MECHANISMS OF CORPORATE RULE

by

Tony Clarke

 

http://www.converge.org.nz/pirm/mechcorp.htm

 

 

In their famous book, Global Reach (1974), Richard Barnet and Ronald Mueller state this: "The men who run global corporations are the first in history with the organization, technology, money, and ideology to make a credible try at managing the world as an integrated economic unit."

 

In the twenty-odd years since these words were penned, transnational corporations (TNCs) have consolidated their power and control over the world. Today, forty-seven of the top one hundred economies in the world are actually transnational corporations; 70 percent of global trade is con­trolled by just five hundred corporations; and a mere 1 percent of the TNCs on this planet own half the total stock of foreign direct investment. At the same time, the new free market and free trade regimes (such as GATT and NAFTA) have created global conditions in which TNCs and banks can move their capital, technology, goods, and services freely throughout the world, unfettered by the regulations of nationstates or democratically elected governments.

 

In effect, what has taken place is a massive shift in power, out of the hands of nationstates and democratic governments and into the hands of TNCs and banks. It is now the TNCs that effectively govern the lives of the vast majority of the people on Earth; yet these new world realities are seldom reflected in the strategies of citizen movements for democratic social change. All too often, strategies are aimed primarily at changing government policies, while the real power being exercised by TNCs behind the scenes is rarely challenged, let alone dismantled. When the operations of TNCs do become a prime target for citizen action campaigns, there is a tendency to employ a rather piecemeal approach to what is a deeply systemic problem.

 

As we approach the twenty-first century, it is imperative that social movements in both the North and the South develop a new politics for challenging the dominant global rule of transnational enterprises.

 

The following overview examines some of the salient ingredients of the new powers that now give corporations effective control over the lives of peoples and nations in this age of globalization and then offers some suggestions as to changing the situation.

 

* * *

 

Over the past three decades, as David C. Korten points out, the world's leading business and governmental elites have been gathering on a regular basis in elite forums, such as the Council on Foreign Relations, and the Trilateral Commission, to develop a consensus on an agenda for globalization.

 

Behind closed doors, these leaders have been able to agree on certain common approaches, which include global economic integration; the "harmonization" of various trade, tax, and regulatory measures; and an economic philosophy that should guide all nations, combined with political strategies to achieve such changes. With passage of the new free trade agreements to augment the Bretton Woods agreement and to establish the World Trade Organization (WTO), this unelected and unaccountable global elite has effectively seized important instruments of governance in the three dominant regions of the world.

 

Regardless of their nominal home bases, Japanese, North American, and European corporations have increasingly become stateless, juggling multiple national identities and loyalties to achieve their global competitive interests. No matter where they operate in the world, these transnational conglomerates can use their overseas subsidiaries, joint ventures, licensing agreements, and strategic alliances to assume foreign identities whenever it suits their purposes. In so doing, they develop chameleon-like abilities to change their identities to resemble insiders wherever they are operating. As one CEO put it, "When we go to Brussels, we're member states of the EEC and when we go to Washington we're an American company too." Whenever they need to, they will wrap themselves up in the national flag of choice to get support for tax breaks, research subsidies, or governmental representation in negotiations affecting their marketing plans. Through this process, stateless corporations are effectively transforming nationstates to suit their interests.

 

THE CORPORATE-STATE ALLIANCE

 

In most of the industrialized countries, business councils composed of the CEOs of the largest corporations and banks have formed new corporate-state alliances. In the United States, for example, the Business Roundtable's two hundred members include the heads of forty-two of the fifty largest Fortune 500 corporations, seven of the eight largest U.S. commercial banks, seven of the ten largest insurance companies, five of the seven largest retail chains, seven of the eight largest transportation companies, and nine of the eleven largest utility companies. In Canada, the Business Council on National Issues has organized itself into a shadow cabinet of the federal government, with CEOs heading up task forces on major public policy issues. Once a policy consensus is reached among the principal TNCs, massive lobbying and advertising campaigns are mounted around key policy issues. Armed with a network of policy research institutes and public relations firms, these business coalitions mobilize facts, policy positions, expert analysis, and opinion polls and organize citizen-front groups for their campaigns to change national governments and their policies. By campaigning for debt elimination, privatization, and deregulation, busi­ness coalitions have effectively dismantled many of the powers and tools of national governments.

