Pluralistic: A perforated corporate veil (20 Feb 2026)


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A diagram of a seance in which a table has risen from the ground as two women rest their hands upon it. Below the table, we can see that it is being manipulated by a male figure. The male figure's head has been swapped with Elon Musk's. The background is a slightly desaturated Brazilian flag.

A perforated corporate veil (permalink)

"Capitalist realism" is the idea that the world's current economic and political arrangements are inevitable, and that any attempt to alter them is a) irrational; b) doomed; and c) dangerous. It's the ideology of Margaret Thatcher's maxim, "There is no alternative."

Obviously this is very convenient if you are a current beneficiary of the status quo. "There is no alternative" is a thought-stopping demand dressed up as an observation. It means, "Don't try and think of alternatives."

The thing is, alternatives already exist and work very well. The Mondragon co-ops in Spain constitute a fully worked out, long-term stable economic alternative to traditional capitalist enterprises, employing more than 100,000 people and generating tangible, empirically measured benefits to workers, customers and the region:

https://en.wikipedia.org/wiki/Mondragon_Corporation

Proponents of capitalist realism will tell you that Mondragon doesn't count. Maybe it's just a one-off. Or maybe it's just not big enough. 100,000 workers sounds like a lot, but Amazon has over 1.5m employees and untold numbers of misclassified contractors who are employees in everything but name (and legal rights).

This is some pretty transparent goalpost moving, but sure, let's stipulate that Mondragon doesn't prove that there are broadly applicable alternatives to the dominant capitalism of the mid-2020s. Are there other examples of "an alternative?"

There sure are.

Let's look at limited liability. Limited liability – the idea that a company's shareholders cannot be held liable for the company's misdeeds – is a bedrock of capitalist dogma. The story goes that until the advent of the "joint stock enterprise" (and its handmaiden, limited liability) there was no efficient way to do "capital formation" (raising money for a project or business).

Because of this, the only ambitious, capital-intensive projects were those that caught the fancy of a king, a Pope, or an aristocrat. But once limited liability appears on the scene, many people of modest means can jointly invest in a project without worrying about being bankrupted if it turns out that the people running it are crooks or bumblers. That lets you, say, buy a single share of a company without having to keep daily tabs on the management's every action without worrying that if they go wrong, someone they've hurt will sue you for everything you've got.

Capital formation is a real thing, and limited liability unquestionably facilitates capital formation. There are plenty of good things in the world that exist because limited liability protections allowed everyday people to help bring them into existence. This isn't just stuff that makes a lot of money for capitalism's true believers, it includes everything from the company that makes the printing presses that your favorite anarchist zine runs on to the mill that makes the alloys for the e-bike you use to get to a demonstration.

This is where capitalist realism comes in. Capitalist realists will claim that there is no way to do capital formation for these beneficial goods without limited liability – and not just any limited liability, but maximum limited liability in which the "corporate veil" can never be pierced to assign culpability to any shareholder. The capitalist realist claim is that the corporate veil is like the skin of a balloon, and that any attempt to poke even the smallest hole in it will cause it to rupture and vanish.

But this just isn't true, and we can tell, because one of the largest economies in the world has operated with a perforated corporate veil for nearly a century, and that economy hasn't suffered from capital formation problems. Quite the contrary, some of the world's largest (and most destructive) monopolies are headquartered in this country where the veil of limited liability is thoroughly perforated.

The country I'm talking about is Brazil, which has had limited limited liability since 1937:

https://lpeproject.org/blog/when-workers-pierce-the-corporate-veil-brazils-forgotten-innovation/

As Mariana Pargendler writes for the LPE Project, Brazil put limits on limited liability to address a common pattern of corporate abuse. Companies would set up in Brazil, incur a lot of liabilities (say, by poisoning the land, water and air, or by stealing from or maiming workers), and then, when the wheels of justice caught up with them, the companies would fold and re-establish themselves the next day under a new name.

Like I say, this happens all over the world. It's incredibly common, and even the pettiest of crooks know how to use this trick. I know someone whose NYC apartment was flooded by the upstairs neighbor, who decided that they didn't need to worry about the fact that their toilet wouldn't stop running – for months, until the walls of the apartment downstairs dissolved in a slurry of black mold. The upstairs neighbor owned the apartment through an LLC, which they simply folded up and walked away from, while my friend was stuck with a giant bill and no one to sue.

