Corporatism: 21st Century Governing System?
previous version of this essay was initially published on the Indian website “Philosophers for
Change” in 2013 under the title Feudalism, Capitalism, Corporatism? As no permission is required several websites
have re-published the essay. This blog version uploaded in June 2016 includes some
minor alterations which do not change the argument or position found in the
essay argues that the capitalism that Marx and his contemporaries observed
during the industrialisation of the UK was a successor to many earlier systems
of control and extraction from the population by a small dominant group. For
reasons to be discussed the 18th century type of capitalism weakened in the 20th
century and in the 21st century
we are witnessing an attempt to develop
and replace it with a new system. This
attempt is based on the dominance of large corporations which do not behave nor
resemble in any way the “firms” of the earlier capitalist period. It is a
system of interlocking corporations exercising global political, social and
economic power and could therefore be called corporatism. Such a designation breaks with the academic and
intellectual use of the term “corporatism” to indicate a unity between
competing forces. The attempt to create corporatism as a governing system has resulted
in severe social, economic and environmental problems which in turn has led to
an increasing and overt opposition to it.
Century Capitalist Model
1) Not one Land Owner but Many Capitalists
2) The Factory Form of Production
3) Mass of Workers
4) No Reason Given – just Work or Starve
20th Century Capitalist Model
1) The Rise in the Power of the State
2) The Factory Form of Production in Decline
3) The Emergence of “Surplus” Labour
4) The weakening of the Hungriness motive
Century Emergence of Corporatism
1) The Dominant Corporation
2) Finance as a multi-level extraction process
4) The Market as a Justification for Inequality
of the Corporatism
First: resistance to inequality
Second: an underclass reaction
Third: efficiency and imperial dysfunction
Fourth: corporation versus nation?
Fifth: financial uncertainty
Sixth: environmental limits
Seventh: weakness of the market explanation
there is a great deal of protest about so-called free trade agreements. It
seems to have been discovered that these agreements give even more power to
corporations to undermine or control governments. However, the increase of power of the
corporation over governments or the state – elected or otherwise – has been of
concern for commentators and analysts for decades.
that time the real change which has occurred is an increasing power of the
corporations. One of the blocks to successful action to deal with the
super-ordinate increase in corporate power has been the use of the word
"capitalism” to describe a global economic system.
problem is that originally "capitalism" was used to describe an
economic process in which capitalists owned industry, producers competed for
customers, prices responded to demand and supply, wealth could be extracted
from the environment without reserve, wages were determined by a “free” labour
market and government had minimal intervention in the economy,
21st century there is almost no element of that system which remains intact,
monopoly or near monopoly has reduced competition and has likewise manipulated
prices, environmental depletion prevents unrestrained extraction and waste,
banks and finance control industry and, most important, governments have
yielded power to corporations.
essay argues that the capitalism in the classical literature of Karl Marx, Adam
Smith and others - which may have been an accurate description at the time - no
longer exists. Instead we are in a
transition period between forms of classical capitalism and a new form of
politics and economics in which the corporation is the leading power
this new situation is referred to as monopoly-capitalism or
corporate-capitalism but these names do not sufficiently indicate which aspects
of the original of capitalism is included. This new system deserves a new name
which reflects the 200 years of development since capitalism was first
discussed and recognises the changed power structure.
suggested here that "corporatism" would be a suitable name.
essay traces the history of the capitalist model from its origins emerging from
feudalism through to the current situation and the dominance of the
corporation. Finally eight side effects of this transition are identified which
separately or together may prevent the complete emergence of a corporatist
seen as a succession of different ways to empower the Rich
French historian and progressive philosopher Fernand Braudel observed that
throughout history there seemed to be a small minority of people who held power
and wealth, ruled society and exploited the population to sustain their power
and privilege. If this were the case then the human history question of
primordial importance is – “how does this minority do it?”
answer to this question involves power.
That is the concept with which social scientists, and particularly
economists, have greatest difficulty.
Power cannot easily be measured, the holders of power, unlike the weak,
can resist being studied and the structures of power created are designed to
prevent power being revealed. But equally there is always a resistance to power
so that the structure in which dominant power is set also has to deal
such a standpoint the 18th century capitalism as described by Marx is a
successor form of domination and subordination which had historical antecedents
of which feudalism is the most studied. If capitalism is production and
distribution controlled by a small group of specifically identifiable persons,
variously known as bourgeois, capitalists or power elites, then these
conditions have existed since any recorded activity of humanity.
every form of domination is different and certainly the 18th century model of
capitalism was dramatically different from that which preceded it. In the 1700s the European enlightenment
enabled a materialist view of the world. That power could be shown to be
sourced overtly in the ownership of the material means of production meant that
the religious view that power could only be derived from God could be
But there is clearly more to the nature of
power, domination and exploitation than the simple ownership of capital even as
important as it is. Ideology, religious
beliefs, prejudices, history of thought, cultures and ideas are all needed to
create a stable system of domination where a minority extracts from the
majority. Marx relegated such social and psychological forces to the
“superstructure” and argued that they were developed from the struggle to
divide up both the ownership and the fruits of production. Weber, Gramsci, Polanyi, Mumford and now
Bischler and Nitzan in their book Capitalism as Power and many others
challenged this view but they only moved cautiously to the holistic idea that
in order to establish domination and exploitation all aspects of humanity would
have to be used.