 

The fundamental purposes of the new free trade deals (such as GATT and NAFTA) are to enable TNCs and banks to act unhindered by national laws and constitutions. As Carla Hills, chief U.S. negotiator for both NAFTA and GATT, put it, "We want corporations to be able to make investments overseas without being required to take a local partner, to export a given percentage of their output, to use local parts, or to meet a dozen other restrictions." As a result, the "national treatment" clauses in NAFTA and GATT guarantee that foreign investors have the same rights and freedoms as domestic firms. The investment codes in the new free trade regimes ensure that various regulations of nationstates are removed, including foreign investment requirements, export quotas, local procurement, job content, and technology specifications. Through this new kind of constitutional protection, the rights of TNCs take precedence over the rights of citizens in their respective nationstates. In ad­dition, the legislative authority of GATT and NAFTA supersedes the legislation of participating nationstates when matters of conflict arise.

 

The creation of a globalized consumer culture is another key element of the new corporate tyranny. The transnationals want to be able to sell their products with the same basic advertising design in Bangkok and Santiago as in Paris, Tokyo, New York, or London. The prime example is the way CocaCola has become a global symbol transcending all national and cultural boundaries. Through television images and satellite commu­nications, a homogenous set of perspectives, tastes, and desires can be transmitted to all corners of the globe to create a worldwide culture of corporate-friendly consumers. It is now estimated that transnationals spend well over half as much money in advertising as the nations of the world combined spend on public education. In turn, all this corporate ad­vertising tends to forge a connection in peoples' mindsets between pri­vate interests (that of the TNCs) and the public interest. As a result, a global monoculture is emerging, which not only disregards local tastes and cultural differences but threatens to serve as a form of social control over the attitudes, expectations, and behavior of people all over the world.

 

* * *

 

The two main Bretton Woods institutions, the World Bank and the Inter­national Monetary Fund (IMF), have become principal tools by which the new global managers maintain corporate control over nations and peoples, especially in countries of the South. Both the bank and the fund are directly linked to the transnational financial sector vis-a-vis the borrowing and lending ends of their operations. Loan agreements are routinely negotiated in secret between banking and government officials who, for the most part, are not accountable to the people on whose behalf they are obligating the national treasury to foreign lenders. The bank and the fund must be regarded, as one observer puts it, "as governance institutions, ex­ercising power through [their] financial leverage to legislate entire legal regimens and even to alter the constitutional structure of borrowing nations.'' The officials of these organizations often have the power to "rewrite a country's trade policy, fiscal policies, civil service requirements, labor laws, health care arrangements, environmental regulations, energy policy, resettlement requirements, procurement rules, and budgetary policy."

 

In the I980s, the World Bank and the IMF used debt renegotiations as a club to force the developing nations into implementing structural adjustment programs (SAPs) in their economies. Each SAP package called for sweeping economic and social changes designed to channel the country's resources and productivity into debt repayments and to enhance transnational competition. The SAP measures included large-scale deregulation, privatization, currency devaluation, social spending cuts, lower corporate taxes, expansion of the export of natural resources and agricultural products, and removal of foreign investment restrictions. In order to obtain the foreign exchange to service their massive debts, developing countries were compelled to become export-oriented economies, selling off their natural resources and agricultural commodities on global markets while rapidly increasing their dependency on the imports of goods and services. In effect, the SAPs have become instruments for the recolonization of many developing countries in the South in the interests of TNCs and banks.

 

The new World Trade Organization established by the Uruguay Round of GATT is designed, in effect, to serve as a global governing body for transnational corporate interests. The WTO will have both legislative and judicial powers and a mandate to eliminate all barriers to international investment and competition. Under the WTO, a group of un-elected trade representatives will act as a global parliament with the power to override economic and social policy decisions of nationstates and democratic legislatures around the world. At the same time, the world's major TNCs will have a powerful role to play in the new WTO through direct linkages with the trade representatives of participating countries. In the case of the United States, for example, members of the Advisory Committee for Trade Policy and Negotiations include such cor­porate giants as IBM, AT&T, Bethlehem Steel, Time Warner, Corning, Bank of America, American Express, Scott Paper, Dow Chemical, Boe­ing, Eastman Kodak, Mobil Oil, Amoco, Pfizer, Hewlett-Packard, Weyerhauser, and General Motors--all of which are members of the Business Roundtable.

