When corporations rule the world

Citation

Korten, D.C. (1998), "When corporations rule the world", European Business Review, Vol. 98 No. 1. https://doi.org/10.1108/ebr.1998.05498aab.007

When corporations rule the world

When corporations rule the world

David C. Korten

The world's power brokers regularly assure us that they are fully committed to economic justice and environmental sustainability, so long as growth and free trade are not compromised. So sacred have economic growth and the expansion of free trade become in our modern culture that only rarely do we find the courage to ask why they should be given precedence over the needs of people and nature. Indeed, why should we consider economic growth and expanded trade to be of any importance at all, except to the extent that they serve people and nature?

When the proponents of growth, market deregulation, and free trade tout their benefits, it is well to bear in mind what some of the most outspoken of these proponents really have in mind. Take this account from a recent issue of Forbes magazine:

As disillusion with socialism and other forms of statist economics spreads ... personal initiative is being released to seek its destiny. Wealth, naturally, follows. The two big openings for free enterprise in this decade have come in Latin America and the Far East. Not surprisingly, the biggest clusters of new billionaires on our list have risen from the ferment of these two regions. Eleven new Mexican billionaires in two years, seven more ethnic Chinese (Forbes, 1993).

Taking a slightly more populist view, Business Week presented its own special report titled "A millionaire a minute", providing this breathless account of what the free market has accomplished in Asia:

Wealth ... Now East Asia is generating its own wealth on a speed and scale that probably is without historical precedent. The number of non-Japanese Asian multimillionaires is expected to double to 800,000 by 1996 ... East Asia will surpass Japan in purchasing power within a decade ... There are new markets for everything from Mercedes Benz cars to Motorola mobile phones to Fidelity mutual funds ... To find the nearest precedent, you need to rewind US history 100 years to the days before strong unions, securities watchdogs and antitrust laws (Business Week, 1993).

Neither article made more than passing reference to the 675 million Asians who continue to live in absolute deprivation. So there we have it. In the eyes of two leading business journals, economic success is about creating millionaires and billionaires through the denial of workers' right to organise independent unions and by giving free rein to securities fraud and the extraction of monopoly profits.

In nearly every country of the world we see growing evidence of social and environmental disintegration ­ rising poverty, unemployment, inequality, violent crime, failing families, and ecological degradation. Contrary to conventional wisdom, our obsession with economic growth has been an important contributing factor.

Aggregate global economic output has increased more than five times since 1950. Most of the benefit of this growth has been captured by the wealthiest 20 per cent of humanity. Furthermore, much of what we measure as economic growth actually diminishes the quality of our lives. For example, expanded use of cigarettes and alcohol increases economic output, both as a direct consequence of their consumption and because of the related increase in health care needs. The need to clean up oil spills generates economic activity. Gun sales to minors generate economic activity. A divorce generates two lawyers' fees and the need to buy or rent and fit out a new home, thereby increasing real estate brokerage fees and retail sales. It is now well-documented that, in the USA and a number of other countries, the quality of living for ordinary people has been declining as aggregate economic output has increased.

Another seldom-acknowledged reality is that the spectacular increase in economic output and material consumption achieved since 1950 has pushed human demands on the ecosystem beyond the planet's capacity to sustain itself. Having reached the regenerative limits of the earth's ecosystem, our continued quest for economic growth accelerates the breakdown of the ecosystem's regenerative capability. It also intensifies the competition for the earth's life-sustaining resources between rich and poor ­ a competition that the poor invariably loose. More and more people are deprived of any means of creating an adequate livelihood and millions of others find their lives consumed by jobs that no longer pay a living wage. Governments seem wholly incapable of dealing with this wanton destruction of people's lives and, as institutional legitimacy declines and the social fabric disintegrates, public frustration is turning to rage.

Though much of the rage has been directed against government, we face far more than a failure of government bureaucracies. We are gripped in a crisis of governance. Born of a convergence of ideological, political, and technological forces behind a process of economic globalisation, power is shifting away from government, responsible for the public good, towards a handful of corporations and financial institutions that are driven by a single imperative ­ the quest for short-term financial gain. This has concentrated massive economic and political power in the hands of an élite few. Because their share of the products of a declining pool of natural wealth continues to increase at a substantial rate, they feel reassured that the system is working perfectly well.

Those who bear the costs of the system's dysfunctions have been stripped of decision-making powers. They are held in a state of confusion as to the cause of their distress by corporate-dominated media that incessantly bombard them with interpretations of the resulting crises based on the perceptions of the power holders. An active propaganda machine, controlled by the world's largest corporations, constantly reassures us that consumerism is the path to happiness, governmental restraint of market excess is the cause of our distress, and economic globalisation is both a historical inevitability and a boon to the human species. In fact, these are all myths. They are propagated to justify profligate greed. They mask the extent to which the global transformation of human institutions is a consequence of the sophisticated, well-funded, and intentional interventions of a small élite, whose money enables them to live in a world of illusion apart from the rest of humanity.

These forces have transformed once-beneficial corporations and financial institutions into instruments of tyranny. Extending its reach across the planet, this tyrannical market is like a cancer, colonising ever more of the planet's living spaces, destroying livelihoods, displacing people, rendering democratic institutions impotent, and feeding on life in an insatiable quest for money. As our economic system has become detached from "place", it has gained ever greater dominance over our democratic institutions. Indeed, our most powerful governance institution is now a global financial system that holds even the world's most powerful corporations captive to its insatiable demands. This financial system and its captive corporations have detached the creation of money from the creation of real wealth and created a system of financial rewards that favour speculators and corporate pirates over those who engage in serious long-term productive investment.