1760 is taken at the starting point of the industrial revolution and 2014 as
the contemporary period then three stages of capitalism can be seen. 1760 to
1890 as the development of a capitalist model as described by Marx in 1867; 1867
to 1970 as a hundred years in which major inroads into this model were made and
1970 to the present when further changes occurred which raises the question of
the viability of the early model. For
convenience these are referred to at the 18th century model, the
changes of the 20th century and the emergence of a new model in the
21st century. Periodisation is only to help understanding – history
is a continuum so there should be no substantive arguments about the labels and
periods made only for the sake of comprehension.
is then a need to ask what the users of the idea of capitalism really mean in
terms of power, both currently and historically. Of more importance perhaps is
to consider the possibilities of a move from one form or system to another that
will continue to sustain privileged elites and dramatic differences of material
welfare within populations.
18th Century Capitalist Model
origin of Marx’s description of capitalism was in the 1700s in the United
Kingdom. Capitalism was then said to
emerge at the same time as industrialism.
Any attempt to disentangle the two is difficult. But there is some agreement that
industrialisation emerged before capitalism which means that industrialisation
could have well been the resistance to
feudalism but which then later became captured by capitalists controlling the
very means by which feudal lords were challenged. This observation is important because it
indicates how systems of resistance are transformed into instruments of power.
was new in 1700’s industrialisation was the form of domination and
exploitation. There were four essential characteristics of this form: 1) power,
which had been centred on small feudal aristocracy and to a lesser extent
governments, became dispersed to large number of individual capitalists 2) the
factory form of production was introduced 3) as a result for the first time a
mass of workers were in the same place doing similar tasks, and 4)there was no
moral, ethical or spiritual justification given for work undertaken by the
factory workers or the social conditions
1) Not one Land Owner
but Many Capitalists
Feudalism power was concentrated in few feudal barons, in kings, clan leaders and
officers of religion. The advent of capitalism
dispersed the social power to a larger number of capitalists. The numerous mill owners, factory owners and
their professional servants were the power successors to the feudal lord. Power in the society became dispersed.
dispersion of power caused Marx and his followers to identify a class of
capital holders. Likewise classical economics could see the hundreds of
individual firms headed by capitalists as a “market” in which they competed
against each other. “Class” and “market”
were the attempt to construct aggregates of power out of dispersed powerful
2) The Factory Form
was more obviously new to the world was the factory system in which a mass of
workers produced mass goods and, above all, were forced to work and be
exploited because otherwise they would starve to death. This was indeed different from previous ways
of disciplining and exploiting the poor in feudalism but from the standpoint of
the poor the results were the same - crushing material poverty, low life
expectancy from disease, malnutrition and inhuman work conditions. Despite all
the historical hype proposing that the industrial revolution and capitalism
meant an improvement for the poor, in the first 100 years of capitalism life
expectancy in the United
Kingdom only moved from 33 years to 41
3|) Mass of
development of a “mass” of workers was absolutely new. In the previous rural
systems of exploitation, even on large farms, the workers were divided by space
and by the different farms on which they worked. In France after land reform there were
individual peasants and that Marx described their revolutionary potential as
low because together they were more like a “sack of potatoes” rather than a
class. In the Communist Manifesto Marx and Engels talked of people in rural
areas being condemned to isolation.
lionisation of the mass of workers as the “working class” was understandable
and his view that such a mass of workers could be the base for a revolution, at
least on the surface, would appear to be well founded. The possibilities of agitation, education and
collective action were certainly enhanced by the social proximity of a mass of
roughly equally exploited people.
