Global Policy Forum

by Murray Dobbin

THE HUGE TRANSNATIONAL CORPORATIONS (TNCS), the corporate supercitizens, have redesigned the planet and its economic system. The political elites of the developed world and the institutions they control have been complicit in this transformation. They have implemented an enormous transfer of power from government – that is, from citizens – to corporations. The media, corporate think-tanks, political parties, universities and other institutions that we created to serve and even define civil society have instead betrayed it.

We are so accustomed to corporations and their power that we forget that they are our creations. Governments have passed, and continue to pass, laws that give corporations their legal right to exist and behave the way they do. They are not aliens amongst us, created by forces beyond our control. To be sure, corporations behave as virtual aliens, demanding the rights of citizenship while refusing the responsibilities. But it is citizens, through governments, who have created them and allowed them, bit by bit, to become what they are. And it is citizens who can, if they choose, change the laws to remake corporations and remove the citizens' rights they enjoy.

At its root, democracy is a constant struggle for rule by the majority. Just saying those words implies what we instinctively know: Most of the time, it is a minority that rules. The increasing domination of huge corporations, the advent of so-called globalization, is just the current expression of the historic contest between social classes over the distribution of wealth and power.

As citizens, we are faced with a crisis greater than any since the Great Depression, and there are good reasons to believe this one is far greater. The consequences of not accepting the challenge of this crisis will be catastrophic. We have no choice. Either we change the world by becoming active citizens or we watch our world descend into a barbarism that is inherent in the amoral nature of transnational corporations.

GLOBALIZATION IS ONE OF THOSE WORDS (LIKE DEFICIT) so loaded with ambiguous meaning, so packed with propaganda value, and so symbolic of modern-day angst that it carries with it the whole story of our current social and economic life. So much of what causes our anxiety about the economy, social programs and the future of our children is encompassed by it. The dictates of the "global economy" imply that we simply have to accept all the misery, as if there were some uncontrollable source of the decline of the civil society of which we are all a part, regardless of social class.

Globalization is also conveniently class-neutral and effectively obscures the fact that what we are really talking about is the power of capital that is increasingly concentrated in the hands of transnational corporations. Globalization is no more a "natural" phenomenon than electronic banking. Dissect it and you find that it has a history consistently of thousands of decisions, some unconsciously contributing to the whole and others explicitly creating the conditions for the advance of the global economy and the transnational corporations that direct it.

The sheer power of the TNC today is breathtaking. American researchers Sarah Anderson and John Cavanagh, in their book The Top 200: The Rise of Global Corporate Power, give graphic evidence of the economic power of TNCs. Of the 100 largest economies in the world, 51 are now corporations. Wal-Mart, No. 12 on the list – Canada ranks No. 8 – is larger than 161 countries; in other words, its gross revenue is greater than the total wealth, or gross domestic product (GDP), of any of these 161 countries. General Motors is larger than Denmark, Ford is bigger than South Africa, and Toyota surpasses Norway. The largest 10 corporations had revenues in 1991 exceeding the combined GDPs of the 100 smallest countries. Put another way, the 200 largest corporations have more economic clout than the poorest four-fifths of humanity.

But while the Top 200 have sales that account for 28.3% of the world's GDP, the percentage of jobs they represent is minuscule in comparison. Out of a worldwide paid workforce of approximately 2.6 billion, the Top 200 TNCs employ 18.8 million, less than three-quarters of 1%.

When just five firms control more than half of the global market, economists consider that market to be highly monopolistic. The Economist recently listed 12 industrial sectors that demonstrate this highly monopolistic pattern. In consumer durables, the top five corporations control 70% of the global market; in the automotive, airline, aerospace, electronic components, electrical/electronics and steel sectors, the top five control more than 50%. Other sectors show equally strong monopolistic tendencies, including oil, personal computers and media, where control of more than 40% of the respective world markets rests with five or fewer corporations.

Monopolistic markets are nothing new; they have existed in developed countries since the 1970s. In the United States in that decade, one to four firms controlled 75% or more of the market in more than a dozen product areas. In Canada in 1991, according to Allan Engler in Apostles of Greed, "10 non-financial corporations accounted for more than one-fifth of the GDP. These were Bell Canada, General Motors of Canada, Ford Canada, Canadian Pacific, Imperial Oil, Alcan, Chrysler, George Weston, Noranda and Thomson Corp."

Surveying this incredible concentration of economic power, and control of markets nationally and globally, exposes the sheer nonsense of any talk about competitive markets, the free market, the free-enterprise system and the critical economic role of the entrepreneurial spirit.

The notion that the attraction of real investors and businesspeople to market ideology leads them to embrace competition flies in the face of everyday business practice. For flesh-and-blood owners, their worst enemy is uncertainty. And competition embodies uncertainty.