 

SYSTEMS OF CORPORATE RULE

 

The sections that follow describe some of the ways that global systems have been effectively usurped by transnational corporations and banks.

 

Global Finance

 

The globalization of finance markets has been nothing short of revolutionary. The days when national authorities could stabilize financial markets through banking regulations, reserve requirements, deposit insurance, limits on interest rates, and the separation of commercial and investment banking are all but gone. In country after country there has been a massive deregulation of finance and mergers between commercial and investment banking. In addition, TNCs are now bypassing banks altogether and issuing their own commercial paper. Information technology has transformed global banking to the point where $2 trillion is transferred every day around the world. Electronic transfer systems make more than 150,000 international transactions in a single day. The speed and frequency of these transactions--from Malaysia to Toronto to New York to Miami to the Cayman Islands to the Bahamas to Switzerland--makes the money trail difficult to trace, let alone regulate. But this deregulated, global finance market has become fragile and unstable to the point where a financial shock in one country (such as Mexico) can dramatically upset financial markets in other countries before national authorities have a chance to intervene. Unless radically new regulatory measures are introduced, the fiscal policies of national governments will not only be dictated but also threatened by a volatile global finance system.

 

Global Industrial Production

 

As the auto, electronics, textile, and clothing industries have outgrown their home countries and shifted their production and supplier operations off-shore to independent contractors, the "global factory," coupled with a radically new international division of labor, has emerged. With the globalization of production networks, transnational manufacturing firms can quickly move their operations around the world, in search of cheap labor, more profitable investment opportunities, and freedom from the demands of unionized workers. In the auto industry, Ford and GM have forged strategic alliances with Mazda and Toyota to produce for each others' markets, while in other industries, companies such as Nike and Schwinn have begun to shift from manufacturing to designing, merchandising, and distributing. The new global factory has resulted in a dramatic loss of manufacturing jobs in the industrial North (the United States, Japan, and Europe) as manufacturing companies move their production to low-wage, tax-free countries in the South. Increasingly, workers around the world find themselves lumped together in the same global labor pool to the point where exploitation in Guatemala, Malaysia, or China is felt as wage competition by workers in London, New York, or Montreal. While the staggering wage gap between workers in the North and the South has begun to narrow, there is a very real danger that the forces of global competition will drag workers everywhere down to the lowest common wage standards.

 

Global Product Distribution

 

In Global Dreams (1994), Richard Barnet and John Cavanagh describe the global supermarket that is transforming agricultural production through­out the world while undercutting the capacity of nations to meet the basic food needs of their populations. Transnational food corporations are demanding an end to the system of agricultural subsidies, regulation, and protection that has maintained a relatively cheap food policy in the indus­trial North. At the same time, poor countries in the South that were once selfsufficient in food but are now desperate for foreign exchange to pay down their debts are forced to turn over valuable agricultural lands to transnational agribusinesses and to convert to cash-crop production while importing food products to feed their own peoples. "Export or die," is the message, but "export and die" is the reality. The introduction of biotech production methods--laboratory-produced vanilla, bioengineered celery, freeze-resistant flowers and tomatoes, and Bovine Growth Hormone for cows, combined with long-distance food transportation--pose further threats not only to the livelihood of traditional farmers in poor countries but also to the quality and safety of food products in general. Meanwhile, the giant food corporations- General Foods, Kraft, Pillsbury, Philip Morris, Del Monte, President's Choice, Procter and Gamble, Pepsico, and others--have merged their operations and expanded their marketing strategies on a global basis. National authorities are also finding it increasingly difficult to maintain adequate food inspection at the border, especially for the massive imports of fruits and vegetables, thereby requiring expanded use of ozone-depleting chemical fumigants such as methyl bromide.

