Multinational Corporations (MNCs): Beyond The Profit Motive
A detailed report examining the history, structure and motives of multinational corporations and their excessive influence over both governments and the general public. The report proposes a framework in which commercial activity can be significantly reduced so that corporations can primarily serve the global public good. Written by STWR's Rajesh Makwana.
Multinational Corporations (MNCs): Beyond The Profit Motive
The type of economic enterprise that concerns us in this analysis is the small number of corporations that exert an excessive influence over many aspects of global economic, political and social life. They operate in multiple countries, in all commercial markets and share similar business models, assumptions and structures. The vast majority of corporations are publicly traded and their shares are mainly owned by other corporations, senior board members, a few wealthy stake holders and, indirectly, the public through investment institutions such as insurance companies and pension funds.
These corporations thrive best in an economy where market forces determine the production, price and supply of goods and services. This fact is mirrored in the prevailing attitude to the economy that dominant governments, economists and industrialists maintain. The argument is that centrally planned economies are less efficient and are unresponsive to consumer demand. They argue that to achieve efficiency, government intervention needs to be reduced to a minimum and the democratic, public control of the economy minimized. Thus, free trade and neoliberal policies are being actively promoted through international bodies such as the WTO, World Bank and IMF.
However, this argument is flawed. For a start, corporations are themselves centrally planned economies. Decisions are not open to question within a corporation and absolute control is exercised over production and distribution networks by management. Also, whereas public companies are required to be transparent to public scrutiny, the contracts that corporations have with respect to resource management or service delivery remain a commercial secret, removing an important level of accountability.
Many of these unaccountable corporations now have a greater turnover than the GDP of most countries. Of the 100 largest economies in the world, 52 are corporations and 48 are countries, and these corporations have sales figures between $51 billion and $247 billion. Seventy percent of world trade is controlled by just 500 of the largest industrial corporations, and in 2002, the top 200 had combined sales equivalent to 28% of world GDP. However, these 200 corporations only employed 0.82% of the global work force, highlighting the reduction in employment created by excessive economies of scale. In the US, ninety-eight percent of all companies account for only 25 percent of business activity; the remaining two percent account for nearly 75 percent of the remaining activity. The top 500 industrial corporations, which represent only one-tenth of one percent of all US companies, control over two-thirds of the business resources in the US and collect over 70 percent of all US profits. Thus there is also a disproportionate distribution of financial benefit from economic activity, which clearly does not pass to local communities through opportunity or wages. It is retained instead by a small number of major shareholders of an even smaller number of corporations.
Whereas corporations are based mainly in affluent countries such as the US, the EU, Japan, Canada and Australia, their key markets, productive facilities and many of their resources are based in or extracted from developing countries. According to the International Finance Corporation (IFC), inflows of foreign direct investment to the emerging markets have grown by an average of 23 percent per year between 1990 and 2000. The combined value of stock markets in emerging economies is set to exceed $5 trillion in 2006, and has more than doubled in the past decade.
As corporations grow, they find it economically beneficial (profitable) to operate in multiple countries, seeking out favourable conditions such as low labour costs, fewer regulations and other financial or tax incentives. Many of these multinational corporations can now be described as ‘transnational', as they have ‘globalized' their operations and retain no particular affiliation to any country. This allows them greater flexibility in operative structure and greater leverage over governments who compete for their business.
The convergence of economic power has created a concentration of political influence in society which is reflected nationally and globally. The resulting influence of the private sector has manipulated global economic, political and public thinking and established an unsustainable, consumerist culture.
Below we will examine the various aspects of the global economy in terms of corporate activity and influence. We also outline proposals to scale down and regulate corporate activity, and to ensure that the essentials for life are not commoditized but shared globally according to need. Replacing a significant portion of existing commercial activity with a system of sharing will have implications for many aspects of the global economy.
Part 1 - The True Cost of Corporate Profit
How to Maximize Profits
It is imperative for a publicly traded company to increase its profitability as this increases dividend payouts, stimulates investment and raises the value of its shares on the stock market. The responsibility to generate profit is shouldered by the company directors who answer to the shareholders. Generally however, the average shareholder's power is too diluted to exert any practical influence on company policy, thus the real influence lies with major shareholders such as company executives or other corporations.
Companies that are not publicly traded do not share the same imperative to satisfy shareholders' thirst for profits. They are often (but not always) smaller and have room for a more socially conscious business approach. Of course, privately owned companies face pressure to float on the stock market as they grow in size, as trading their shares publicly generates massive levels of finance which can stimulate growth. However, as Anita Roddick soon realized after publicly trading the Body Shop chain, the legal imperative for growth and short term profits is at odds with most ethically guided business models. Anita Roddik regretted stock market floatation for these reasons, and has now relinquished all remaining ownership in the corporation, having witnessed market forces and the profit motive undermine the business's ethical concerns.
In the cut throat financial market place, a company that is not maximizing its profitability (for example, it may be implementing strict environmental standards that sacrifice profit), is a prime target for an acquisition or hostile takeover by another corporation. The acquirer may have purchased a significant portion of shares and could claim to be able to increase the company's profitability, or may wish to simply dismantle the company for a quick profit. As such, ethically minded corporations find it difficult to sustain their position, and are forced instead to yield to the profit motive. Stock markets applaud when they witness acquisitions and mergers, creating profits for speculators whilst thousands of workers often find themselves unemployed.
As a result of mergers, acquisitions and jobs being transferred abroad (in line with globalized market forces), job losses in affluent countries are common. Between 1980 and 1993, over four million jobs were shed by the largest 500 industrial corporations in the US. Since President Bush took office, two million have lost their jobs and in 2004 nearly one in ten could not find a full time job. The International Labor Organization (ILO) calculates that global unemployment rates are at an all time high. Of the 2.8 billion workers in the world in 2005, nearly 1.4 billion still did not earn enough to lift themselves and their families above the two dollars a day poverty line - the same proportion as ten years ago.
The substantial benefits gained from streamlining operations serve mainly to increase profits, and are channelled into bonuses for directors and CEOs. Chevron's CEO received $37 million in total compensation in 2005, whilst Exxon's CEO received a $400 million pay and retirement package. In the meanwhile the minimum wage in America (£5.15 per hour) is at a 50 year low. Whilst global economic growth remains slow, at around three percent, corporate growth is around four times as high, again reflecting the concentration of financial gain from a global economy led by corporations. In fact, last year the number of millionaires globally swelled to a phenomenal 8.7 million, 5.7 million of whom are based in North America and Europe. In addition, Forbes reported a 15% rise in the number of billionaires since last year alone, virtually all have made their fortune from their involvement in various sectors of industry and are now worth a combined $2.6 trillion.
The other way to keep profits up is by increasing sales. This can be achieved by increasing economies of scale, moving into new lines of production, diversifying activities through acquisitions and mergers, or relocating operations to new countries in search of cheaper labour and favourable economic conditions. This expansion of corporate activity is backed by multi billion dollar marketing campaigns that are effective at promoting unsustainable consumerism and creating demand that would not exist otherwise. Often corporations target new markets in developing countries as Nestle did in the 80's and more recently, the tobacco industry. In these and many other cases, corporations deny any health risks to their products, even in the face of overwhelming scientific evidence, in order to maximize profit. Nestlé's fierce marketing of powdered milk in the 80's caused the deaths of an estimated 1.5 million children through the contaminated water used to make the infant formula.
