GLOBAL CORPORATE POWER?
Multinational corporations (MNCs) are regarded by many as the driving force behind the global economy.[109] However, debate ranges over the scale and reach of corporate power.
The sceptical objection covers two points: first, through an analysis of economic data, that MNC activity is largely nationally based, and that at most we are witnessing a period of internationalisation not globaliza- tion,[110] and secondly, that while nation-states may be complicit in any rise of corporate power, they possess the upper hand in terms of their power to regulate corporate activity.[111] It is therefore important to look at the evidence. I will argue that MNCs now exert global influence in terms of their modi operandi, and that the material changes wrought by globalization have resulted in ‘a complex interrelationship between corporate and state power’ which ‘enhances the global power of corporate capital.’[112]Quantitative Analyses of Corporate Power
Globalization-sceptics, like Paul Hirst and Grahame Thompson, ground their case in the observation that corporations remain organised at a national level. In support, they cite evidence such as data on the (relatively low) proportion of cross-border economic activity, the national composition of boards of directors, and the extent to which activities such as research and development, production and sales are still municipally-based (and also the location of assets and profits). They conclude that claims as to the unique globalizing character of the present epoch are overstated.[113] Hyperglobalists, like Kenichi Ohmae, on the other hand, portray a world of ‘footloose’ corporations, detached from any sense of national domicile, able and willing to locate and produce anywhere.[114] It is unnecessary to adopt the latter position to disagree with the sceptics’ position that there is no serious agglomeration of corporate power as a result of contemporary economic processes.[115]
The case that we are experiencing a significant augmentation in corporate power relies on a number of indicators which highlight the increasingly global nature of MNC activity.
Leslie Sklair here makes a helpful distinction between international and globalizing corporations: the former have a strong national base allied to a number of foreign subsidiaries, while the latter are ‘denationalizing from their domestic origin’ and are embracing ‘genuinely global strategies of operation.’[116] His argument is that those who eschew the recent vintage of globalization conflate internationalisation with globalization, and thereby fail to see the significance of contemporary phenomena for the constellation of economic power. This case is supported by analyses which highlight the increasingly transnational mode of organising production and distribution[117] which now make global corporate networks a reality.[118] For example, the car industry has moved from attempts to resist US expansion by promoting ‘national champions’ in the postwar period to the present situation where firms sell 40 per cent of car production abroad.[119] While such networks can be found at other stages of human history, it is claimed that the present globalizing era is ‘greater in scope, reach and intensity,’ not least because of the technological innovations of the digital age which further compress business time and space.[120]Sklair provides some empirical support for the globalizing thesis. Combining analysis of the Fortune Global 500 companies,[121] with interviews with corporate executives, he shows how these companies no longer perceive themselves as ‘national companies operating abroad,’ but as ‘globalising corporations.’[122] For example, Mitsui, originally founded in Japan, stated in its 1996 annual report that its main goal was to expand ‘its presence and scope as a global enterprise.’[123] Sklair notes that the two ‘megatrends’ that were central to Mitsui’s activities were the globalization of market principles, and ‘the advanced global information network society’ that is rendering national boundaries more and more obsolete: in response, it has changed its traditional role of distributing products and services, and is increasingly ‘a global entrepreneur’.[124] He also finds considerable indications of globalizing organisation vis-a-vis utility companies,[125] which, given their historic attachment to national economies, he regards as an important indicator of the global economy.[126] His conclusions are that corporations feel compelled to globalize to succeed in the new economy, and to satisfy a ‘shareholder-driven growth imperative.’[127]
Research has shown how these structural changes have gone hand in hand with a greater reach and intensity[128] of corporate activity.
Some studies highlight the global nature of corporate activity by adverting to levels of foreign direct Investment. For example, UNCTAD’s World Investment Reports67 in the late 1990s reveal that the extent of global corporate investment had ‘reached record levels’68 such that MNC activity could be detected not just in the industrialised west, but in the former Warsaw Pact and throughout the developing world (and significantly in Latin America and East Asia). For Held et al, this data suggests that in the 1990s, ‘few economies were outside the reach of MNC activity and global production networks.’69 Stilpon Nestor, former head of corporate affairs at the OECD, attests to the tighter nexus between corporate activity and individuals, commenting that ‘the role of the private sector corporation as an engine of economic development and job creation has been vested with a new urgency and importance in the last two decades.’70Other studies emphasise the greater intensity of corporate activity since the 1990s. For example, new productive investment doubled from the 1980s to the early 1990s,71 and the number of interfirm agreements rose from 1700 in 1990 to 4600 by 1995.72 Others cast this greater intensity in more dramatic terms. In its 1999 analysis of the world’s leading 200 corporations,73 the Washington-based think-tank, the Institute for Policy Studies, shows that 51 of the world’s largest economies (measured in terms of corporate sales against GDP) are corporations. As a direct comparison, it suggests that General Motors, Royal Dutch/Shell and Sony are bigger than Denmark, Venezuela and Pakistan respectively.74 For some though, these comparisons are inapposite and taken together with the other indicia outlined above, do not make the case for increased global corporate power.75 It is therefore necessary to supplement these more quantitative analyses with a qualitative assessment of global corporate power.