 

The corporate dream of turning the whole world into a global shopping paradise is also near at hand. Not only have CocaCola and Marlboro become universally recognized brand names through massive corporate advertising, but global retailers such as Procter and Gamble, Philip Mor­ris, RJR Nabisco, Kellogg, General Motors, Sears, Unilever, Pepsico, Nestle, and McDonalds have been spending billions of advertising and promotion dollars each year to create a steadily expanding global market based on mass consumption. The strategy is to sell the same things in the same way everywhere with little or no regard for local customs, tastes, or cultural or religious differences. Giant retailers such as Wal-Mart have led the way with development of a chain of superstores designed to sell the largest range of retail consumer goods (food, clothing, hardware, furni­ture, pharmaceuticals, and so on) in cities and towns throughout North America. Using a variety of tactics ranging from low-wage part-time employment, misleading advertising, predatory pricing, competition law vi­olations, and coercive sourcing from suppliers, Wal-Mart has managed to force local merchants out of business and, in some cases, create ghost towns. Now the most aggressive giant retailer in the world, Wal-Mart has plans to expand its operations into parts of Latin America, Europe, and Asia.

 

Resource Control

 

Transnational resource giants such as Exxon, Mitsubishi, Texas Gulf, Shell, Rio Tinto Zinc, and Alcan and a host of energy, mining, forestry, and hydro corporations have expanded their operations to the four corners of the earth, posing serious threats to the environment by causing massive oil spills, reversing river flows, flooding huge land tracts, depleting vast forest areas, eliminating fish stocks, and destroying vegetation and wildlife. The only thing new about this is the new atmosphere of deregulation in areas such as environmental protection. The resource and energy codes built into NAFTA and GATT are designed to accelerate the rapid development and export of natural resources. Moreover, "the export or die" demands of the IMF mean that poor countries with resource-based economies have no choice but to open their doors to transnational resource companies without regulation or environmental protection. Rapid exports not only accelerate the depletion of nonrenewable resources but greatly intensify the global demand for supplies of fresh water that are now being targeted by TNCs. Add to this the persistent destruction of the last rain forests plus the continuous dumping of hazardous wastes into the ecosystem by companies such as Union Carbide, Dow Chemical, and Du Pont. It leaves little wonder why the world is on the verge of an ecological holocaust.

 

Banking, Insurance, Education

 

Transnational corporations are also rapidly taking control of basic services such as health care and education, which have been the public responsibility of governments in most countries. Through a series of vertical and horizontal mergers, a system of large-scale health care corporations is emerging. In the United States, the major drug companies such as Eli Lily are merging with health insurance industries such as PCS for the takeover of hospitals, pharmacies, free-standing clinics, nursing homes, and doctors' practices. The world's largest profit-oriented hospital companies, Columbia and Health Trust, have merged to form a giant health care corporation with sales exceeding that of Eastman Kodak or American Express. In a deregulated global economy, these new health care giants are poised to swallow up pieces of the public health care system in countries such as Canada, where there is enormous pressure to privatize. At the same time, TNCs are also invading the education system. In the United States, organizations such as the Business Higher Education Forum and the New American Schools Development Corporation (which funnels corporate finances into profit-oriented elementary schools) are composed of TNCs such as AT&T, Ford, Eastman Kodak, Pfizer, General Electric, Heinz, and many others. Companies that sport household brand names such as Coca-Cola, Pepsi, McDonalds, Burger King, and Procter and Gamble are also directly involved in developing curricula for schools along with advertising promotions to help kids grow up corporate.

 

Patenting of Life Forms

 

While government regulations over TNCs are being dismantled in countries all over the world, the monopoly rights of the transnationals over information and technology are now internationally protected under the intellectual property rights components of GATT. Moreover, the interna­tional patent right protection has been extended to genetic materials, including seeds and natural medicines. The patenting of life forms allows TNCs to secure widespread control over genetically engineered organisms, from microorganisms to plants and animals. Worse still, transnationals are now able to obtain monopoly rights over genetic research, plus any products derived from that research, concerning an entire species. The W. R. Grace Corporation, for example, through its subsidiary Agracetus Inc., has secured a U.S. patent on all genetically engineered or "transgenic" cotton varieties (1992)and a European patent on all transgenic soybeans (1994). In addition, it has applications pending in other countries including India, China, and Brazil, to take control of 60 percent of the world's cotton crop. Under these conditions, farmers who traditionally save seed from one harvest to replant for the next crop find themselves in violation of international patent law. Unless they pay a royalty to the TNC that owns the patented seed, farmers around the world are now prohibited from growing their own seed stocks. Furthermore, there are moves to have these global monopoly rights and patent protection laws extended to include the cloning of human embryos.

