationality. Limited liability encourages investment by limiting people’s downside risk—they can lose only the cash they put in the corporation. Put the two things together and you have an institution that allocates spare money to productive purposes and minimises fear and friction by freeing investors from the threat of personal ruin.

Economic historians have noted that limited liability sat at the heart of the Industrial Revolution. Before the 19th century you could obtain it in many countries only if you won special permission from the government. But as capital-hungry technologies such as the railroads arrived, followers of President Andrew Jackson (a prominent fan of limited liability) in America and free-market liberals in Europe threw the privilege open to all comers.


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