Faced with pressures to produce ever greater short-term returns, the world's largest corporations are downsizing to shed people and functions. They are not, however, becoming less powerful. By using mergers, acquisitions and strategic alliances, they are, in fact, tightening their control over markets and technology. At the same time, by controlling the market access and jobs, they are forcing both subcontractors and local communities into a standards-lowering competition with one another. In addition, by deepening our dependence on socially and environmentally destructive technologies, the related market forces are sacrificing our physical, social, environmental, and mental health to corporate profits.

The problem is not business or the market per se, but rather a corrupted global economic system that is gyrating far beyond human control. The dynamics of this system have become so powerful and perverse that it is becoming increasingly difficult for corporate managers to manage in the public interest, no matter how strong their moral values and commitment.

Take the example of the Pacific Lumber Company in California. It pioneered the development of sustainable logging practices on its substantial holdings of ancient redwood timber stands, provided generous benefits to its employees, fully funded its pension fund, and maintained a no lay-offs policy during downturns in the timber market. This made it a good citizen in the local community. It also made it a prime takeover target. Corporate raider, Charles Hurwitz, gained control in a hostile takeover. He immediately doubled the cutting rate of the company's holding of thousand-year-old trees, clearing a mile-and-a-half corridor into the middle of the forest that he jeeringly named "Our wildlife biologist study trail". He then drained US$55 million from the company's US$93 million pension fund and invested the remaining US$38 million in annuities of the Executive Life Insurance Company, which had financed the junk bonds used to make the purchase.

Driven by the imperative to replicate money, the system treats people as a cause of inefficiency, and is rapidly shedding personnel at all levels. As the industrial revolution reduced dependence on human muscle, the information revolution is reducing dependence on our eyes, ears, and brains. The industrial revolution dealt with the resulting unemployment by colonising weaker countries and sending surplus populations off as migrants to less populated lands. People in the colonised countries fell back on traditional social structures to sustain themselves. With the world's physical frontiers largely exhausted and social economies greatly weakened by market intrusion, few such safety valves remain. Consequently, the redundant now end up as victims of starvation and violence, homeless beggars, welfare recipients, or residents of refugee camps.

It is within our means, however, to reclaim the power that we have yielded to the institutions of money. We could recreate societies that nurture cultural and biological diversity ­ thus opening vast new opportunities for social, intellectual, and spiritual advancement beyond our present imagination. Indeed, all over the world people are awakening to the truth about economic globalisation and are taking steps to reclaim control of their economic and political lives.

Our experience with the real consequences of economic globalisation is providing many important lessons. One such lesson is that economies should be local, rooting power in the people and communities who realise their wellbeing depends on the health and vitality of their local ecosystem.

If we want a market economy that responds to community interests, with a minimum of intervention from big government, then we must look beyond the classic choice between corporate capitalism and state socialism. Instead, we must give serious attention to a third option: to restructuring the system of finance and ownership so that business interests are linked with community interests. In a global economy there is only one stakeholder with the clout to hold powerful corporations accountable to its interests ­ the global financial system. By contrast, locally owned and managed businesses operate within a context of community values and relationships. They create a framework in which business responsibility is more likely to become a natural act of self-interest than a suicidal act of self-sacrifice.

In the name of creating a level playing field, proponents of economic globalisation are rewriting the world's trade and investment rules. What is emerging is a system that gives ever greater freedom to rootless, global corporations to prey on local economies with impunity. It is a prescription for economic, social, and environmental disaster. If we are serious about making business more responsive to the community interest, we must change the trends and promote policies that do just that. Such policies will favour smaller, locally owned and managed enterprises that compete fairly in local markets, provide secure employment, pay a fair share of local taxes to maintain essential public infrastructure, play by local rules, and function as responsible community members.

To favour local enterprise is not isolationist, as the advocates of globalisation maintain. To the contrary, it is essential if we are to move from a life and death struggle for survival in a world in which every person and community is pitted against every other person and community, to a world in which we can engage in co-operative relations with our neighbours, at home and abroad to freely share experiences, ideas, culture, and technology to help all people live a better life in balance with the earth. It is our consciousness ­ our ways of thinking and our sense of membership in a larger community ­ not our economies that should be global.

It is time to assume responsibility for creating a new human future of just and sustainable communities. Once freed from the myth that greed, competition, and mindless consumption are paths to individual and collective fulfilment we can achieve that future. Millions of people are also making an important discovery ­ that life is about living ­ not consuming. A life of material sufficiency can be filled with social, cultural, intellectual, and spiritual abundance that place no burden on the planet.

To bring our lives into balance with the earth, we will need more than changes in our individual lifestyles. We must also restructure our living spaces and production-consumption systems. We must create largely self-contained communities in which most of our transport needs are met through walking and bicycling, our food is grown locally and organically, garbage is recycled as a resource, and energy needs are met largely by the sun.

To reclaim the power that a rogue global economy has usurped from people and communities, we must press for sweeping political campaign reforms to get big money out of politics. We must re-establish that a corporate charter is a privilege ­ not a right. It is issued by government to serve a public purpose, and it is the inalienable right of the sovereign people to withdraw it any time they decide a corporation is not serving that purpose. We must also break up the largest corporations to restore the conditions essential for the efficient function of competitive markets. And we must return to nations and communities the right to set their own economic priorities and to regulate commerce within their jurisdictions.

Having reached the limits of the materialistic vision of the scientific and industrial era ushered in by the Copernican Revolution, we are now on the threshold of an ecological era. Grounded in a more holistic view of the spiritual and material aspects of our nature, this ecological era will be called into being by an Ecological Revolution. This revolution now calls each of us to re-claim our political power and rediscover our spirituality so that we may create societies that nurture our ability and desire to embrace the joyful experience of living to its fullest.