Nor are human rights observed. Chevron and Coca Cola have been indirectly involved in the violent killings of workers and union officials in developing countries in attempts to suppress workers rights. Instances of kidnappings, torture, discrimination, health violations, fuelling conflicts, privatizing and contaminating local water sources, using child labour and even sex trafficking have all been documented as occurring under the responsibility of the largest corporations. Sweatshops are often used in developing countries by the apparel industry which usually pay negligible wages to under age workers who often work long hours in terrible conditions.
If all else fails, financial accounts can be adjusted to create the impression of profit and growth. This was the case in numerous corporate scandals and the collapse of corporations such as Enron. Its case simultaneously implicated many other sectors of the accounting and banking industry, such as Arthur Andersen and the National Westminster Bank, who were taken in by and facilitated Enron's false accounting, financing and fraudulent activities. Of course the big losers were the 21,000 employees who not only lost their jobs, but their pension plans and savings which were all tied to Enron stock.
Environmental concerns are also secondary to securing profit, and environmental catastrophes are common ‘externalities' (see below) of the business economy. At a time when many of our resources are depleting globally- in particular our fossil fuels, and even regionally-such as water supplies, the profit motive does not encourage restraint or conservation. Logically, a profit making company cannot advise its customers to consume less, as this directly undermines business revenues. In the case of fossil fuels, this simple fact has seen the continual increase in oil consumption that is so dangerously poisoning our biosphere. It is unlikely that alternative energy production will prove more profitable in the near future, and thus quite unlikely that alternatives will be vigorously pursued by profit making companies. In the UK, despite current drought conditions and water usage restrictions imposed upon the general public, Thames Water PLC has declared record pre-tax profits. Meanwhile it has neglected to reduce the 894 million litres a day that is lost through faulty pipes and leakage. A publicly owned and managed water supplier would not be under financial pressure by shareholders and would be able to reinvest profits into infrastructure and conservation.
Corporate profit is exaggerated by what is effectively publicly funded corporate welfare. The package of corporate welfare begins with governments who offer incentives to corporations in order to attract their business, increase their GDP and compete with other nations. National resources that rightfully belong to the public are the first carrots on the stick, and are offered at highly discounted prices to corporations without public consent. Governments even give away valuable common assets at no cost to corporations, such as oil and mineral rights, saving corporations billions of dollars in costs.
In addition, affluent governments pay out huge subsidies to the largest corporations. Government support to farmers in OECD countries totalled $283 billion in 2005, representing 29% of total farm income. Unfortunately, the majority of farmers who own small to medium sized farms do not benefit from these subsidies. 30% of farmers in the US do not receive any of the $26 billion of US subsidies, and over 85% go to only 20% of the largest farms, a pattern repeated in the EU.
Industrialized countries also subsidize corporate exports and agri-business inputs such as energy, pesticides and chemical fertilizers. This encourages energy and chemical intensive production methods that only large scale agri-business can sustain. As a direct result, the number of small farms in the US has decreased from 6.8 million in 1935 to 1.5 million in 1998. In global commodity markets these subsidies mean that producers in developing countries, many of whom produce their goods with more efficiency and less cost than the US and EU, cannot compete with agri-business suppliers. Their livelihoods are destroyed. Market competition is cut throat, valued higher than life itself. Individual cows in Japan receive $8 a day in subsidies alone, whilst half of India's 1.2 billion people live on less than $2 a day. These actions strengthen the market dominance of corporations, whilst marginalizing smaller, community based producers.
In addition, corporations pay much less tax than ordinary people, often registering their headquarters in tax havens. According to the Centre for American Progress "At a time of rising corporate profits, the US Government Accountability Office (GAO) reports that 95 percent of corporations paid less than 5 percent of their income in taxes, and 6 in 10 paid nothing at all in federal taxes from 1996 through to 2000". The corporate share of taxes paid fell from 33 percent in the 1940's to 15 percent in the 1990's. The individual's share of taxes has risen from 44 to 73 percent. At a time of record corporate revenues, the American public is making up the loss in tax revenue through Bush's biased tax regime.
The effect of corporate welfare upon the poorest nations is most disastrous. When local resources and basic goods are controlled by corporations and absentee owners, local industry is curbed, essential services are often unaffordable and profits are repatriated in wealthy countries, bypassing the local economy. Although privatization in developing countries does prove beneficial in certain cases, overall the process resembles economic mercantilism as it is ultimately fuelled by selfish, commercial interest. What is needed is a significant transfer of resources to the global south, not to multinational corporations.
When governments give away public resources, subsidize the largest industries and provide tax incentives to corporations, it usually occurs without the public's knowledge and proves detrimental to their local communities. The price we pay for goods does not include the cost we have already paid through our taxes, the cost to the poorest producers around the world, or the cost to the environment.
Classical economic thinking and accounting procedures are heavily biased against local communities and the environment, as they only reflect financial profit and loss. Maximizing profit means passing more immaterial or long-term costs on to society for them to deal with. This process is known as externalization, and externalities are typically negative social or environmental costs to a community, region or the planet which corporations do not have to account for in anyway. Corporations are compelled to externalize costs wherever possible so that they can increase their profits.
For example, export-oriented industrial agriculture is a major contributor to climate change. Agricultural externalities poison our soil, waterways and atmosphere. And corporations are learning to externalize more efficiently - they may, for example, relocate to countries with lower labour or environmental standards. The negative effect upon society and the environment of these externalities and lower standards are unaccounted for in the cost of their products or their financial reports. In the meantime, consumers are taken in by the illusion of low cost goods and services and they seek out ever cheaper suppliers. However, as the true environmental and social costs of corporate activity are becoming apparent, consumers must realize that they cannot avoid paying for them in one way or another. For example, these costs are paid through aid sent to developing countries (often after climate-change aggravated disasters); through the public money spent on tackling climate change; through the millions spent nationally tackling poverty, inequality, unemployment and other social issues; and through the detrimental effect upon quality of life that results from lower working standards and conditions.
Every year corporations are fined hundreds of millions of dollars as their externalities create serious environmental catastrophes, neglect employee rights and even cause deaths. Examples are plentiful and well documented by countless NGO and civil society groups, and usually concern the most well known and largest corporations. However, mainstream media coverage of these issues is virtually non existent. Take for example Chevron. The majority are unaware that it is guilty of some of the worst environmental and human rights abuses in the world such as the dumping of 18 billion gallons of toxic waste into rivers used for bathing water in the Amazon, devastating the health of the local community.
However, fines for these corporate crimes are negligible in relation to a company's turnover. The likelihood of being fined is often accounted for well before the event. Given the potential financial savings to be gained by violating environmental protection laws and workers rights, the decision to ignore these laws constitute a simple cost-benefit calculation. Worryingly, shareholders cannot be held accountable for these violations as they are protected by their limited liability, and directors and executives successfully plea that they have no direct involvement with the corporate crime committed. Thus the corporate ‘entity' itself is fined, and little incentive to change irresponsible corporate behaviour is provided.
