The state as a formal government organization began to come into focus in the sixteenth and seventeenth centuries, the period of history in which the sovereign state emerges, as does a more complex economy. This emergence also coincides with the formalization of the parts of the dominant coalition as perpetually lived organizations, ultimately constraining the powers of the state and creating elite rights. Because the rights of elite organizations are possessed in perpetuity and do not adhere to individual identities, both the powers and privileges of the sovereign state and of elites must be defined impersonally.

The first societies to reach the doorstep conditions were Britain, France, the Dutch, and the United States. As these first movers reached the doorstep and access began widening in these societies, the corporate body of the sovereign state came to prominence. Over this period, the individual identity of the monarch faded in comparison to the corporate identity of the state. By the eighteenth century, the first movers had created a perpetually lived corporate state. By doing so, these societies not only constrained the powers of the king, they constrained the power of every individual leader of any state organization and began to restructure private organizations as well.

5.4.1 Moving toward the Doorstep in Europe and the United States: Impersonality in Public and Private Organizations

In natural states, the place of each organization within the state hierarchy is typically tied to the position and power of the elite individual (or individuals) who lead the organization.13 The bureaucratic structure of a natural state becomes more complicated and sophisticated as a natural state matures, but it retains its personal nature. The development of perpetually lived state organizations leads to the identification of state organizations as legal persons with a life of their own. Government organizations cease to be defined in terms of the life or identity of their leader and instead become organizations that live on beyond the lives of their members.

State treasurers in the early United States are an example. From the American Revolution on, every state had a treasurer who was an officer of the state. Some were elected, but most were appointed. In almost every state, the treasurer’s accounts, and the money in them, were legally the

13Bates (2001, pp. 66–8) illustrates this with his discussion of the Percy family in sixteenthcentury England. Many elite organizations have multiple leaders who are part of the dominant coalition. We often use “leader” where “leader and leaders” would be more accurate.

property of the treasurer as an individual: they were not legally the property of the state. When a treasurer died in office, resigned, or was replaced, the accounts of the old treasurer had to be audited. It often transpired that the accounts of the old treasurer did not balance, embroiling the state in legal battles that could last for years. The new set of state accounts created with every new treasurer had to include an entry in which claims against the old treasurer were carried as unrealized assets of the state. In formal and sometimes financial terms, the treasury as an organization died whenever the treasurer died.14

The transformation of the state treasuries into organizations with perpetual life with accounts that did not die with the treasurer required a change in the organizational and institutional structure of the state. The development of treasuries as formal organizations did not eliminate the problem of fraud and incompetence. However, it did mean that significant financial operations could no longer be carried out by the treasurer as a private individual playing with the state’s money. Risky financial operations by treasurers, previously the personal prerogative of the treasurer as an individual, could now more easily be placed off limits.

Dan Bogart’s (2005a,b) work on parliamentary incorporation of turnpike trusts in the eighteenth century provides another illustration. The British began creating local governments with explicit perpetual life, the ability to levy taxes on local ratepayers, and to impose tolls on turnpike users. Bogart shows how these powers facilitated British development of the transportation infrastructure. Venal office holding in France, although usually not thought of in this respect, is in part a history of the creation of local government organizations. Among the most important organizations were courts and municipal governments, but thousands of other local governments (and, of course, local rent-creation arrangements) were also created and sustained in France (Bossenga, 1991; Doyle, 1996; Kwass, 2000).

For a society to move to the doorstep involves thousands of incremental changes such as these. The changes vary widely in content from society to society, and history and culture affect the specific changes that take place. In general terms, states begin transforming themselves from a hierarchy of

14The United States was no outlier. Mathias and O’Brien (1976) and O’Brien (1988) note the difficulty of reconstructing the British fiscal accounts before the nineteenth century because the accounts were the personal property of the Chancellor of the Exchequer and the many and various other officials who handled funds. The same was true in France, on a vastly larger scale, where financial offices were bought and sold (see Bonney, 1981).

organizations tied together through individual and personal connections to a hierarchy of perpetually lived, impersonal, and often more independent organizations. Britain, France, the Dutch Republic, and the United States developed methods for creating perpetually lived organizations within the state. Creating perpetually lived organizations and the institutional means to support them was part of what put these countries on the doorstep of a transition by the late eighteenth century.

The history of formal business incorporation is well known, and we examine it more closely in Chapter 6. The first British business incorporation was the Russia Company, formed in 1553 (Scott, 1951). In typical natural state fashion, the company was closely held by powerful friends of the government. The use of charters in Britain grew slowly in the sixteenth and seventeenth centuries. The Russia Company was followed by the Africa Company, the Merchant Adventurers, and the East India Company. The Virginia Company was chartered in 1606 to establish the first permanent British colony in North America. Eventually all the North American colonies received charters. The Dutch chartered their own East Indies Company, the VOC, in 1597 to exploit opportunities in the Portuguese-controlled Asian trade, the New Netherlands Company in 1614 to exploit North America, and the West Indies Company in 1621. In France, Colbert created the state-subsidized French East and West Indies Companies in 1664, plus a Compagnie du Nord (established in 1669) to compete with the Dutch in the Baltic. French companies existed before 1664, but the sources for French business corporations are more difficult to access.15 In competition with Spain and Portugal (and each other), the British, Dutch, and French created colonial empires by licensing “merchants to organize colonial rule” (Tilly, 1992, p. 92).

These corporations were natural state entities created in response to changing economic opportunities. The corporate charters granted extensive and exclusive privileges to these companies in return for fiscal and (occasionally) military support for the government. The charters also explicitly recognized the sovereignty of the state in the expanded territory colonized by the corporations. The grant of a corporate charter represented an explicit political manipulation of economic access, creating exclusive privileged rights to resources and activities. Every corporation received a charter from the hand of the king or the action of a legislature. Each charter was considered separately; no hint of open access to incorporation existed yet.

15Dutch and French corporations are discussed by de Vries and Van der Woude (1997, pp. 382–410).