Qualitative Analyses of Corporate Power
The qualitative objection to theses of globalizing corporate power rests in an assertion of the continuing vitality of state sovereignty. On this account, states
67 UNCTAD, World Investment Report 1996: Investment, Trade and International Policy Arrangements (New York, United Nations, 1996); UNCTAD, World Investment Report 1997: Transnational Corporations, Market Structure and Competition Policy (New York, United Nations, 1997); UNCTAD, World Investment Report 1998: Trends and Development, Overview (New York, United Nations, 1998): discussed in Held et al, above n 12, at 243-45.
68 Held et al, above n 12, at 243.
69 Ibid at 244.
70 S Nestor, ‘International Efforts to Improve Corporate Governance: Why and How’ (Paris, OECD, 2001).
71 Held et al, above n 12, at 246, referring to UNCTAD, World Investment Report 1996, above n 67, at 16.
72Held et al, ibid at 247, referring to UNCTAD, World Investment Report 1997, above n 67, at 5-6.
73 S Anderson and J Cavanagh, The Top 200: The Rise of Corporate Global Power (Washington, Institute for Policy Studies, 1999): http://www.ips-dc.org/reports/top200text.htm.
74 Furthermore, ‘the Top 200 corporations’ combined sales are bigger than the combined economies of all countries minus the biggest 10’ (ibid).
75 See, eg, M Wolf, ‘Sleep Walking with the Enemy’ Financial Times, 16 May 2001: http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Art&cid=FT3FVM66SMC&live=true exercise sovereign power in a vertical relationship with their subjects, including corporations. However, it is problematical to conceive of them as either completely separate from, or subordinate to, the state. For example, on the one hand, police responses to anti-globalization demonstrations in Seattle and Genoa seem to demonstrate the continuing reality and presence of state power. However, although the means of organised violence remains (principally) in state hands, the threat of police and military force operates to prevent the world economy destabilising, and so also works to shore up corporate interests.[129] Rather, there is a more complex relationship between states and MNCs, sometimes one of co-operation,[130] at others one of competition,[131] but which in the context of the global economy is best characterised by a significant augmentation in the power of MNCs vis-a-vis nation states.
This is manifested in three principal ways: through influencing state political processes, through taking over the role of the state, and through the institutional framework of the global economy.The State-Corporate Nexus
The state-corporate nexus emphasises the close relations between states and corporations, and the extent to which the latter are implicated in policy making and execution. A growing body of social science literature has highlighted the institutional links between corporations and government. In the age of the global economy, it would be surprising if the views and decisions of the CEOs of multinationals did not have a significance beyond the boardroom. However, it is equally important to emphasise the more formal ways in which corporations are ‘increasingly international political actors.’[132] For example, it is now commonplace for transnational firms to have their own ‘embassies’ and representatives prosecuting their interests, in major centres of political power, such as Washington[133] or Brussels.[134] Also, corporations are mobilising as a political group. David Korten recounts how since the early 1970s, US-based transnational corporations have formed organisations such as the Business Roundtable,[135] which consists of business leaders, including the CEOs of an important cross section of the Fortune 500,[136] and which conduct ‘aggressive campaigns’ to promote their interests in the political process.[137] Similar organisations exist in Canada[138] and the UK.[139]
The most visible link between states and corporations is probably the practice of business donations to political parties. In the US, it is estimated that in the 2000 presidential elections, corporate donations to campaigns through official political action committees totalled around $259.8 million, before including the ‘soft money’ which is given overwhelmingly from the corporate sector.[140] Constitutional law tends to deal with this issue in terms of capping expenditure in the aim of securing greater electoral equality.