Taking the cost of these externalities into account, Ralph Estes estimated that the public cost of private corporations was over $3 trillion in 1995. His externalities included "workplace injuries, pollution, employment discrimination, consumer rip-offs, corporate white collar crime, tax abatements and all the other instances of corporate welfare, government contracting fraud and creative accounting" all of which have carry an equivalent financial cost to the public. Estes calculations reveal that the corporate claim to efficiency is clearly false - most corporations would not be able to continue without major changes if they bore the full costs of their of their product or service.
Clearly a corporation's pressing need for increased profits comes at too high a cost to the global public. When corporate welfare and the public cost of externalities are taken into account, corporate profit is a meaningless term. Within the current framework, corporate profit must be viewed alongside the social and environmental consequences of corporate activity. This more balanced approach calls into question the global economic system that perpetuates this state of affairs.
Part 2 - The History Of The Corporation
In 16th century Britain, the majority of corporations were charitable institutions licensed by the crown and forbidden to engage in profitable commercial activities. At the time the prevailing business model was that of partnerships of individuals who pooled their resources and acted in the interests of their own communities. Limited liability corporations were generally distrusted by most, including Adam Smith, and due to widespread corruption and fraud, they were at one stage banned for more than 50 years in the UK.
However, a few corporations were deemed to be acting directly in the nation's interest as they engaged in very large-scale, high-risk commercial activities. For example, the Massachusetts Bay Company was chartered by King Charles I in 1638 in order to colonize the new world, and it settled in the United States. This and similar companies, such as the Dutch East India Company and the British East India Company, were a crucial part of the mercantile economic policies practiced by the colonial powers who were effectively running state monopolies in their colonies. These corporations were able to accumulate great financial and economic power through publicly trading shares in their companies.
The US experience of corporate monopolies enforced upon them by their colonial rulers reinforced their dislike of the corporate structure. The public and the courts were acutely aware that corporate bodies could amass undue public wealth and have excessive control over resources, production, the media and the electoral process. As a result, these powers were considered unconstitutional and held in check. Corporations could not indulge in activities which their charter did not specify, and they could not hold stock in other corporations. Some states even banned private banking charters altogether. Legislators, not courts, would cautiously grant limited charters and would hold business owners liable for any harms or injuries to persons or the community. Corporate charters were not granted freely until the mid 19th century. Until then the preferred method of economic organization was unincorporated business associations, cooperatives and publicly funded social services such as universities, libraries and firehouses. Agriculture, manufacturing, municipal markets and warehouses were all promoted and subsidized locally.
This changed prior to the American Civil war, as corporations started to abuse their charters and amassed private fortunes by creating conglomerates and trusts. The advent of the Civil War further increased their wealth and power as they benefited from the massive government spending that usually accompanies military conflict. As they learned to use their economic and political wealth more effectively, modern corporations exerted more and more influence over democratic life in the US. They used their wealth and influence to bribe officials at all levels of government, and influence court decisions. In return, governments handed over public resources such as land, water, timber and minerals, and granted massive financial subsidies. Most worryingly, they began influencing governments and courts, which secured them constitutional rights that were, up until that point, designed to protect people and their civil liberties.
Securing Legal Rights
Corporate lawyers established the precedent of ‘Corporate Personhood' in US law, which granted them the same constitutional rights as ordinary people. They first began manipulating the courts perception of the Fourteenth Amendment, originally designed to protect the civil rights of slaves. They argued that ‘equal protection rights' and ‘Due Process' should apply to corporations as well as people, and in 1889, the supreme court bestowed these rights on corporations under the authority of the Fourteenth Amendment. Thus corporations became ‘persons'. This was a major turning point, allowing corporations to use these new powers to undermine the democratic rights that the constitution originally intended to confer on citizens: the right to a republican form of government, derived exclusively from the consent of the governed.
The enshrining of limited liability in British and US law in the latter half of the 19th century removed the risk factor from corporate business. It allowed investment funds to be obtained by the public trading of company shares, without imparting any legal responsibility upon the shareholders for the actions of the company. One by one, states in the US began encouraging local investment by lifting restrictions that prevented corporations from merging and acquiring other corporations and stock. Soon corporations were allowed to exist indefinitely and have business multiple interests in multiple states.
In 1906, corporate lawyers secured Fourth Amendment Constitutional Rights for their clients, which originally protected people's possessions from unreasonable searches. The corporations used this protection to limit health, safety and environmental investigations in corporate facilities and to keep corporate documents private. This has undermined the public's right to proper heath and safety standards and environmental protection ever since.
Corporations were also granted protection under the Fifth Amendment, preventing corporate powers from being revoked without due process. This allowed corporations to be compensated if they loose revenue from local laws designed to protect citizens.
Under the First Amendment (Freedom of Speech) corporations have been granted the right to influence legislation that is unrelated to their business. As a result corporations have infringed upon the very heart of democracy. States can no longer limit corporate advertising, even when politically motivated, or limit financial contributions to political campaigns.
These, and other changes, have undermined the people's right to treat corporations as subordinate, man-made entities. Corporate rights now directly compete with the public's right to their health, safety and welfare. The courts have chosen not to address this conflict of interest and the undermining of the democratic process. They have instead allowed modern corporations to use these rights to amass greater wealth. Economic power creates political influence, a fact that, given their new protections under US law, corporations use to their full advantage.
As the financial markets flourished in the early 20th century, the US continued on its prosperous path. The concept of private wealth generation soon dominated political and economic thought, and even the shift of emphasis to social concerns during the great depression of the 20's did little to change this view. Soon, the corporate agenda went global, spurred on by the US foreign policy objectives. A window of opportunity opened after the 2nd world war which allowed the US to create favourable trading conditions with a war torn Europe. Although generous assistance was provided through the Marshall Plan, the creation of the Bretton Woods institutions (IMF, World Bank and GATT) secured US dominance of international trade and finance, guaranteeing future US prosperity. The government's tools for global economic exploitation were their faithful corporations.
Dominating the Global Economy
International Trade and Finance
More recently, corporations realized that it was possible to dramatically increase profits by shifting their operations to developing countries where wages, costs and taxes were much lower, and regulation almost nonexistent. This was achieved through the Bretton Woods Trio and free trade agreements.
The World Bank has proven to be profitable to large corporations based in the north, initiating large-scale development programs in poor countries that attract private investment. Foreign direct investment now exceeds $1 trillion per year for projects such as privatization of public utilities and creating banking systems - such projects are clearly safe bets for corporate investors. Again there is a stark concentration of political and economic power here, as 1% of all multinationals own 50% of the total stock of all foreign direct investment.
Whilst the World Bank inflates Third World borrowing for development projects, the IMF acts as the lender of last resort for the balance of payment deficits often experienced by developing countries. The combined result of these actions is massive indebtedness for impoverished countries. To guarantee returns, these same institutions impose structural adjustment programs on borrowing countries to prioritize debt repayment. This proved lucrative for financial corporations based in the north, whose interests the IMF has openly defended. When these corporations made bad loans to developing countries, the IMF provided multi billion dollar bailouts. For example, it bailed out foreign investors in Russia with an $11 billion package and orchestrated a massive bailout of the big banks that made bad loans to Asian countries. In 1995, the IMF gave almost $18 billion to Wall Street investors who stood to lose billions with the peso devaluation.