4) No Reason Given –
just Work or Starve
however, the most important difference between the new industrial/capitalist
system and the old forms of exploitation of the poor was the absence in the new
system of any justification for it. Prior to the industrial revolution each of
the different systems of domination-subordination were accompanied by powerful
psychological, non-material reasons for poverty. Peasants were pressured to believe in the
“divine-right” of landlords, feudal serfs were told they needed the lords for
security, lower caste members were told that the caste structure was necessary
for an orderly and stable society as required by the Gods. Even slaves were told that it was “‘Gods
will” as claimed to be in the Christian bible that they were destined to be
inferior and needed to be civilised by their owners. All of this was cemented
into place by theology which preached the principle of the legitimacy of the
existing power of the exploiters. These justifications associated with the
feudal system started their dramatic decline with the French Revolution of 1789
when the lords lost their heads along with the myths concerning the divine need
for aristocratic land ownership.
industrial/capitalist system was then entirely different. The only way of dominating people and forcing
them to work was the threat of starvation.
For this to be a real threat the possibility of securing food and
shelter other than from work in the factory had to be prevented. The work-survival connection was made
permanent. No explanation for this was given.
In a long discourse about wages and poverty Adam Smith gave no reason
for the gruelling work other than that it would avoid starvation or secure
That Adam Smith should not refer to any higher
or spiritual reason to work hard and long for a “superior” master should be of
no surprise because he was just following a trend of the Enlightenment
thinking. The philosophers of the
Enlightenment, such as Spinoza, Locke and Voltaire, argued for rational, as
opposed to spiritual and suspicious thinking; in doing so they provided the
possibility of logical opposition to heredity and hierarchy and from that to
the development of political theories of democracy.
But Enlightenment thinking also allowed the
birth of a materialism based on economic production and it led to the
proposition that work was only to secure the material (food, housing, and
clothing) necessary for survival. Thus if work was lost starvation an early
death ensued. This was considered the driving
force of humanity and the motivation for work and production.
In 1982 Paul Samuelson, a world famous
American economist text-book writer, said that the problem with the USA economy was
that “it lacked the hungriness motive.”
20th Century Capitalist Model
story, however, did not end with the establishment of industrialism and
capitalism in the UK and elsewhere in the 19th century. The current discourse about “capitalism” in
that sense is then frozen in the 18th century model as described by
Marx and based on his contemporary economists.
In the 20th century there were changes which so weakened the
nature of the early capitalism that its relevance can now be questioned.
changes and challenges to capitalism in the 20th century were 1) the
dispersed power to the individual capitalist was re-concentrated, first in the
state and then in the corporation 2) the factory form of production diminished
3) the mass of workers originally associated with factories became globally
dispersed and large numbers of workers were no longer needed for production
raising the “surplus” labour issue 4) in many countries of the world the
“hungriness” motivation for work was severely undermined
1) The Rise in the
Power of the State
20th century witnessed throughout the world the rise of the power of
the state. The power of the bourgeoisie and
of the “market” was constrained by the rise of the state especially in its
relationship of the state to capitalism is controversial amongst Marxists
because if the state was to change capitalism then it would not have been as
Marx predicted nor for Lenin for whom the state was simply “the executive
committee of the bourgeoisie”.
the Marxist debate, however, it can be easily shown that the activities of the
state in major economies and imperial powers between 1920 and 1975 profoundly
affected the power of the 18th century type capitalists and, as will
be noted later, undermined many other motivational aspects of the original
core of this story rested on the state and its redistributive policies. There
is a history to the level of state power. Perhaps the most important event was
the coming to power of the communists in Russia in 1919. This meant that there was extant a form of
confiscatory socialism in the world — a political regime in which the capital
and material goods of elites was actually removed (confiscated) — from them.
many advisors to elites had convinced themselves that Marx predication of the
revolutionary potential of the pauperisation of the mass was true. The “material deprivation” theory of
revolution was widely accepted. Mass agitation and social movements both labour
and political also pushed the state into a redistributive role. It seemed then
that state redistribution was the key, elite property would be relatively
protected if material deprivation and pauperisation of the mass was prevented
and the material conditions would be better for the poor.
the Anglo-Saxon economies there were three markers of this development – the
Keynes- written pamphlet of 1929 in which he argued that the state should
accept responsibility for full employment, the New Deal legislation in USA
1933-36 in which Keynes was involved and the subsequent establishment of welfare
provisions in UK post 1945. The precursors to these developments were in
Continental Europe and even in tribal cultures of Africa but the UK and USA were imperial powers which
meant their institutions were spread around the world. The intellectual and technical basis of all
these was Keynesian economics in which government expenditure was key in
managing material deprivation.
state redistributed through Keynesian policies throughout the 1930s and 1940s.
Then from the 1950s onwards “military Keynesianism” prevailed in the USA and
elsewhere supported by the Cold War. The
state retained its power basically via the military budget and the military
hierarchy prevented the excesses of accumulation in the private sector which
was witnessed in the last part of the century. In many countries in the 1970s
the state was redistributing against the higher incomes to the extent of 50
percent of income earned. In 1963 retiring President of USA, Eisenhower, warned
against the dominance of a “military-industrial complex” as a threat to
democracy but in 1980 the complex had reversed itself and it was now “industrial-military
complex” governed by corporations.