 

Cultural Cloning

 

Armed with satellite communications, global entertainment corporations are selling their pop music cultural products all over the world. The target audience of this global entertainment industry is the two-fifths of the world's population who are under the age of twenty. The biggest techno­logical leap in the global entertainment industry came with MTV in the 1980s. By 1993, MTV programs were reaching 210 million households in seventy-one countries throughout the world. Bertelsman's pop music em­pire presently dominates youth markets throughout Europe, North America, and Latin America and is now moving into Asia. Sony, Philips, and Matsushita have also been expanding into these markets.

 

Increasingly, the big six global entertainment corporations are focusing their energies on opening up markets in Latin America and Asia, where the greatest growth potential exists. But this expansion is also being challenged as a new form of cultural imperialism. For the poor countries of Asia, Africa, and Latin America the big six's penetration of transnational sound will choke off traditional music of the local culture and restrict employment opportunities for local artists. At the same time, the global entertainment industry will increasingly generate a homogenized culture that reflects Western corporate values and priorities.

 

NEW BASES FOR SOCIAL ACTION

 

The best hope for countering growing corporate domination lies in the building of social movements in which people reclaim their sovereign rights over TNCs and banks.

 

Most people now feel that they have lost control over their economic, social, and ecological future. This is not only true among the poor majority in the South, following the damage done by massive SAPs, but increasingly among the majority of working, middleclass peoples in the North. For many, the dream of securing a fulltime job, a relatively stable and crime-free community, or a clean environment with a bright future for their children has been shattered. In this climate, the politics of fear and insecurity have become rampant in most of our countries, expressing themselves sometimes as ethnic violence or, more recently, as rightwing citizen militias.

 

Underlying the politics of fear and insecurity is the fundamental question of democracy itself. These conditions, in turn, could create new political opportunities for building social movements to reestablish democratic control.

 

Popular Sovereignty

 

In the building of social movements today, emphasis must be placed on the notion of popular sovereignty as a common base for action. Throughout this century alone, peoples all over the world have fought for the recognition of fundamental democratic and human rights--the right to adequate food, clothing, and shelter; the right to employment, education, and health care; the right to a clean environment, social equality, and public services--and the right to self-determination and participation in the decisions that affect these rights. Together, these basic communal rights, which constitute the core of popular sovereignty, have been codified and enshrined in the Universal Declaration of Human Rights, the International Covenant on Economic, Social, and Cultural Rights, and the International Covenant on Civil and Political Rights.

 

The emergence of the corporate state, however, wherein the reins of democratic governance have been taken over by corporations and banks, has completely disfigured and distorted the responsibilities of the national governments. The moral and political obligations of nationstates to intervene in the market economy have been eliminated in order to ensure that the entire national system--economic, fiscal, social, cultural, environmental, political--functions for the purpose of providing a profitable climate for transnational investment and competition in the new global economy. As the politics of insecurity unfold, however, a brand of rightwing nationalism is likely to arise with new forms of protectionism against immigration and cheap imports for the major TNCs--in other words, protectionism for the powerful. In this climate, social movements must focus their energies on resisting the corporate state and the rise of the new rightwing nationalism. Peoples' energies need to be mobilized around a new social vision of the nationstate in an age of global interdependence, where governments reclaim the power and tools necessary to exercise democratic control over TNCs and banks. In effect, the nationstate must be retooled to serve the people's rights to determine their economic, social, and ecological future. But this new nationalism must be simultaneously carried out in concert with social movements in other countries that are engaged in similar struggles.

 

Citizens' Manifesto

 

In order to build social movements in both North and South that are committed to reestablishing democratic control, a common platform and agenda need to be developed. This could take the form of a common manifesto for citizens of the world, which would include (1) a declaration of the fundamental rights of people to determine their own economic, social, and ecological future; (2) the sovereign rights of peoples over TNCs and banks; (3) the demand that TNCs meet certain basic economic, social, and environmental conditions; (4) the insistence that governments develop and enact new regulatory measures for exercising democratic control over TNCs; and (5) the responsibility of social movements to take whatever forms of action are needed to ensure that peoples' basic rights are upheld and that democratic control over TNCs is maintained. The core of this citizens manifesto would be the spirit and practice of popular sovereignty. Its primary purpose would be to provide social movements in both the North and the South with a common platform for action in dis­mantling the corporate state and challenging the operations of TNCs at local, regional, national, and international levels.