In 1995, the General Agreement on Tariffs and Trade (GATT) was replaced by the World Trade Organization (WTO), which has worked closely with corporations in world trade negotiations. The WTO membership confers upon its member countries absolute adherence to its regulations and agreements. The agreements specify that WTO trade rules supersede any domestic laws and regulations which arguably restrict trade in any way. In this way, environmental, safety and labour laws are regularly circumvented since they can potentially reduce commercial activity. As a result, the WTO is effectively the world's highest legislative body. WTO rulings have often resulted in national governments being sued by corporations simply for placing national interests above corporate profit. The overall effect is the harmonizing of international regulations and standards to their lowest denominator, an outcome that is welcomed by the multinationals.
Intellectual Property Rights
Under the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, the most insidious corporate victories to date have been the granting of patent protections to all genetic material. In 1980, the US Supreme Court ruled that a particular genetically engineered micro-organism could be patented. This patent right was extended by the US patent Office in 1985 to cover all genetically-engineered plants, seeds and plant tissue, and was further extended to cover all animals in 1987. In 1998 EU countries extended patent laws to cover patents on plants, humans and life forms.
Biotech companies are being snapped up by giant ‘Life Science' corporations in a race to consolidate the food and seeds industry which tripled in size between 1992 and 2002. It was worth around $2,000 billion a year in 2001. By May 2002, there were 1,457 biotechnology companies in the US with a total value of $224 billion. Market consolidation is acute, 70% of patents on staple food crops are held by six multinational corporations who can set the market price for them and block competition for 20 years, thereby monopolizing the market.
Patenting costs can be up to $1 million, ensuring that those in the developing countries cannot possibly compete with the wealthy corporations. The developing world, where 75% of people's livelihoods depend upon agriculture, is the source of 90 per cent of all biological resources. Yet transnational companies based in developed counties hold 97 percent of global patents. Since 1985 there have been 10,778 patents on plants registered in the US. Overall, patent applications at the World Intellectual Property Organization have soared from 3,000 in 1979 to 67,000 in 1997.
Commercially owned genetic varieties of such staples as cotton and soya beans have devastated farming communities in developing countries, who can no longer store seeds without paying corporations for the privilege. There has been widespread opposition to what has been deemed ‘bio piracy'. This is when biotechnology corporations, in their haste to secure financial advantages, patent varieties of plants, seeds and applications that already exist and remain in use by indigenous communities. The patenting of life goes against the sharing of traditional knowledge and the preservation of biodiversity and culture. This precedent is a major victory for corporations. The potential for future profit is almost limitless.
The growth of corporate rights, economic power and political influence has mainly been confined to the past 150 years, although the seeds of corporate domination rest in more distant mercantilist and colonial practices. On the surface, the global political, economic and cultural landscape has changed dramatically over this period, and democracy is in its ascendancy. However, it is undeniable that over the same period of time, the people's democratic right to determine their economic life has been superseded by corporate interests. This consolidation of political power comes at the expense of public authority and continues to stimulate strong opposition globally. It is maintained by the neo-liberal policies being pursued on a global scale.
In line with historic conflicts all over the world, the current battle is between the global public and the corporate and political elite over the control of government. Who decides how people organize and live their lives? Who decides if people go with or without water, food, healthcare or education? These rights must rest with the global public and their representative bodies, and not with a tiny minority who directly benefit from an ideology that shrinks public involvement in these central decisions.
Corporations are not people. They do not exist without shareholders and they exist only for profit. They are incapable of demonstrating the same values that people hold and express within their communities. The US constitution was never meant to represent the rights of economic entities; there is no mention of corporations or other such entities in the constitution. The corporation must not enjoy the protection of the Bill of Rights. In a true democracy, corporations must exist at the pleasure of the people and under their sovereignty.
Part 3 - Corporations, Government And Public Opinion
Democracy vs. Corporate Rule
"The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than the democratic state itself. That in its essence is fascism: ownership of government by an individual, by a group or any controlling private power." President Franklin D. Roosevelt.
The historic relationship of the ruling class towards the public in the US and many European countries has been one of ‘men of best quality' who better understand the needs of the ‘unthinking masses'. As David Hume noted, this mass of people tends to submit their power to the few who rule them surprisingly easily, given that "force is always on the side of the governed". This line of thinking can be traced from philosophers such as Hume and Frances Hutcheson, to President James Madison- one of the principle architects of the US constitution. Madison is known for securing private property rights and stating the importance of "...protect[ing] the minority of the opulent against the majority", a view that was widely held amongst his contemporaries. Over time, this method of government led to the concentration of both political power and wealth in the hands of the few.
Modern corporations were born of this concentration of financial and political clout, to serve the ‘nation's foreign interests'. Corporate power and influence has steadily increased over the past 150 years, with corporations learning rapidly from past errors. Their increasing financial security has enabled them to manipulate the democratic process and dictate government policy very effectively, particularly in the US and the EU. Specific examples are well documented, as are the conflicts of interest that surround politicians in both these countries. The net result is that global economic policy is controlled by a small group of politicians and corporations who have similar financial interests.
The privilege of influencing policy is one that rightly belongs to the public, not the corporate elite who make up less than 1% of the population. But since political influence increases with economic and financial power, the corporate influence in national and global governance structures far outweighs public influence. Thus, democratic process has been the battle ground whereupon the pubic good has fought the corporate agenda. Only when the global public seize back the democratic process and implement appropriate measures to curb corporate influence on the democratic process will the global economy reflect the needs of the majority.
The public's attention in many western countries has turned away from government - a fact born out by the very low turnouts during recent elections in the UK and US. Such national apathy to government is to a large extent the result of the failure of political leadership to sincerely represent the public or to convince the public that they are on their side, fighting for public issues. The resulting consensus within society adds momentum to the private sector's ambitions to roll back government control in favour of market forces. It has also contributed to the strengthening of the ‘partnership' between the government and the business sector, and this has made it even easier for corporations to successfully lobby governmental to loosen their hold on the economy.
Below we examine some of the techniques that corporations use in order to create a global economy that serves their needs and how they have manipulated the government and public thought to secure their financial returns.
The Global Economic And Political Agenda
As mentioned above, the corporations' biggest success has been in standardizing a global, neo-liberal or free market ideology that supports their capitalist necessities. The success of corporate influence on the global economy is measurable, as 70% of global trade is now controlled by just 500 corporations.
In his exhaustive book, ‘When Corporations Rule the World', David Korten identifies the Council of Foreign Relations, the Bilderberg and the Trilateral Commission as key historical institutions that shaped modern economic globalization. These well funded, highly influential and often rather secretive institutions, brought together key government ministers, business leaders, educators and media representatives as early as 1939. Together they created the necessary consensus for economic globalization and shaped public opinion to support the policies that were essential to their goal.
Lobbying at the WTO and Creating a Trade Regime
More recently, the US and other economically dominant countries secured the ultimate competitive advantage by dominating the World Trade Organization (WTO). Although the WTO consists of 149 member countries and it is technically concerned with promoting free trade and standardizing trade rules between nations, it is extremely biased in its operation. The dominant economic powers- USA, Canada, the EU and Japan establish the trade agenda before a round of trade talks. Most countries are not involved in these key decisions. Eighty percent of all corporations reside in the US and EU, and through their lobbyists they enjoy privileged access to the government policy makers who partake in trade talks. Over 30,000 corporate lobbyists are based in Washington and Brussels, vastly outnumbering the US Congress and European Commission staff that they lobby. The vast majority of lobby groups represent business interests who spend billions of dollars annually advocating their main cause, which is currently market access in emerging economies. In the US, corporations and their agencies spent $9.7 billion lobbying Congress between 1997 and 2000, about $4.5 million per year per member of Congress.