However, there is little in the constitutional literature about how corporate donations do impact on the policy-making process. In this regard, research such as Thomas Ferguson’s into the dollars-votes connection in the US adds to our practical knowledge of constitutional law. Ferguson suggests that there is a link between corporate financial support and the direction of public policy. In an extensive analysis of US electoral history, he argues that ‘political changes are usually— but not always—intimately involved with shifts in the balance of power among... large investors.’[141] One of the consequences of this increasingly close relationship is the blurring of business and governmental personnel.[142] While the cash-politics nexus may historically have been associated primarily with the US—not an insignificant phenomenon given the scale of US capital and political power—concerns over the link between big money and politics have grown in other G7 countries, including Italy, Japan, France, Germany and the UK.[143]The Corporate-State Nexus
The corporate-state nexus speaks to how, at the national level, corporations are bypassing states as the direct provider of legislative and executive functions. The argument that corporations exhibit state-like characteristics has been made historically, for example, by highlighting how entities like the British East India Company circulated its own currency and possessed a distinct military capability,[144] or by showing how nineteenth century common law doctrines regarded the corporation as ‘a body politic.’[145] We can update this to the present age by showing that in many areas of social life, decisions of multinational companies are the direct source of political decisions affecting citizens’ daily lives, and not their national governments. Some approach this by focusing on the scale of corporate power as revealed through its abuse,[146] whether by the commission of corporate crimes,[147] health and safety failings,[148] or environmental exploitation,[149] each of which would be a major scandal if carried out by agents of the state. Others document that where the state no longer does or can act as functionary, corporations have acquired ‘quasi-governmental’[150] or ‘quasi-state’[151] roles. Noreena Hertz, for example, has shown how corporations are increasingly taking on the role of the state themselves:
In Nigeria, for example, Shell spent $[US]52 million in 1999 on a social investment programme, building schools, hospitals, roads and bridges, supplying electricity and water to areas that the government effectively abandoned in the early 1980s. In fact, the company now employs more development specialists than the government.[152]
In other cases, corporations are assuming traditional state functions as ‘welfare providers and social engineers, environmentalists and mediators.’[153]
The idea that corporations are major political actors is being accepted within the corporate world through the discourse of corporate social responsibility
(CSR). Sometimes framed as corporate citizenship,[154] this goes beyond the ‘minimal’ requirements of corporate citizenship, ie, compliance with state company law, and also focuses on ‘a complex relationship of interlocking rights and responsibilities [between a corporation and its communities].’[155] Instead of purely economic concerns, this discourse speaks in terms of human rights and environmental standards which have generally been seen as applicable solely to states. This thinking is reflected, for example, in the preamble to the OECD Principles of Corporate Governance, which explains that part of their rationale is that ‘factors such as business ethics and corporate awareness of environmental and societal interests of the communities in which they operate can also have an impact on the reputation and long-term success of a company.’[156] While some doubt the motives behind CSR,[157] these developments are emblematic of how, when corporations effectively act like states, this will raise questions over their political accountability.
The Constitutional Framework of the Global Economy
The third way in which MNCs’ influence over nation-states is made concrete is the establishment of supranational institutions designed by states to police the global economy. One of the paradoxes of the present age is the extent to which states have created the machinery for limiting their capacity to intervene in economic affairs. The most significant development in this regard is the coming into force of the World Trade Organization (WTO) in 1995, characterised by Held et al as an ‘intensification of global economic surveillance.’[158] The WTO represents three important differences from the General Agreement on Tariffs and Trade (GATT) established at Bretton Woods, from which it developed: first, it expands the list of measures included in the GATT agreements;[159] secondly, it contemplates trade now as a global system, rather than simply as agreements between nation-states; and thirdly, it effected an important shift in the guiding criteria for global trade policy, prioritising commercial over other policy con- cerns.[160] In short, the WTO attempts to set down the ‘constitutional structure’ of the contemporary world trading system.[161]
At the heart of the WTO agreements is a powerful dispute settlement process, which has been described as the ‘linchpin’ of the whole trading system.109 Although initiated by states as WTO members, claims under this process are often brought on behalf of MNCs,110 and in practice have been an important outlet for the exercise of corporate political power. The WTO Dispute Settlement Body (DSB), generally regarded as more comprehensive in scope than the previous GATT procedures,111 hears complaints from member states over alleged ‘infringement of the obligations’ under any of the WTO agreements,112 principally that states have erected tariff or non-tariff barriers to the liberalisation of trade. If the DSB finds a state has acted inconsistently with WTO agreements, the primary form of redress is for that member to bring its national law into compliance,113 or face having to pay compensation114 or withdrawal of WTO concessions.115 As such, the WTO can be differentiated from other international agreements in terms of its potentially coercive powers of enforcement. The DSB has not been shy to use these powers: for example, it has ruled that an EU decision to ban US beef injected with (potential carcinogenic) artificial hormones,116 Canadian attempts to give tax advantages to domestically produced magazines,117 and the US federal law that required imported shrimp to be caught by methods which protected sea turtles,118 all illegally restricted free trade as set down in the WTO agreements, and ordered the parties concerned to amend their laws or face further sanctions. In this way, the WTO and its mechanisms effectively open themselves to act as a proxy for the exercise of corporate power.119
Global Corporate Power in Practice
How have MNCs’ extensive resources of political power been utilised in practice? This is not a simple case of translating will into might—MNCs, like other political actors, exist in a mediated world of contradictions, unintended and
