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Michael Novak: Capitalism and the Corporation

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Michael Novak: Capitalism and the Corporation
Michael Novak: Capitalism and the Corporation
The purpose of this research is to impart an academic opinion on the topic of how long
the corporation has existed, distinction between the British and European corporation and the
American corporation and the result of such difference, the definition of stakeholders, the effects
of social democracy and the danger of perpetual demand without responsibility, and last but not
least, the interpretation of the phrase from Michael Novak that the corporation is “not a cold
meteor fallen from the sky.” Before initiating the research paper, it is of foremost necessity to
understand the definition of a corporation. A corporation is defined as a group of businessmen or
merchants acting as a single and complete unit, accredited by law as a trade association endowed
with various rights and duties including the capacity of succession (Merriam-Webster’s
collegiate dictionary, 2003).
Michael Novak documents that corporations began in the early Middle Ages, mostly as
internment societies which, transitioned over to cloisters, then to towns and to universities
(Novak, 1999). The early Middle Ages was a period of the European history lasting from 500
AD to 1000 AD, i.e. from the 5th century to approximately the beginning of the 11th century
(Mckitterick, 2001). The first institutions largely considered to be universities were constituted in
Italy, France, and Britain in the 11th and 12th centuries for the study of art, law, medicine, and
theology (Cobban, 1999). The first occurrence to end the monopoly powers was the start of the
corporation in the Unites States of America, which was in 1636, by setting up a charter of
incorporation of the Harvard University without getting the prior approval of British government
(Novak, 1999). The American Revolutionary War began in 1776 in pursuit of getting absolute
emancipation from the callous monopoly powers of Britain and eventually the United States of
America succeeded in getting the independence. Also in 1776, Adam Smith, proffered his theory

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Michael Novak: Capitalism and the Corporation
of free market and argued that free market is the freedom of individuals and businesses to
function with a nominal government intervention by empowering individuals and businesses to
create, produce, transform, develop, innovate and compete in the marketplace by developing
goods and services that society values most because the free market system brings forth
enormous efficiency in economic activities and gets harmonious with individual freedom and
political democracy (Smith, 2000). After having independence from Britain, there cropped up
more universities and railroad infrastructure in the United States than the collective ones in the
whole Europe because of thriving businesses in the United States with appalling prosperity,
predominantly in the East Coast thereof.
The difference between the United States corporation and the European corporation is
that the United States corporation is the conceived creation of individuals whereas the European
corporation is the creation of state or government, which resulted that more corporations and
businesses flourished in the United States than in Europe. The creation of corporations by
individuals proved beneficial and the United States saw a grandiose industrial revolution in the
1800s and 1900s (Klein, 2007). Canals and railway development played a cardinal role in
hauling people and cargo to the Western United States, which ultimately augmented the size of
the market place (Klein, 2007). With the new infrastructure of roads and railways, even distant
parts of the country acquired the ability to communicate and institute trade alliances with
business centers in the Eastern United States (Klein, 2007). Industrialization in the United States
entailed three important evolvements, i.e. transportation sector was amplified, electricity was
effectively exploited, and enhancements were made in industrial processes to spur production,
and simultaneously the United States government helped American manufacturers by passing
protective tariff laws (Klein, 2007).

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Michael Novak: Capitalism and the Corporation
The first definition of stakeholder is the social democratic feel of stakeholder which is
ascribed to those who consider themselves as rightful to make claims on the system and to
receive benefits from it, i.e. citizens can have a claim to social inheritance. Two scholars, Bruce
Ackerman and Anne Alstott, also proposed the formation of stakeholder society to address the
non availability of opportunities on account of disparate wealth possessions (Ackerman &
Alstott, 1999). According to them, social inheritance should take the form of a large cash
allocation to all citizens when they attain the maturity age, which can allow each individual to
actuate the best use of his or her social inheritance (Ackerman & Alstott, 1999). In this
stakeholder society, people do not feel the sense of personal obligation and their claims from the
government for personal support can be incessant, which can lead to a lasting personal disquiet.
The second definition of stakeholder is that stakeholders are owners and private risk takers
whose intention is to protect the general welfare in the larger public interest, which is the
foundation of free societies. According to Michael Novak, free persons have diverse acumen for
common good and in this society, he is accountable under the “veil of ignorance” for his own
benefit and for the betterment of society (Novak, 1998). Common good originates from the acts
of free persons, and those of individual freedom that must be protected by economic, moral and
cultural institutions that ultimately restrict the state power (Novak, 1998).
Michael Novak feels that the effects of social democracy are like socializing self-interest
and the societies based on the social democracy model are neither contented nor satisfied. He
feels that individuals are absolved from personal accountability under this model and ultimately
social democracy becomes enslavement (Novak, 1999). The danger of perpetual demand without
social responsibility is that there is no motivation to work harder because socialistic systems
offer no inherent incentive to work for. This makes socialism an anemic model, as the system

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Michael Novak: Capitalism and the CorporationThe purpose of this research is to impart an academic opinion on the topic of how long the corporation has existed, distinction between the British and European corporation and the American corporation and the result of such difference, the definition of stakeholders, the effects of social democracy and the danger of perpetual demand without responsibility, and last but not least, the interpretation of the phrase from Michael Novak that the corporation is not a cold meteor fallen from the sky. Before initiating the research paper, it is of foremost necessity to understand the definition of a corporation. A corporation is defined as a group of businessmen or merchants acting as a single and complete unit, accredited by law as a trade association endowed with various rights and duties including the capacity of succession (Merriam-Websters collegiate dictionary, 2003). Michael Novak documents that corporations began in the early Middle Ages, mostly as internment societies which, transitioned over to cloisters, then to towns and to universities (Novak, 1999). The early Middle Ages was a period of the European history lasting from 500 AD to 1000 AD, i.e. from the 5th century to approximately the beginning of the 11th century (Mckitterick, 2001). The first institutions largely considered to be universities were constituted in Italy, France, and Britain in the 11th and 12th centuries for the study of art, law, medicine, ...
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