On the other hand, many developing countries do not have the resources to send enough, if any, representatives to argue for fairer trade practices that would benefit their own economic development. In addition, WTO negotiations are undemocratic, with the public denied access to, or information about, the discussions. The same is not true of corporate lobby groups such as the European Services Forum (ESF) and many US corporations who can directly affect and have access to Trade Committees. Unsurprisingly then, the interests of rich nations and their corporations form the basis of WTO agreements and directly influence the global political and economic architecture. The corporate bottom line, espoused by the WTO, is to open market access in all countries to resources, services and intellectual property in an endless drive for greater profits.
Corporate links with the WTO as well as with the IMF and World Bank are well documented, and they continue to negotiate access to emerging markets and to secure intellectual property rights. Through the free trade agreements such as NAFTA and WTO agreements such as GATS and TRIPs, the potential for even greater corporate economic dominance is plain. Corporate rights continue to be enforced and essential common resources such as water, genetic material and knowledge are privatized, without regard for the sovereignty of developing countries.
Corporate Links to Government
In his book Captive State (2000), George Monbiot lists 43 individuals who, since the 1997 elections in the UK, have been appointed as ministers, heads, chairmen, and advisors to as many government departments and independent committees. In each case their previous corporate positions (mostly as directors, chairmen or chief executives) and existing links to industry present a direct conflict of interest with their governmental roles. To take a random example, Lord Simon of Highbury, the previous chairman of oil giant BP and vice chairman of the European Roundtable of industrialists (a powerful corporate lobby group) was appointed minister for Trade and Competitiveness in Europe at the Department of Trade and Industry.
As expected, the same conflict of interest exists at the highest levels in the US government, only more openly and to greater detriment. The majority of President Bush's cabinet are millionaires and several are multimillionaires. The President, Vice-President, Commerce Secretary and National Security Adviser all have strong ties to the oil industry. The Bush family had strong ties to Enron-which was President G. W. Bush's largest corporate source of funding. Bush's father, the former President, has exploited his government connections to solicit investments on behalf of the Carlyle Group. Vice-President Dick Cheney amassed some £50m-$60m while he was chief executive of Halliburton Oil Company. Condoleezza Rice was a director of Chevron. Secretary of Commerce Donald Evans held stock valued between $5m and $25m in Tom Brown Inc, the oil and gas exploration company he headed, and the list goes on, highlighting in particular a pronounced concentration of energy connections.
Unsurprisingly, US domestic and foreign policies are highly biased. The securing of Iraqi oil fields is a pertinent recent example. Since the beginning of the Iraq war, Halliburton, the Texas energy giant once headed by Vice President Dick Cheney, has seen its stock price more than triple in value. According to Halliburton Watch, Halliburton's contracts under the Bush administration grew by 600%.
To take a key aspect of the administration's tax plan, Bush's cabinet members, according to one estimate, saved between $5 million and $19 million each as the Bush administration repealed the Estate Tax. This will come at the cost of an estimated $1 trillion dollars over the first 10 years to the public. Those who benefited from the tax cuts represent a fraction of 1% of the American public. It is this same elite section of US citizens that dominate and manipulate the entire political system. As such, a symbiotic relationship is established, with both the government and the corporate elite sustaining each others legitimacy.
This state of affairs was cemented in the mid 1970's when the US Supreme Court extended First Amendment Constitutional Rights to corporations, allowing them to finance elections as an extension of ‘free speech' rights originally intended for people. The 2004 US presidential elections were the most expensive ever; total campaign contributions were $880,500,000. President Bush alone was in receipt of $367,228,801 for his campaign, 74% of which he collected from individuals, as opposed to organizations, businesses or the government. In US elections, money equals publicity. Even in the 2002 Congressional races, where money was much less a determinant of the victors than the 2000 elections, 95% of all House seats and 75% of Senate seats were won by the higher-spending candidate.
Contributions from businesses and political action committees (PAC) are also substantial. The coal industry donated $1.5 million during the 2002 election cycle, mostly to the Republicans, Enron gave $2 million between 1999 and 2002, and Eli Lilly and Company gave over $1 million. In return for these and countless other contributions, President Bush's policies during his administration have clearly favoured the wealthy and corporate interests by awarding lucrative contracts and by adjusting policy and laws. A Blade investigation revealed that since Mr. Bush took office in 2001, the federal government has awarded more than $3 billion in contracts to the President's 2004 Texas fund-raisers, their businesses, and lobbying clients alone. Similar issues have presented themselves in the UK, where donations to political parties by individuals with strong corporate connections have been ‘exchanged' for peerages in the House of Lords.
Money must not be equated with political influence in any country or within global governance structures. Raising massive contributions for campaign spending is only open to those with very strong connections to wealthy individuals. Civil society simply cannot compete financially, and the current state of politics in the US reflects this situation. This misused financial leverage and influence is also at the heart of global governance injustice. The IMF and World Bank operate on a ‘one dollar, one vote' basis, denying the democratic rights of the majority of the world simply because they are not wealthy enough.
Manipulating Public Opinion
Public Relations, Marketing and Advertising
Since the 70's, as public objection to corporate rule and environmental degradation increased, corporations have mounted a successful campaign to increase corporate rights and win back public opinion. This initiative saw the rise of corporate sponsored law firms who fiercely defended corporate interests by, for example, opposing environmental and social standards and regulations. Such organizations were presented as ‘public interest' groups in an attempt to equate public and corporate interests whilst masking corporate involvement. They included environmental and consumer groups that are nothing more than extensions of corporate lobbying in disguise, promoting environmental and commercial deregulation. The academic world was also targeted as corporations funded programs and research in economics and law that favoured neo-liberal ideals. The success of the public relations campaign was guaranteed by their huge financial resources and broad coalition across business groups.
In order to influence policy more directly, conservative policy think tanks were established, such as the Heritage Foundation, the American Enterprise institute and the Cato institute. Influential Business Roundtables made up of CEOs were also established in the 70's, enabling representatives from broad spectrums of industry to actively campaign for the common agenda of economic globalization. Currently almost 200,000 public relations employees in the US actively manipulate public opinion to the advantage of their corporate sponsors.
Far from supplying public demand, corporations actively dictate cultural habits and create demand by influencing the public mind through a sophisticated and well funded combination of research, marketing, advertising and media manipulation. The result is the subtle, but quite apparent, alignment of public and corporate interest. This cultural homogenization of society both nationally and globally is fertile ground for maximizing profit. Whilst levels of unnecessary and unsustainable consumption increase globally, corporate longevity is secured. This non consensual capitalization of the public by the wealthy few is another example of an undemocratic process resulting from excessive financial capability and political influence. The sophistication and effectiveness of advertising and marketing methods is well understood. The ubiquity of the television and the increasing number of hours it is watched, especially by children, is particularly disturbing. In the US, watching TV is the 3rd most time consuming pastime, after sleeping and working. In the US, 75% of commercial television time and 50% of public television time is paid for by the 100 largest corporations. Projected global advertising expenditure for corporations in 2006 is over $427 billion dollars.