Risk-avoidance at the level of the global corporation absorbs a huge amount of effort because it pays off. And only huge corporations can successfully engage in such activity. When we hear corporate CEOs talk about the need to be ever larger in order to be globally competitive, what they really mean is they need to be gigantic in order to ensure monopoly control of their markets and gain enough clout to engage in the modern-day version of collusion.

The modern transnational corporation has taken the historic efforts to control markets, technology and capital to heights never before imagined. One of the strategies of the supercorporation is to rid itself of as much risk as possible by contracting it out to smaller firms. Instead of internalizing the costs of doing business – the sign of a genuinely free-market economy – the global corporation does its best to externalize them.

Under true competition, thousands of buyers and sellers determined the price of each good. Today, as a result of corporately administered markets, the producer gets less and the consumer pays more than the free market would have dictated. This is true as well in developing countries, where the huge banana plantations of the past have been largely replaced by dozens of "independent" producers, who are in fact dependent on one large buyer that has externalized the risks of production and restricts its activity to processing and marketing.

The Economist magazine has actually suggested that the TNCs, already creating semi-feudal relationships worldwide, go the last step in risk-avoidance: Don't produce anything, just rent out the "right" to produce. Those who have exclusive control over patented technologies would set a price for renting the patent to producers at a price equal to what they would have made if they had done the work themselves.

But the ultimate transnational will look quite different, and the connections already developing between the corporate giants are the likely harbinger of the future. According to management consultant Cyrus Friedheim, the world economy will become dominated by what he calls the "relationship-enterprise." Rather than a single corporate entity, the relationship-enterprise would be a continuously adapting network of strategic and tactical alliances. These alliances could be geographic, technological or within sectors.

Friedheim gives, as an example, talks between the largest aerospace companies – Boeing, McDonnell Douglas, and Airbus, and Mitsubishi, Kawasaki, and Fuji – about a joint project to build a new super-jumbo jet. Such relationship-enterprises would dwarf anything seen today and could easily have revenues exceeding a trillion dollars. The Apple-Microsoft alliance fits this relationship-enterprise model as well. This is the model for the largest corporation in history.

CANADA FEATURES JUST SIX OF THE TOP 500 GLOBAL CORPORATIONS, and none of the Top 200 are based here. (Of course, many operate here as if they were Canadian, accorded, under free-trade and other international agreements, virtually the same rights as Canadian corporations.) But there are home-grown corporations that typify the TNC in their behaviour and lack of any commitment to their home country, its communities or the workforce that built their company.

One of the most prominent Canadian transnationals is Northern Telecom, the crown jewel of the high-tech sector in Canada. It has demonstrated at one time or another in its recent history all of the characteristics of the TNC: the transfer of domestic jobs to low-wage countries, efforts to undermine unions, concerted attempts to arrange its activities to take maximum advantage of tax, environmental, labour and other laws in the various countries in which it operates.

As early as 1975, Northern Telecom had identified the importance to its manufacturing strategy of having low-wage facilities in the United States. The firm shut down a unionized plant it had purchased in Michigan, and shifted the production to a non-union facility in Nashville, Tenn. Throughout the latter stages of its U.S. expansion, Nortel increasingly chose southern right-to-work states for its facilities, simultaneously closing down those in the northern U.S. where its employees were unionized. Between 1984 and 1989, Nortel campaigns decertified five of the seven unionized plants.

If the company's North American workers were denied the benefits of Nortel's tremendous success, its workers in cheap labour locations fared even worse. In Turkey, Northern Telecom fired 1,600 union members after they won a three-month strike. In 1992, the company decertified a union in Britain months after it acquired the company the union bargained with. Over an 18-year period, Nortel worked hand-in-hand with the Malaysian government to thwart five attempts by its employees to unionize.

Nortel's labour relations improved somewhat by 1993, but its restructuring did not stop. In the early 1990s, serious restructuring in the new global mode saw the loss of 3,000 jobs in Canada. The company, which is itself controlled by huge conglomerate BCE Inc., now has 68,000 employees in 15 countries; only 22,000 of those are in Canada. As is the pattern worldwide, it is the shareholder who benefits, and the employees and communities who pay the price. In 1993, when Nortel closed or sold plants in Montreal, London, Winnipeg and Saskatoon, it increased its dividend; it increased it again the next year after announcing the closing or selling of four more plants. During those same two years, Nortel opened plants in two of the most notoriously low-wage, politically repressive and environmentally unregulated countries in the world: China and Mexico.

