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The face of the enemy: The “Global 500″ corporations

May 28, 2011

I think the biggest problem with protest movements over recent years is that they lack a clear definition of the enemy.  The global frustrations are evident – unemployment, poverty, declining wages and benefits, austerity, rising inequalities, insecurity, small business failures – but who is to blame?  It’s all so vague.  It can’t be just a matter of dictators because we see just as much frustration within the democracies.  It’s great to rid oneself of tyrants of course, but the Egyptians and Tunisians will surely soon discover their lives won’t change too much.  Those in the western democracies already know how little the vote actually means.

Each of the frustrations listed above are economic and this should give us a strong clue that the underlying problem is related to economic power.  We need to put a face on that power, though, if we’re to make any progress in challenging it.  We could simply say that the problem is capitalism and, while I’d agree, it’s still far too nebulous.  Capitalism in the public mind is often associated with an efficient market economy, democracy, and freedom.  What specifically is being opposed?  We have to get more specific.

My view is that the root problem is concentrated economic power.  So I propose we put a concrete face on that power and point our fingers directly at what Fortune Magazine has identified as the “Global 500” corporations.  These are the largest 500 corporations in the world and they were able to accumulate a staggering $23 trillion dollars in revenues in 2010, almost 40% of global GDP!  This is an incredible concentration of economic power that necessarily affects all facets of global politics, income distribution, and life chances.  These companies are clearly the drivers of our current world.  All are global in nature and it’s quite simple to identify their key interests: low income taxes, open global markets, flexible and low cost labor, limited regulation, and small government focused on competition.  And what are the economic policies of virtually every state and all key international economic bodies?  Low income taxes, open global markets, flexible and low cost labor, limited regulation, and small government focused on competition.  We can’t be too far off target when we point to these 500 companies as the concrete face of the enemy.  They, far more so than our governments, are our rulers.

The Global 500 are not economic atoms existing in the free market world of supply and demand curves which we find in our economics textbooks; far from it – they’re oligopolistic titans which have purposely corrupted the very nature of free markets in order to maximize their power.  They each have the power to price as if they were monopolies, have the wherewithal and incentive to corrupt and control political systems, channel extreme wealth to the already wealthy, and, by controlling virtually all important means of production, force vast majorities into modern day versions of dependency.

Economists and other elites often refer to our system as a “market economy” as it evokes impressions of fairness, transparency, and equal exchange.  But we must recognize that the global world system is not at all like that. The great historian Fernand Braudel in his profound “Civilization and Capitalism – 15th to 18th Century” provides an extremely useful historically informed way to look at the true nature of capitalism.  His essential message is that capitalism is very different from the market economy.  He saw the market economy as a distinct “floor” of an economic structure.  On that floor, transparent markets operate within the norms of our textbook theories of supply and demand.  Here we see normal everyday transactions for everyday life; we see the town market.  Capitalism doesn’t operate on this floor, though, but on the next floor up.  It’s hierarchical in character and able to manipulate exchange for its advantage; it’s the world of speculation and big business.  He notes that just a few wealthy merchants in 18th century Amsterdam or 16th century Genoa could throw whole sectors of the world economy into confusion.  This is the “shadowy zone” hovering over the “sunlit world” of the market economy.  “Capitalism is the top floor with its mighty networks, its operations which already seemed diabolical to common mortals.”  It’s an accumulation of power, a form of “social parasitism”, not the true market economy but often its opposite.  “Above the market economy – the anti-market where great predators roam and the law of the jungle operates”.  The capitalist stood in a certain position in society and had the advice and wisdom of peers.  “There was no need to be a genius if one stood among those controlling the system”.  He notes that more capital was used for speculation than innovation and points out that the idea that capitalism is responsible for growth identifies it too closely with the market economy.  Any reinforced form of domination “secretes” capitalism as we see it moving from Venice to Amsterdam to England: it was always the same reality.  Braudel identifies the normal methods of capitalist control – notice how consistent they are to today.  The key is to get outside of the regular market price system; buy grain before it’s harvested, wine before the grapes are picked etc.  Prices are controlled by hoarding or buying directly from the producers so that people are obliged to buy from them.  Prices can be maintained by restricting supplies of commodities and competition can be put out of business by underselling.  All big business is based on monopoly.  Anti-competitive mergers and acquisitions are probably the biggest additional tool used today.