This ascending semi-circular graph of state power is matched inversely
by the accumulation of the top one percent in the USA. The percentage share of net wealth of the top
one percent began to decline in the 1930s with the introduction of the new Deal
and did not rise to even pre-1940 levels until the end of the Cold War in 1989
as the state began to lose control of private accumulation.
1980s onwards the corporations in global sectors began to concentrate and their
relative power increased – so by 1980 in the imperial countries the zenith of
the state and state redistributive power had passed. The process of weakening state authority
continued in the Global South through “structural adjustment” programmes.
events in the 20th century did not destroy 18th
capitalism as described by Marx but they changed its form significantly and had
profound effects on the other distinguishing factors of the model.
2) The Factory Form
of Production in Decline
The factory system was
introduced as a control device in the 18th century model.
Before that industrial production was by the "putting-out" system
when textiles were produced on looms in workers homes and collected by a
middleman to be sold by a merchant. Having workers in one place reduced
supervisory costs and enable the pace of work to be increased
But as Marx predicted there was a contradiction in such a mass of
workers because they took collective action and help bolster the power of the
state against the capitalists and corporations.
So from the 1980s the factories in the major economies began to close —
some scholars have argued this was the end of “Fordism” (after the Ford motor
company in USA which was one of the first mass production factories). It would be easy to believe that the factory
system has declined in the rich and powerful countries only to be resurrected
in the poorer countries to supply imports. But that is only partially true
because, for example, manufacturing imports from the low wage countries to the
high wage countries is still less than 20 percent of the total. What has happened is that everywhere
employment in large-unit manufacturing has declined mainly because of automation,
robotisation and digitalisation.
question here was how important was the factory system in the 18th
century model? It was important as the
principle instrument of disciplining and exploiting the workers in it.
But it was also important as one of the contradictions of the
arrangement – the mass of workers organised and became the principal and
practical opposition to continued exploitation.
On it was built the whole history of labour movements, social struggles
and redistributive achievements. With
its decline has come the decline in power of trade unions based on mass
membership of one industry. The mass war
cries based on the old history of trade unions now do not have meaning to the
partially or precariously employed service worker. This was not the end of work-place collective
action but the end of it as a major force as it was in the 20th
3) The Emergence of
the labour area there was always an important internal contradiction of 18th
century capitalism. The reliance on material or economic coercion to make
people work without support from religion, ethics, moral or ideas was always
weak. So from the beginning it became clear that to maximise wealth at the top
and avoid revolt and insurrection from the bottom fewer and fewer workers had
to be used – in political economy terms the productivity of labour had to be
raised. But both classical and Marxist theory of capital accumulation accepted
that the rich would be richer (accumulation) if there was full employment. Marx’s labour theory of value meant that each
capitalist extracted from a worker surplus value which meant that the more the
number of workers the greater the surplus value.
was clear in the 18th century that there was a labour surplus. Marx
called it “the reserve army of labour” which was deliberately developed and
assisted by the advancement of capitalism driving people from the land, from
the changes in the needs of industrial production and from general
overpopulation. This surplus labour and reserve army played an integral role in
the determination of wages and the general advancement of capital accumulation
in the 20th century the increase in labour productivity anticipated
by Marx was accompanied by the state attempting to control the size of the
“reserve army”. In addition, the
corporation could not act as capitalist at the head of a firm with workers
because of restraints imposed by trade unions and governments. The result was a
mass of surplus labour which was not integrated into the capitalist system as a
reserve army as in the 18th century model. In many countries
unemployment and wages increased at the same time.
extra productivity arising from automation, digitalisation and then
robotisation started to make a permanent and impermeable divide between those
with permanent jobs and those without. In the mid-1990s two German journalists —Martin
and Schumann— talked of the “20-80 society” in which 20 percent owned assets or
were permanent employers of production machines and 80 percent were basically
20-80 maybe an exaggeration the recent crises have easily demonstrated that the
swathes of unemployment produced in countries across the world has not affected
the top 20 percent of income and wealth holders. In London in 2011, 2.1 million
people were decreed to be in poverty while in the same year 2,714 bankers
mostly living in the London area earned over $3 million each. The top earners
and those with well-paid and permanent work are beginning to be “ring-fenced”
from the “underclass” “working poor” and other such labels applied to the
people who cannot find a place of worth in the production system.
result of this is a form of global ghettoisation in which the poor are
increasingly distinguishable by ethnicity or religion and effectively kept
apart as an underclass. This has always been the case in the USA but it has a more recent introduction in Europe. It has
been argued that this was part of the imitation of the USA model – the insistence that the ethno-nation
states should become the multi-cultural civic nations similar to that which is
claimed for the USA. But this argument ignores that the same
process of creating an unwanted labour force was inherent in Europe in the
continued application of the policies of attempting strong productivity growth together
distributional mechanisms favouring the rich.
has once again raised “the fear of the mass” so much a part of the mid-20th
century. Is the development of mass
marginalisation in fact Marx’s prediction of the “pauperisation of the mass”?