As traditional markets are saturated, or public opinion turns against a particular product, corporations, using the same aggressive marketing, shift their attention to developing countries with devastating effect. Nestle is notorious for its aggressive marketing of infant formula in poor countries in the 1980s. Because of this practice, Nestle is still one of the most boycotted corporations in the world, and its infant formula is still controversial. In Italy in 2005, police seized more than two million litres of Nestle infant formula that was contaminated with the chemical isopropylthioxanthone (ITX). In recent years, as public awareness of dire health consequences of smoking tobacco have come to light in industrialized nations, tobacco giants have had to shift their focus to increasing demand in developing countries. The WHO has reported that 84% of the estimated 1.3 billion smokers live in developing and transitional economy countries. A 1994 WHO report estimated that the use of tobacco resulted in an annual global net loss of US$ 200 billion, a third of this loss being in developing countries, stumping development efforts.
The education system provides arguably the most fertile ground on which to influence public opinion. In the US, corporations are making significant in-roads by sponsoring teaching materials and aggressively marketing and supplying junk foods through vending machines and lunch programs. Of greatest concern are corporate sponsored curriculum modules, public education propaganda videos, and grants and sponsorship programs that refocus education to pro-corporate aspects of law and economics. Competition, economic growth and profitability are emphasized- qualities that secure future corporate opportunity. There is a simultaneous shift away from learning the benefits of cooperation, community endeavor and goodwill. Together such tactics effectively skew public opinion from an early age and further enshrine the neo-liberal, corporate agenda. Unsurprisingly there is a trend in the US, the EU and developing countries for corporations to operate public schools for profit, capitalizing on yet another market opportunity.
Corporate responsibility has been the buzz word of late in business circles as environmental and social concerns have become impossible to ignore. Corporations have employed a number of tools to ensure that they are perceived as socially responsible, including pressure groups and sophisticated marketing and advertising campaigns. However, given the strict legal obligation to pursue profits, along with ever mounting market pressure to perform financially, corporate responsibility must be viewed as another public relations exercise. Currently, it seems to be working well, boosting profits by making a company more appealing to consumers who are growing more socially and environmentally mindful. Even highly respected neo-liberal economists such as Milton Freidman agree that these measures would be rejected by the board and the company's shareholders if they didn't positively impact on the bottom line. Corporate PR and loose involvement in socially and environmentally friendly schemes thus involve a simple cost-benefit analysis. All major corporations, particularly those which have the greatest negative impact upon the environment, have repackaged themselves recently as having ‘green' credentials to great effect. The oil giant BP's new green, flower-like logo and recent PR campaign is an excellent example. As a result, BP has successfully managed to shift public focus away from the fact that is one of the world's foremost polluters of the environment and considered by many as one of the top 10 corporate criminals.
There is another aspect to the issue of corporate responsibility. All publicly traded companies exist in a fiercely competitive financial market which ultimately dictates the activities and lifecycle of many companies. In a financial climate where aggressive takeovers are not only common, but are a valid and profitable form of business enterprise, truly socially conscious corporations are at an immediate disadvantage. Such enterprises typically pay very generous wages and employee benefits, locate their facilities in areas where they can make a positive impact on the community and manage their resources sustainably. They believe in more than just profits. Such firms are targets for corporate raiders who can undertake an aggressive buy-out on the basis of windfall payouts to existing shareholders. Once the bid is accepted, the new owners will abandon social responsibility and concentrate on increasing short term profits. This may involve redundancies, relocation to countries with cheaper labour or simply dismantling the company to sell component resources. The loans used to make the purchase are quickly paid off, often utilizing existing employee pension funds, and after a number of years the company may be publicly traded once again, at a higher price.
The point is that the market has its own life; it lives for profit, at all costs. It only shares humane concerns for social and environmental issues insofar as it is profitable to do so. Actions deemed to be cooperative with environmental, health, safety or social concerns, are motivated primarily by self interest, the wider interests of society are a distant second. Legally there is nothing wrong with this; it is what a corporation is designed to do, and what it is bound by through its charter. As such we should not expect anything more from these profit making economic entities, and we should certainly not expect them to harbour any significant environmental or social concern.
This analysis clearly demonstrates that at present, the battle for control of the democratic process is being won by the corporate and political elite. The phenomenon of market forces is becoming more entrenched in every aspect of public life, even influencing our subconscious minds, conscious attitudes and behaviour. As many industrialized nations call for democracy to be spread globally, the economic ideologies they have vested our future in are cancerous to these same democratic principles.
The roll of government as the democratic representatives of the people must be concretely established -in the US, the EU and in global governance structures. True democracy can only be established if the global public is empowered to make decisions that favour cooperation and economic efficiency over competition. This can only occur when corporate rights are scaled down to a level where, once again, corporations act in a limited capacity to serve the public's economic needs, and exist without the ability to influence politics or public life.
Part 4 - Sharing Resources And Restructuring Business Activity
The Case for Sharing
We have described in the above analysis how multinational corporations are largely detrimental to social and economic life. The drive for profit at all cost is perpetuating an economic system that is unsustainable. Corporations do not practice sound environmental husbandry - rather the excessive consumption that they encourage harms the environment. In addition, international bodies such as the WTO strengthen the commercialization process which is gradually homogenizing global society and culture. As corporations exercise their accumulated economic and political power, the principles of democracy and sovereignty are eroded.
Extensive legislation now exists internationally and within countries to protect corporate rights. Therefore, wide-ranging structural and regulatory changes are essential if we are to transform the corporate led economy into one centered on communities that actively participate in political and economic life. The prioritization of community based enterprise and the curtailing of mega corporate entities will inevitably create greater social equity in both the north and south.
However, regulatory measures alone are not enough if the global community wishes to address the global inequality and extreme poverty that exists today. Large swathes of Africa, Asia and South America do not have the resources to compete internationally even if the terms of trade were rendered fair and their debts forgiven. Nor can regulation address important issues of who controls the global commons, on what basis common resources are utilized, how they are distributed globally, or how to ensure their equitable and sustainable consumption. And localizing economic activity would not, by itself, stop commercial interests controlling the allocation of essential resources. Within a localized and regulated economic environment, common resources would still be considered commodities that owners could manipulate for economic advantage over other communities or nations.
Clearly, what is required alongside regulating corporate activity, is a substantial transfer of resources to the majority world to ensure sustained poverty reduction. Yet this cannot be achieved through existing aid or development programs. A fundamental restructuring of the global economy that replaces competitive self interest with cooperation and global equality must be initiated. This new economy would prioritize the securing of basic human needs for all by sharing essential resources, and it would replace the existing aid and development efforts.
Within a system of sharing, resources that are considered essential to life would not be commoditized or controlled by business interests. They could instead be owned by the global public on a shared ownership basis, under the direction of an international and democratic body. Local communities would be cooperating at the national level, and nations would be cooperating internationally, to ensure that all basic needs are met.
Resources would be produced and consumed locally where possible, then shared with the global community. This would enable local communities in the poorest countries to prioritize their self sufficiency and eliminate poverty. As only excess production would be shared, the system would reduce waste and allow a more efficient economy to evolve. The environment would be a major benefactor of such as system as pollution would be significantly reduced.
Sharing in this way will allow countries to maintain their sovereignty and identity, which can facilitate the cultural growth of humanity. Most importantly, global cooperation can foster goodwill amongst nations and sow the seeds for a lasting peace.