With Braudel’s help, we can see that capitalism today is no different in kind than centuries ago.  But in size and concentration, it certainly dwarfs its ancestors.  We are living under the near complete domination of global capitalism and the direct face we can put on it is the Global 500.

Ownership of these 500 companies is so diffuse that the very term becomes meaningless.  They’re controlled by an executive management team that has virtually no ownership.  The technical owners are mere passive stockholders who normally know nothing about the business and provide none of the normal responsibilities of ownership.  On what basis do they have any rightful claim to the profits of these massive organizations?  On what basis do they have any right to rule over us?

I think one of the best examinations of the large corporation was written way back in 1932 by Adolf Berle and Gardiner Means: “The Modern Corporation and Private Property”.  They note that the economic argument in favor of owners receiving the profits is based on the perceived societal benefits of inducing risk taking and assuring that businesses are operated efficiently.  But since passive stockholders are completely absent from any control, they have no economic justification for reward.  The economic case would actually call for the rewards going to those who are running the business – management.    As Berle and Means point out, the corporation is a different animal to which the old logic of Adam Smith no longer applies.  There’s little economic reason to reward passive wealth and, since they’ve surrendered their responsibilities for control, they have no clear cut right to the profits.

So, what’s the conclusion?  I’d conclude that the stockholders of the Global 500 have no moral or economically valid claim to profits.  The companies should be nationalized and operated in the interests of the broader public by competent managers at significantly reduced compensation.  Operating these giant production machines in the interests of society would almost certainly go a long way in changing the dynamic of poverty and insecurity.  And especially so in light of the monetary insights of Functional Finance and Modern Monetary Theory.  I’d also conclude that concentrated economic power is by its very nature corrosive and should be ended wherever it exists.  While there can be a place for a market economy, there can be no place for capitalism.  Of course individual countries can’t nationalize all these companies alone.  Capitalism has always been a global problem and it can ultimately only be addressed at that level.  But much is still possible at the state level and the fight has to start somewhere.  Clearly identifying the enemy is a critical beginning.

From → Global

4 Comments
  1. Tom Hickey permalink

    Excellent post.

    According to Michael Hudson, who has written about this extensively, there are three aspects to economic rent — land rent, monopoly rent, and financial rent. All three are at the foundation of the modern oligarchy that has replaced the feudal aristocracy. Modern capitalism is feudalism in a different form.

    What is not detailed explicitly is how the global elite has capture the apparatus of the state in liberal democracies, as well as central banks and international financial institutions like the IMF, the World Bank, and the Bank of International Settlements.

    There is now an inevitable clash brewing between emerging nations clamoring for their seat that the table and the oligarchy that dominates the West and rules through neoliberalism, neo-imperialism and neocolonialism.

    This rule is being challenged not only in the developing nations but also in the developed nations, which are suffering for the overreach of the elite, which is not bent on transferring the burden of its mistakes to the people. Expect more riots and social unrest as the people push back. Resistance will be difficult in the age of the national security state and surveillance society. Things are going to get interesting before this is resolved.

  2. Hi Tom,

    Regarding how the elite have captured the state, that’s such an interesting and crucial question. Going back again to Braudel and the history of capitalism, he points out that the power apparatus – the might that pervades and permeates every structure is greater than the state. It’s the sum of the political, social, economic, and cultural hierarchies – a collection of the means of coercion. The state is seldom solely in control. In our world, a reasonable 1st pass simplification would seem to be that economic power is primary and focusing on huge corporations therefore appropriate. But it obviously goes quite deep. The power of the corp is deeper than just economic, its greatest power, especially in the US, is almost certainly cultural.

    The clash from developing nations is real but it would seem the rulers of those nations are just as controlled by dominant capital. The rulers of the BRIC’s, etc. aren’t remotely representing their own people.

    Agree totally that the national security state is a real risk. The world’s never been under such a dominant power. We haven’t seen it fully used yet – we’ll never truly know if we’re in a democracy until we try to meaningfully exercise our authority. Definitely interesting times.

    Jim

  3. dave permalink

    I don’t see a single one of those developing nations doing anything to change anything. Their elites will get a seat at the table, the people will not.

  4. One more thing Tom,

    Agree totally that capitalism is just a different form of feudalism. What’s amazing is that so many of our current serfs – i.e. the workers – have this view of themselves as being free and independent. Truly amazing bit of successful propaganda.

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