The process bears little similarity with capitalist theorist’s under-consumption
theory. Further, the political mobilizing forces of these populations tend to
be ethnicity and religion combined with social class but not class alone as in
Marx’s mono-cultural, mono-religious model.
has raised security issues throughout the world is sometimes seen as sourced in
this development. Regardless of such speculation it again means that the 20th
century model was drifting further and further away from the 18th
4) The weakening of
the Hungriness motive
original means of controlling work and labour was, as noted, the threat of
starvation. At the beginning of the 20th
century there was a move to a positive rather than a negative reward for part
of the workforce – from “work hard or you will starve” to “work hard and you
will get more”. This was partly an
expression of defeat for governing elites because it made the privilege of the
rich dependent upon a continued and permanent increase in employed workers’
output (increased productivity and economic growth).
movements which had a moral reason and ideology - in particular the labour (and
to a lesser extent) the socialist movement - had considerable success against
opponents who could have no resort to ethics.
The result was that in industrially advanced countries of the world, starvation,
death by untreated illness and low life expectancy was no longer accepted by
populations who then looked to the state to create a “safety net” against
disciplining function “work or starve” was then lost as one of the key factors
of the 18th century model.
Without a strong and overt system of discipline and sanctions no form of
extraction can have long-term stability.
There have been attempts to restore hunger as a motivational force.
Poverty and inequality have increased in the richest of countries. Poverty is increasing and will increase in
Europe as the result of the austerity policies most of which have elements that
make the loss of work more materially serious.
to restore harsh conditions have been made at least since 1975. Yet government spending on welfare has not
declined dramatically. Even extreme
conservative governments have been forced to pass laws which placate the
material demands of the underclass. One
of these was The USA American Dream Downpayment Initiative (ADDI) signed by
President Bush (junior) in 2003 which was the last of several acts to help
provide houses to citizens who could not afford them. This practice of subsidising the USA
poor at the expense of the rest of the world was one of the causes of the 2008
so-called financial crisis. In other
countries pressures to reduce or end social welfare have not been successful
and welfare payments have remained stable or increased. A tough labour system was introduced into
Germany which has resulted in Germany reporting about 16 percent of households in
relative poverty (less that 60 percent of the median income). Yet recently the government was forced to
introduce a minimum wage. Similar attacks on the welfare provisions are faced
with strong political opposition.
system generating privilege and exploitation can be sustained without a
powerful goad for people to work hard and long and to have a social discipline
which prevents attempts at redressing of inequalities. Attempts to restore the
hungriness threat have not succeeded or are failing. The 18th century
model of capitalism is left without one of its principle mechanisms for
in the last quarter of the 20th century what had changed from the model
that Marx described? The state increased
its power and in doing so changed the power configurations between capitalists
and corporations permanently, and at the same time laid an enduring resistance
to exploitation based on the threat of starvation. Large masses of impoverished people were
pushed outside of the capitalist system, and the mass production factory system
is being replaced. These factors alone
should cause reflection on whether the 18th century Marx model of capitalism
now can deliver predictions and assist in the development of progressive strategies
for the 21st century. The
importance of these changes has been recognised by some writers distinguishing
the current period as “late capitalism”.
It is suggested here that the changes do not merely result in versions
of capitalism as in “early” and “late” but are an ongoing attempt to transform
capitalism into another distinct regime creating privilege and poverty.
Century Emergence of Corporatism
last quarter of the 20th century until the present saw an
acceleration of trends which had started earlier but which became more proven
and in some cases more noticed by mainstream observers. From 1970 four factors changed the 20th
century nature of capitalism: 1) the rapid rise of corporate power changed the
power structure of capitalism 2) this event set off an extreme rise in the
power of financial corporations (banks) 3) there was an attempt to create a
justification of exploitation based on the market 4) the development of the
globalisation practice and ideology to consolidate neo-imperial power of
1) The Dominant
at least the 1970s there has been an ongoing and accelerating process of
concentration of corporations in almost all global sectors. This means that by
2010 it was estimated that that the global economy was controlled by about 200
corporations and banks.