The demand for a society based on egalitarian principles continues to grow around the world as a growing number of nations and members of civil society are rejecting the neo-liberal economic model. It is clear that International consensus for change is unlikely to occur without mass public pressure. In addition, the global economy is in a very precarious state, relying on volatile financial markets and driven increasingly by commercial pressures. Many economists and analysts are predicting a global economic failure sparked by a stock market or financial collapse. This possibility is strengthened by the current conflicts over resources, political instability in many parts of world and the declining strength and influence of the US dollar. Such a crisis may turn out be the catalyst for much needed change.
A New Economy: Sharing in Practice
As the system of sharing is implemented, the production and supply of essential resources would be divorced from multinational corporate control. Essential resources would no longer be traded within a biased commercial framework or speculated upon in financial markets. This would considerably reduce corporate activity and involvement in the global economy, and directly benefit the poorest sections of society who would receive essential resources directly through a program of sharing.
Once national needs are met, excess production would be registered on the Global Sharing Network (GSN) and held in trust by the UNCRS on behalf of the ‘donor' country, for meeting needs in other countries. Note that these excesses would not necessarily be ‘exchanged' by countries, unless donors were also in need of other resources that the UNCRS held in trust. Production in excess of global needs would similarly be registered on the GSN, allowing countries to stockpile to pre-agreed levels only where prudent - for example in regions with a high risk of crop failure. Feedback from the GSN database would ensure that unnecessary global production does not occur, and waste is prevented.
The UNCRS framework would ensure that all countries are equally entitled to essential resources and would guarantee their provision even where communities are unable to contribute to the global pool of resources. As extreme poverty is eradicated, communities would find themselves living healthy, educated lives, as all their basic needs are provided for. Then, the UNCRS, in conjunction with other UN agencies, could then assist them in participating in their future economic development.
Eventually the differences in levels of development would be less prominent, as poverty is reduced and productive capacity is increased in developing countries. Once a state of relative equality exists, the GSN should function more consistently and predictably. Major disruptions to the system at that point would include unforeseen natural disasters or droughts. In such circumstances, a well established GSN would prove extremely effective at providing emergency aid such as food and medicine as efficient databases and distribution channels will already be in place. It is intended that the UN Emergency Redistribution Program and the subsequent sharing of resources replace all existing international aid and development mechanisms.
A distinction must be made between net ‘donors' and net ‘receivers' of essential resources. Developing countries would obviously be the main recipients of resources. Highly industrialized countries, in their capacity as primary donors, would have to make sacrifices by reducing their consumption levels. A simpler lifestyle, not based on consumerism is crucial for rich countries to adopt. Current consumption levels are unsustainable; the world does not have enough resources for all countries to develop to the existing western standard. The benchmark must be lower in terms of the quantity of resources we consume, but higher in terms of the quality of life we pursue. This recalibration of values must establish a way of life which all countries can realistically aspire to.
A New Business Framework: Strengthening Local Communities
Sharing the world's resources to meet basic human needs is essentially a global safety net and welfare system. However, the removal of essential goods and services from the existing commercial trading structure does not require abolishing the market-based approach to commerce. To the contrary - the two models of economy can, and must, coexist to form a modern global economy. Traditionally a market-based economy has been acknowledged as one that encourages enterprise, innovation and competition which, on a global scale, can lead to rapid technological advances for humanity. At the local level, it is this enterprising initiative that allows communities to interact economically and enrich each others lives socially. Local business, whether small farms, shops, market stalls or local services are the cornerstone of society around the world and their activity must be strengthened. Networks of small and medium sized privately owned businesses, locally based, are important factors in the creation of democratic communities and cultural diversity around the world.
Sadly, the prevalence in recent years, of huge corporations has significantly impacted on small businesses and communities, and is creating a homogenization of culture throughout the world. These corporations have created huge economies of scale which result in a downward levelling of job numbers, wages and employment standards. The most visible culprits are agri-business, giant fast food chains and retail outlets such as supermarkets. The goods supplied by these companies have quickly replaced local businesses who often supply the same goods with greater levels of nutrition and with negligible social and environmental consequences.
The effects are visible and measurable in society. For example, in the 10 years that Wal-Mart moved to Iowa, in the USA, 7326 local business closed as a direct result. In the UK, the supermarket giant, Tesco, currently opens one new ‘Tesco Express' (a smaller, local version of their larger stores) each day. This results in a local grocer going out of business each day, and 50 local specialist stores close each week. The impact on the developing world is also stark as corporations move steadily into emerging markets. India has recently experienced a surge in contracts to large agri-business firms as the government pursues the high output agricultural policies of the US and EU. This has resulted in entire villages being put up for sale in some states and, according to the National Sample Survey Organization (NSSO), more than 40 per cent of Indian farmers are keen to quit agriculture altogether as a result of these market pressures. In addition, the competitive activity of multinationals has helped to sustain an unfair international trading regime that increases global inequality through biased trade rules and increases global warming through inefficient import and export networks.
It is imperative that these trends are reversed, and that community involvement in economic life is strengthened and safeguarded. If corporations and the free market are to survive and work harmoniously with a system of sharing, far reaching changes need to be implemented that can ensure business activity works to benefit society. The aim should be to ensure that profit making businesses do not infringe in any way on the rights and interests of the local, national or international community.
The size of corporate enterprises should be capped and their activity more stringently regulated. The economic activities of huge multinational corporations must be divested in the local community and small-scale, locally based enterprise should be encouraged. Direct government intervention would be necessary to break up monopolies and large corporations into component parts. These smaller businesses could then be managed at the local or regional level by the public through local cooperatives or government managed initiatives. Divesting economic power in this way would reverse the ‘division of labour' trend by increasing the number of available jobs. Higher wages and better conditions would follow as the new enterprises would not be driven solely by the profit incentive.
Where economies of scale are essential, business enterprises can work in association or as cooperatives. Alternatively, under special license, it may be agreed that certain multinational corporations remain in control of the production/supply of a particular resource. In such circumstances, the corporation may be required to provide the resource at cost price to the government, and it would operate under a strict mandate to serve a specific public interest.
Of course the activity and structure of all corporations, large or small, would be subject to fundamental changes that ensure they serve the public good. Proposals for the necessary regulation of corporations are plentiful. They have been proposed by civil society groups and individuals all over the world. Comprehensive examples can be found in the work of David Korten, as well as the International Forum on Globalization. Below we present some of the most important changes that many organizations, including STWR are urgently calling for.
Specific Changes to Commercial Activity
For all its influence and power, a corporation is little more than an economic entity, whose right to ‘life' is granted by the public, through their governments. The private rights of the corporations that governments protect and strengthen only exist in the first place because they have been granted by governments. These rights must be transformed by these same governments as it is now clear that in their current incarnation, corporations no longer serve the wider public interest.
Below we highlight the technical and regulatory changes that must be implemented.
The Global Economy
Corporations should exist as an integral component of a global economy that prioritizes the provision of basic needs for the global public - economic, social, political and spiritual. The primary objective of the global economy should not be commerce, trade liberalization or economic growth, but the production and distribution of all resources that are essential to life. International consensus must eventually lead to a clear demarcation with regards to what can be commoditized and what cannot be. As all essential resources will be shared, commercial interests should have no direct influence on this aspect of the global economy. Corporations should operate within this new global framework, to serve the remaining economic, industrial and technological needs of society.