109 Ibid at 124.
110 Many actions are raised by the US, where, given its leading role in forging the global economy, symbiosis between state and corporate interests is most pronounced. For example, the challenge to the EU ban on beef which had been treated with artificial hormones (WT/DS 26 and 28), Wallach argues, was brought ‘by the US at the behest of its agribusiness and pharmaceutical interests’ (above n 107, at 179).
111 Jackson,above n 106, at 125.
112 Art 3, para 8 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (being Annex 2 to the Agreement Establishing the World Trade Organization): http://ww.wto.org/english/docs_e/legal_e/28-dsu.wpf.
113 Ibid, Art 22, para 1.
114 Ibid, Art 3, para 7.
115 Ibid, Art 22, para 2.
116 WT/DS 26.
117 WT/DS 31.
118 WT/DS 58.
119 Eg, in the shrimp-turtle case, the main losers under the US Endangered Species Act were the large industrial fishing concerns, who had to bear the cost of adapting boats to meet these standards (small fishing vessels themselves pose relatively little threat to ocean life such as turtles). unforeseen consequences. However, the important point is that in the global economy, public policy becomes amenable to MNC pressure. In some cases, this takes a more direct form: for example, a joint report by the European Bank for Reconstruction and Development and the World Bank Institute measuring governance and corruption in the transition economies of the former Soviet bloc,[162] found that ‘state capture’ in the form of buying laws and policies, was prevalent on the part of transnational corporations in order to secure greater market liberalisation.[163] In the developed world, though, the relationship between states and MNCs is often better expressed by the notion of ‘regulatory competition’ whereby states compete for MNC investment by offering more attractive regulatory regimes.[164] While this does not necessarily lead to the lowest common denominator prevailing in terms of regulatory regimes, it does mean that states no longer have the final say, as there is always the possibility of a lower standard being adopted elsewhere, a contingency which MNCs exploit by sustaining their assault on (to them) unfavourable regulations.[165]
In a number of important areas, it is clear that MNCs have been successful in reorienting regulatory regimes to their interests. Take, for example, foreign direct investment (FDI). This is very much driven by the interests of MNCs, as it lowers costs and raises profits. However, attracting FDI has also become a central plank of states’ policies, through both identifying FDI with economic development and a fear of losing out to other states in the global economy. Accordingly, states have offered a raft of subsidies and inducements to MNCs in the hope of gaining investment.[166] The priority given to winning FDI fuels other important aspects of the corporate agenda: states perceive taxation policy to be a key incentive (or disincentive) to investment, and have reduced both corporation tax and the higher rates of income tax.[167] As well as being of direct benefit to MNCs on their profit and loss sheets, such policies also support their longer term objectives: for example, increasing the share of revenue from indirect taxation shifts the burden of social security more onto employees.[168] For some, these developments are indicative of a general change from a welfare to a competition state,[169] where the discourse of public policy is conducted less in terms of ameliorating the disruptive consequences of market capitalism and more with ‘sustaining and sharpening competitiveness.’[170]
We can find further evidence for the promotion of MNCs’ political interests if we adopt a sectoral outlook. Public health is perhaps the leading example of how all three of MNCs’ resources of political power reorder its provision to serve corporate interests. First, we can see the influence of the corporate agenda on the public policy process—both indirectly, through the general neoliberal thrust to cut public sector functions and costs,[171] and directly, through the lobbying by the private sector.[172] Whatever the source of the impetus, the result, in the developed economies of the west, has been the widespread opening of health services to market forces, for example, through the adoption of mechanisms like the internal market.[173] Secondly, particularly in the developing world, corporations are becoming the direct source of healthcare for many people, whether by setting up clinics, or running Aids education campaigns.[174] Thirdly, where state reforms have not satisfied corporations’ wishes, the WTO framework has provided a further outlet to broaden their influence. For example, the WTO secretariat has argued (in effect on behalf of US healthcare companies seeking to remove the remaining barriers to their full entry to the UK health system) that the General Agreement on Trade and Services (GATS) should extend to health services.[175] Taken together, these actions by MNCs contribute to regarding healthcare in terms of commodification, rather than a universally available public good. We can therefore state that in the globalizing age, corporations can, and do, exercise political power on a breadth and scale that renders the idea that they are subordinate to the state’s sovereign power increasingly untenable.