fact has yet to be understood by journalists, academics and producers of
statistics who are still involved in a statist discourse and use the statistics
of economies of states rather than corporations. They are entrapped by the discourse and the
residue of the zenith of the power of the state at the mid-20th
percent of world trade is controlled by multinational corporations; 30-40
percent from exchanges between the subsidiaries of the same corporation and a
further 30-40 percent sales between different corporations. Ninety-five percent of all foreign investment
is corporate. Yet statistics, academic papers
and politician’s arguments are still based on “foreign direct investment”
rather than “foreign corporate investment” and inter- country (international)
trade without ever mentioning the corporate presence. Smart-phones are not
exported from South Korea
they are exported from Samsung Electric Co., which controls 35 percent of the
global market in these phones and contributed 17 percent of South Korean
GDP. USA does not export disk operating
system software, Microsoft does.
power of the corporation is now a constant, regardless of the political regime.
The Chinese state-owned corporations (SOEs) are now listed with the so-called
independent corporations from Europe, USA,
and elsewhere. While most commentators
argued that SOEs are simply an arm of the state, deeper research would indicate
that the relationship party-state-corporation is not characterised by a simply
dominance of one party. These Chinese corporations when they invest overseas
begin to adopt the same strategy of action and finance as the non-state owned
discussions of the “globalisations” and international trade and investment in
terms of state exports of good and foreign investment are merely shadow
discussions behind which are the corporate controls of these transactions.
process through which the new situation has arrived is 30 years of corporate
mergers and acquisitions on a global scale which has meant that almost every
global sector is now governed by 2 to 5 multinationals. There is a rule of thumb used by economists
that if 40 percent of sales are governed by 4 corporations or less in an
industry then oligopoly exists. Such a
narrow control of the industry would mean that almost all global sectors are
technically oligopolies. The global
wide-bodied jet sector has two dominant corporations —
Boeing and Airbus; the disc operating software
has one company dominant corporation — Microsoft; the iron ore industry has two
corporations, the cement industry five corporations. Almost every sector shows a history of
increasing concentration. The banana sector, for example, saw the top three USA
corporations Chiquita, Dole and Del Monte which in 1972 had 54 percent of the
global market move to 66 percent in 2007. The top five banana corporations
control 86 percent of the global production and consumption of bananas. Statistics from the USA show how
fast this process is moving. In 2002, the top 10 banks controlled 55 percent of
all U.S. banking – in 2012 that figure is now 77 percent. In 1983 50 media corporations
controlled most of the news in the USA - the same news is now delivered
by six corporations. Japanese
corporations have always had quasi monopolies internally despite the attempts
to break up their internal domination after 1945. Japanese and Chinese
corporations have developed regional spheres of power rather than global but
this situation is changing fast.
modern multinational does not compete in the product market as in the 18th
century model. At the maximum there is
“friendly rivalry” which does not affect prices as they would do in the
classical model. When there is
competition it tends to be nationally based rather than product-based. Bischler and Nitzan claim that all
corporations monitor the average return on capital invested and when their
sector drops below that level they use their power to engineer an increase
though political and social means including influencing states in relation to
study by a group of researchers from Switzerland has become well-known because
they showed with mathematical sophistication in 2011 what Charles Levinson, an
international trade unionist, predicted in 1969, that less than 200
corporations control the production and output of the world. The study looked as 43,000 multinational
corporations and discovered, using network analysis, that 1,318 of them controlled
the network and within that group there were 147 which in turn controlled more
than 40 percent of the entire network.
(The Network of Global Corporate
Control by Stefania Vitali, James B. Glattfelder, Stefano Battiston,
Published: Oct 26, 2011http://dx.doi.org/10.1371/journal.pone.0025995
Adam Smith saw that firms became
monopolies as the result of the tendency of businessmen to conspire to prevent
competition. Baran and Sweezy in their
book Monopoly Capital put monopolies at the centre of the economic
scene. These arguments focussed on the economic aspects but none of them correctly
foresaw the political form rather
than the economic form of monopoly.
political form of the tendency to prevent competition is the modern global
corporation which is far more than an economic monopoly or oligopoly dominating
economic life by manipulations of prices and wages. The modern corporation is
as much a political and bureaucratic entity as it is a monopoly
enterprise. In maintaining the dominant
position the corporation uses every element of societal existence. In the
natural resource sectors corporations have become virtual state
administrations. The modern corporation can hire private armies, which are also
corporations, can publish its views through the press which are also
is a new situation. When corporations dominated the world via imperialism they
were state corporations supported by state monopolies in the imperial
countries. State and corporation were merged as in the British, Dutch, French
and Portuguese versions of the East India Company. Now the state merely supports the independent
activities of its large corporations via diplomacy and consular services.
states and corporate elites are merging.