As a result of the reduction in corporate activity, it will be possible to progressively dismantle the IMF, World Bank and the WTO. Any remaining functions of these bodies should be integrated with existing UN agencies such as UNCTAD and ECOSOC. More information on this subject can be found here.
Restrictions placed upon governments to regulate corporate investment and finance as part of free trade agreements should also be overturned. Developing countries must also be allowed to protect their infant industries and protectionist measures should be progressively reduced as a country develops economically.
The financial and banking sectors are central to the working of the global economy and they should be strictly regulated. A Tobin Tax on financial transactions is essential, and there should be a graduated surtax on short term capital gains to reduce speculation and stabilize the market. The UN system should be funded by these, and other, global taxes.
Legal Rights and the Sovereignty of the People
Corporations' limited liability and corporate personhood rights must be eliminated - they should no longer have the same rights as human beings, and should instead serve the public. Holding shareholders accountable for any harm caused to the community, employees or the environment would create socially responsible business models.
Corporations should work for the benefit of society in some way. At the very least, society must retain the legal right to revoke a corporate charter and put an end to corporate activity if its actions are proven to be detrimental to society. Revoking their protection by the Fifth Amendment will allow this. The global public's democratic right to determine their social, economic, political and environmental life without interference should be reinforced. A shift along these lines would also create greater participation in the democratic process, locally and nationally.
In the US, corporate protection under the 14th amendment must be revoked, as must corporate right to free speech under the First Amendment. Corporate activity should be transparent; they should not be allowed the protection of Fourth Amendment constitutional rights.
Intellectual property rights legislation should be revised to ensure that information and knowledge are free availability where needed. It should not be possible to patent ‘life' in any form. Exclusive patent rights should be held for a significantly shorter period of time, long enough only to encourage innovation, the recovery of costs and moderate financial reward.
Politics and Democracy
To create a functional democracy, corporations should not be permitted to contribute funding for ‘political purposes'. This includes both donations to political parties as well as corporate donations to ‘non profit' organizations which pose as ‘public interest' groups whilst retaining specific political or commercial objectives. Alongside the ending of corporate donations, the political influence of corporate lobbyists should be substantially reduced to the same level as other organizations and groups. Governments must also end their practice of employing individuals from the private sector to key regulatory or strategic position within government.
To ensure that elections are not determined by the size of a party's budget, they should be publicly funded with a limited, agreed level of funding. The media must also exist without political bias. The best way to achieve this is by preventing corporate media monopolies.
Democratic political participation can be created as a result of a reduction in the number of large multinational corporations, and the break up of their economic and political influence. The global public must replace the corporate elite who heavily influence the political process. This can only be done by strengthening local communities and their ability to determine for themselves their economic and social wellbeing.
Economics and Regulation
Corporate welfare must end. This is best achieved by ending government subsidies and tax exemptions to corporations. In addition, public assets such as land and mineral rights should no longer be given away to corporations.
Competition law must be enforced to ensure that monopolies, mergers and acquisitions are regulated. Restriction also need to be placed on the maximum size a corporation can reach. In unusual circumstances, special charters for exceeding these limits could be granted. Such restrictions will ensure that corporations do not infringe on market principles by making it more difficult for smaller companies to emerge in developing countries. It will also prevent the race to the bottom that has occurred in recent years, as job numbers and employment standards have reduced to the lowest common denominator in order to boost profit.
Full cost accounting should be normal practice all for companies. This will further reduce the reckless approach to profits by ensuring corporations comprehensively bear all costs that they currently externalize. These include environmental, health, safety and social costs. Another possibility is a graduated taxation on businesses depending upon the degree to which they benefit society and the environment.
The regulatory system must be greatly strengthened to ensure that rules are effectively enforced. Regulatory agencies should be able to administer fines which are appropriate to the type and profitability of a business. Where necessary they should be able to hold directors and managers directly responsible and even suspend corporate charters or activities. The ‘precautionary principle' should be the basis of public health, safety and environmental regulations.
Community, Society and Culture
Equity in society can be encouraged through greater pay equality. The wages of senior management and CEOs should not exceed an agreed ratio - for example, 15:1. It is also important that the number of hours worked each week is significantly reduced. This would create more jobs, reduce unemployment levels and foster social, cultural and spiritual growth. This will become possible when resources are shared globally as unnecessary and wasteful productivity will be significantly reduced. The formation of trade unions should be encouraged in industry and their rights protected.
Local government bodies, councils, schools and community groups must be able to have a greater say in how their communities operate socially and economically. They should have the power to hold corporations to account. The establishment of local banks and retail outlets that work in the interests of local communities should be encouraged. The largest banking and retail chains must be divested into the hands of the local communities where they are based. Similarly, affected workers and communities should be given the first option, at preferential rates, to buy out a plant or business before it closes or is sold or merged. In this way, societies can evolve economically, socially and culturally, and participation in the democratic process can be strengthened.
Revoking the corporate claim to the First Amendment constitutional right to freedom of speech will put an end to the corporate domination of public thought. In particular, corporate influence of the public's mind through advertising must be restricted in general, and removed altogether from schools and other places where it can influence young people. Non profit organizations must be required to be transparent, as often they are posing as ‘public interest groups' when in fact they are fronts for corporations created to further their political objectives by influencing the public mind.
The failure of the global economy and the existing aid and development programs to address poverty and inequality is apparent. At the heart of this failure is the competitive, profit driven, self interest of economically dominant nations. Modern, multinational corporations are the embodiments of these traits, and they play a key role in sustaining the status quo through their economic and political influence.
An alternative system based on sharing the world's resources to meet basic human needs can act as a global safety net in a way that the existing economy cannot. Such a system is based on cooperation and can foster good-will between nations. It is essential that a system based on sharing works alongside a reformed commercial sector and local businesses. Together, these two systems can deliver a global economy that meets not only important welfare requirements, but also our need for innovation, individuality and recognition.
Discussions regarding economic systems should not be based on ideologies of socialism or capitalism, but on the practicalities and realities of our modern world. Today, the reality is that thousands will die from a lack of food, water and medicine, because of the failure of the global economy to allow them to have access to these basics. At the same time, a few business people will have earned millions of dollars in wages, thanks to the same economic system. These extremes must be reconciled urgently.
Most classical economists and first world politicians state that any alternative proposal to economic globalization is reactionary and conservative; that it effectively closes the door on a new global reality based on interdependence. Such a view is extremely simplistic. The creation of a global community that cooperates to ensure each nation's wellbeing is the goal of an economy based on sharing, and it represents a fairer model of globalization, based on interdependence, cooperation and equality. Is it not the desire to uphold outmoded systems of commerce and economy, based on competition and selfish, nationalistic foreign policy objectives, which is truly reactionary and conservative?
The need for far reaching reform of business structure and activity is apparent, as is the need for democratic participation to be re-established at the community level. Economic development must be a process which is not imposed from above, but secured locally, and then regionally. For this to occur, all necessary resources should be made available to the majority world who mainly live in isolated, rural communities in developing countries. We have a United Nations General Assembly, the only world body with the potential to bring about these reforms. We also have the technology to implement complex systems that can span the globe, and we have the infrastructure and capability to distribute resources anywhere. All this is required is a shift in priorities; the political will to share what we have.