In 1997, the company announced that it was adding 6,000 jobs in Canada as part of a boom created by the electronics revolution and massive deregulation of telecommunications. But consistent with another Nortel pattern, these jobs were in marketing and development, not the more valuable production jobs. Partly as a result of Nortel, Canada has a large electronics trade deficit, and it has grown by more than 300% in the past decade, reaching $12 billion in 1994.

Nortel has been a huge beneficiary of R&D tax credits, yet uses the research to export jobs abroad. The company has received at least $880 million in federal research and development tax credits. The Canadian taxpayer has subsidized each job remaining at Nortel's Canadian operations (as of 1995) to the tune of $140,000.

Lest it be assumed that Nortel pays back the Canadian taxpayers for the largesse it receives, its worldwide income tax bill in 1994 totalled $35 million, just 0.4% of total revenue. As of 1996, the company owes $213 million in deferred taxes. Even its expansion plans in Montreal in 1997 saw it get a two-year property-tax holiday and reduced taxes for three more years.

Without laws and regulations, Canadians might well be working 60-hour weeks and be subject to extremely dangerous work conditions in order to make a living. The proof seems close at hand. The same chief executives and board members who run our large corporations in Canada also run corporations in Mexico, the Philippines, Indonesia, Thailand and a host of other underdeveloped countries.

Canadian-based Placer Dome consists of four regional business units, in Vancouver; Santiago, Chile; Sydney, Australia; and San Francisco. It also has an international exploration office in Miami, Fla., and a joint-venture office in London, England. The company is infamous for an environmental disaster at the Marcopper Mine in the Philippines. On March 24, 1996, a tunnel from a containment pit collapsed and sent four million tonnes of tailings into the Boac River. The spill was so serious and the culpability of Placer Dome so obvious that the Philippine government charged Marcopper president John Loney and mine manager Steve Reid with criminal gross negligence.

It now appears that all charges will be dropped, however, as Placer Dome has succeeded in persuading the government to quash the prosecution. Charges were "indefinitely" postponed, and then-president Fidel Ramos pointedly "welcomed" Placer Dome to "continue its investment in the Philippine mineral industry."

The same year as the Boac River disaster, the company was being condemned for its environmental record at its joint-venture Porgera mine in Papua New Guinea. That mine discharges 40,000 cubic metres of tailings a day directly into the Maiapam-Strickland River. The waste rock includes heavy-metal sulphides, hydroxides and cyanide compounds, up to 3,000 times the country's legal limits. The Mineral Policy Institute of Australia has documented 133 unusual deaths of villagers along the river between 1991 and 1993.

Placer Dome's operations elsewhere provide little promise of any better treatment of local populations or the environment. In a Mineral Policy Institute news release, Placer Dome was cited for its operations at the Misima gold mine at Milne Bay in Papua New Guinea, where the processing plant dumps tonnes of soft-rock into the oceanic trench next to the island. The institute warns that "the effects of unrecovered cyanide in the Misima's tailings are potentially disastrous." At the proposed Placer Dome mine at Namosi in Fiji, one of the largest open-pit mines in the world, the intention is to engage in "submarine dumping of 98,000 tonnes of tailings daily."

Placer Dome's conduct and its public image-building inhabit different worlds. In its 1994 corporate profile, the company goes on at length about its international record, using such phrases as "living the ethic of environmental responsibility in our business practices," "working towards high standards of environmental protection and safety at all our operations worldwide," "sensitive to cultural differences…striving for harmonious relationships in different cultural environments."

WHAT THE EXAMPLES OF NORTHERN TELECOM AND PLACER DOME DEMONSTRATE is not just that corporations flout ethics and morality when they operate in less-developed countries. Their behaviour extends to participating and co-operating with local authorities to undermine democracy and suppress political dissent. Placer Dome's intervention with president Fidel Ramos, and Northern Telecom's enlisting the Malaysian government to thwart its workers' legal attempts to unionize, reveal a willingness of Canadian corporations to align themselves with reactionary and repressive governments in order to enhance their bottom line.

As corporations become ever larger and the regulations governing them increasingly weaker, we get to see the raw power of capital in ways not observed since the last century. It is an instructive, if frightening, revelation. As transnational corporations use their unprecedented power and global reach to expand their freedom, all large corporations take advantage of that power and that freedom.

As we observe the steady erosion of communities, social programs, the power of workers and environmental and other regulations, we are also observing the true nature of the corporation. As it strips away the features of civil society, the corporate citizen reveals itself as a dangerous fraud. Without the state's strict enforcement of the obligations of citizenship, the corporation is exposed for what it is. It is not a citizen, or anything even vaguely resembling such a multifaceted and complex entity. The corporation is strictly one-dimensional, personifying only the narrowest of characteristics: greed. From The Myth of the Good Corporate Citizen by Murray Dobbin © 1998 Murray Dobbin. Reprinted by permission of Stoddart Publishing.

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