More and more corporate chief executives are appearing formally and
openly at the heads of states. President
Fox of Mexico came from Coco-Cola, Thaksin Shinawatra from mobile phones became
prime minister for Thailand, Prime minister Berlusconi in Italy from his media empire;
G.W. Bush as President of USA from an oil company, Mario Monti successor to Berlusconi
in Italy was from the bank Goldman Sachs while Somali appointed a businessman
as prime minister in 2012. Even more heads of state later become businessmen –
in the Netherlands former trade union leader, then prime minister, Wim Kok went
to the board of the Shell Corporation. This is no longer the so-called
revolving door between the corporation and the state but rather the integrated
entry to the world of corporate power.
corporations are not transnational. They
exist by manipulating the segmented labour and product market of a world
divided into over 180 units. The surplus
goes back to the headquarter countries.
In some cases the surplus generated serves not only the rich in the
headquarter country but sometimes also to ordinary employers – profits made
globally by General Motors go to help pay the health and pension benefits of
retired workers in the USA.
withering away of the state in socialism has become the withering away of the
state in corporatism. Adam’s Smith’s
hope that the laws would enforce competition failed, and Baran and Sweezy’s
prediction of more imperialism to dispose of surplus did not foresee the global
power of the corporation which adjusts capacity globally.
modern corporation has not only destroyed the market but has also assumed
the neo-classical theory of capitalism nor the Marxists theory of capitalism
can predict what a single corporation with 90 percent of its global market will
do next year. The economic theories of
behaviour are not equipped to deal with the processes of power in which the
economic objectives are clear but the economic restraints are minimal.
power of the modern corporation is in the process of replacing the capitalist
of the 18th century with dominant owners and controllers of
corporations and thus ushering in a 21st century corporatism.
2) Finance as a
multi-level extraction process
contemporary events and developments can be traced back to these
transformational changes to the 18th century model of capitalism. In
that model extraction from the working population was from manufacturing work
in which the owner of capital took a disproportionate share of total
productivity. Marx also saw that at some
time and in some countries financiers would challenge manufacturing. In his analysis of French society in 1850 he
“While the finance aristocracy made the laws,
was at the head of the administration of the State, had command of all the
organised public powers, dominated public opinion through facts and through the
Press, the same prostitution, the same shameless cheating, the same mania to
get rich, was repeated in every sphere….. to get rich not by production, but by
pocketing the already available wealth of others. In particular there broke
out, at the top of bourgeois society, an unbridled display of unhealthy and
dissolute appetites, which clashed every moment with the bourgeois laws themselves,
wherein the wealth having its source in gambling naturally seeks its
satisfaction, where pleasure becomes crapuleux,
where gold, and dirt and blood flow together. The finance aristocracy,
in its mode of acquisition as well as in its pleasures, is nothing but the
resurrection of the lumpen proletariat at the top of bourgeois society.” Marx: “Class
Struggles in France 1848: The Defeat of June, 1848”
account appears at first sight to reflect almost exactly what is happening in
Europe and North America today.
in fact this is not what is happening.
thought the financiers were parasites and were in opposition to the
industrialists and that the industrialists would fight back and eventually
displace the financiers. His view,
accurate at the time, was of a large number of industrial enterprises whose
principal purpose was to extract profit from the population through organising work
is no longer the case. In the 1970s and 1980s corporations increased their
oligopoly and monopoly position. This
meant that when they needed finance they simply increased their prices to yield
an investable surplus. The banks were
then without their usual investment customers.
But by mid 1990s financiers and industrialists saw the advantages of
working together with the banks and finance as a multi-level means of
extraction. Now the politically active
corporations are either controlled by finance or there has been a cosy alliance
between banks and corporations. The Network
study cited earlier claimed that a “large portion” of the control over the
corporations which control global production and consumption “flows to a small
tightly-knit core of financial institutions”.
means that one of the new ways of exploitation in corporatism is through
finance and debt rather than manufacturing.
An employee sees part of his/her
production taken by the employer as in
the 18th century capitalist
model, now a second part is taken as interest on his/her personal debt and then
a further third part is taken through taxes to the owners of national
debt. The mechanism of extraction via
debt is now greater than from production.
manner of extraction is practiced at all levels from individual to state. At
the state level it reached a great level of sophistication in the 1980s and
1990s when applied to countries of the Global South and some East-European
communist countries. The states were
encouraged to take loans even under clearly unstable conditions. When the loans could not be paid back,
sometimes because of the manipulations of raw material prices on which the
states were dependent, the International Monetary Fund , backed by the
financial sector, imposed penalties and sanctions on the governing elites
unless they undertook “structural adjustment”. One of the main features of this
was to sell state assets at low prices usually to foreign corporations. The
so-called “Third World Debt Crisis” was not a crisis for the lenders – the debt
was paid back to the banks and government and the corporations acquired
valuable assets cheaply. This process is now being applied to some countries in
description was right about the behaviour of individual bankers and corporate
chief executive officers but wrong about their collective behaviour —
industrial corporations did not oppose the financiers. Under corporatism they allied with the
bankers as another useful form of extraction.