The limited liability company is the scammer's best friend. In the UK, an anti-tax extremist invented a tax-evasion scam whereby landlords pretend that their empty commercial buildings are tax-exempt "snail farms" by scattering around some boxes with a few snails in them:

https://www.patreon.com/posts/149255928?collection=1941093

When this results in inevitable stonking fines and adverse judgments, the "snail farmers" duck liability by folding up their limited liability company after transferring its assets to a new LLC.

Capitalist realists will tell you that this is just the price of efficient capital formation. Without total, airtight limited liability – the sort that allows for this kind of obvious, petty ripoff – no one would be able to raise capital for anything.

Brazil begs to differ. In 1937, Brazil made parent companies liable for their subsidiaries' obligations, with a system of "joint and several liability" for LLCs. This was expanded with 1943's Consolidation of Labor Laws, and it worked so well that the Brazilian legislature expanded it again in 2017.

Remember back in 2024, when Elon Musk defied a Brazilian court order about Twitter, only to have Brazil freeze Starlink's assets until Musk caved? That was the "joint and several" liability system:

https://www.nytimes.com/2024/09/13/world/americas/brazil-musk-x-starlink.html

As Pargendler writes, Brazil's liability system "represented a distributive choice: prioritizing Brazilian workers’ ability to enforce their rights over foreign capital’s interest in minimizing costs through corporate structuring."

Pargendler (who teaches at Harvard Law) co-authored a paper with SĂŁo Paulo Law's OlĂ­via Pasqualeto analyzing the impact that Brazil's limited liability system had on capital formation and corporate conduct:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=6105586

Unsurprisingly, they find that there has been a steady pressure to erode the joint and several system, but also that some countries (the US and France) have a "joint employer" doctrine that is a weak form of this. Portugal, meanwhile, adopted the Brazilian system, 70 years after Brazil – this transposition of law from a former colony to a former colonial power is apparently called "reverse convergence":

https://lpeproject.org/blog/heterodox-corporate-laws-in-the-global-south/

More countries in the global south have adopted regimes similar to Brazil's, like Venezuela and Chile. Other countries go further, like Mozambique and Angola. Somewhere in between are other Latin American countries like Peru and Uruguay, where these rules have entered practice through judicial rulings, not legislation.

The authors don't claim that perforating the corporate veil solves all the problems of exploitative, fraudulent or corrupt corporate conduct. Rather, they're challenging the capitalist realist doctrine that insists that this system couldn't possibly exist, and if it did, it would be a disaster.

A hundred years of Brazilian law, and Brazil's globe-spanning corporate giants, beg to differ.

(Image: Gage Skidmore, CC BY-SA 2.0, modified)

Hey look at this (permalink)


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Object permanence (permalink)

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Upcoming appearances (permalink)

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Recent appearances (permalink)


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Latest books (permalink)


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Upcoming books (permalink)

  • "The Reverse-Centaur's Guide to AI," a short book about being a better AI critic, Farrar, Straus and Giroux, June 2026

  • "Enshittification, Why Everything Suddenly Got Worse and What to Do About It" (the graphic novel), Firstsecond, 2026

  • "The Post-American Internet," a geopolitical sequel of sorts to Enshittification, Farrar, Straus and Giroux, 2027

  • "Unauthorized Bread": a middle-grades graphic novel adapted from my novella about refugees, toasters and DRM, FirstSecond, 2027

  • "The Memex Method," Farrar, Straus, Giroux, 2027


Colophon (permalink)

Today's top sources:

Currently writing: "The Post-American Internet," a sequel to "Enshittification," about the better world the rest of us get to have now that Trump has torched America (1037 words today, 32992 total)

  • "The Reverse Centaur's Guide to AI," a short book for Farrar, Straus and Giroux about being an effective AI critic. LEGAL REVIEW AND COPYEDIT COMPLETE.

  • "The Post-American Internet," a short book about internet policy in the age of Trumpism. PLANNING.

  • A Little Brother short story about DIY insulin PLANNING

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