Corporatism unlike Marx’s capitalism does not rely on direct production
and is able to integrate newer forms mechanisms of control and extraction.
ideology of the multinational corporation is globalisation. There is one core reason for this.
Globalisation is a process by which the state is weakened. Weakened, that is,
at any attempt to control the economic destiny of its people via regulation at
the borders or through internal political processes. A multinational has a single basic need which
is access, access that is to the economy, wealth, resources and labour of any
country. Access-denying programmes are usually introduced by the state which in
turn is connected by political movements that claim autonomy, sovereignty or
are nationalist. The development in the 20th century convinced
corporate elites that the major threat anywhere in the world would be the
action of states. For this reason major
international powers of mid-20th century, in the pretence of
opposing communists also attempted to destroy nationalist movements in already
creation of corporatism is an imperial project – in the Network study quoted
above no information was given concerning the
nationality of the 147 corporations in control of the global economy but just
on the basis of the numbers of corporations in existence it is certain that
they are predominately from Europe and North America.
and extraction from the global political economy is assisted by the activities
of inter-state agencies at the universal and regional level. The corporations discovered that by working
through existing inter-state agencies - the World Bank - the IMF, the UN or the
EU – they could achieve outcomes that could have never been achieved by acting
alone or at the national level. Once
corporate power had increased on the domestic level it was a short step to
allow the corporate and financial interest to “capture” inter-state
organisations. The structural adjustment
programmes executed in the Global South reached a level of imperialism which
perhaps not even the original imperial powers could achieve based on the
imperial policies of military oppression and divide and rule. Structural adjustment delivered the economy,
lives and destinies of countries to the dictates of the IMF and World Bank themselves
representing the core financial and corporate sectors. The policies that these latter proposed were
to privatise, liberalise and economise.
Privatise to corporations, liberalise to corporate products and economise
to serve debt repayments to banks. The EU, which is supposed to be neutral on
the issue of public and private enterprise, recently agreed that privatisation
was a condition of receiving loans in Greece and Italy which are in part
derived from European citizen’s taxation.
economies of these countries were restructured to suit an imperial mandate
which was to have un-impeded access for foreign banks and corporations.
Lenin the state was the “executive committee of the bourgeoisie” under
capitalism. Under corporatism the state
is made a partner and previous state-constructed institutions became the global
executive committee of the dominant corporations and banks.
4) The Market as a
Justification for Inequality
elites of corporatism are aware, it seems, that one of the weaknesses of the 18th
century model of capitalism was the lack of a non-material justification for
dominance and exploitation compared with other such systems. The exaltation of
the market as an explanation for the outcomes in social affairs had been
largely confined to theoretical economists rather than a general explanation
for social ills and problems.
the late 20th century, however, the market was launched to the
public as an explanation for all social and economic events which might be
ascribed to a policy, institution or person.
reason for the timing of the launch of the market as an explanatory myth is the
arrival of corporate elites in position of global and national power which
challenge the state. At the very moment when the competitive market was
destroyed by the monopoly or oligopoly of the corporation the market was
launched on the world as an explanatory variable.
corporation had arrived as a lead institution. Dominant institutions always had
a non-material, mythical answer to questions concerning misery and
inequality. In answer to the questions
“why am I poor and others not” the religion and church answer was (and is) “it
is Gods will”. When the state became the dominant power in many countries the
answer to the same question was “it is the people’s will”. Now that the corporation is so dominant the
expectation would be that “it is the will of the market”.
the market is given as the explanation of austerity because “the financial
markets demand” it and for high executive salaries “we must pay what the market
price for these people”. The market is anthropomorphised – given human
qualities – it thinks, it tells people, it reacts.
compared with other justifications for poverty and exploitation based on
religion, security or solidarity the market explanation is extremely weak and
gets weaker as the myth of it is exploded by revelations of fraud and
collusion. The market is revealed in these cases as nothing but people
manipulating policies directed at other people in order to secure material
a justification for poverty and unemployment then it lacks the all-embracing
power of the previous explanation for these condition. In an attempt to boost
its power it has been recently linked to democracy and human rights. The
argument is that the “free market” yields political freedom. The organisation
of liberals, Liberal International, describes itself as the preeminent network
for “promoting liberalism, individual freedom, human rights, the rule of law,
tolerance, equality of opportunity, social justice, free trade and a market
economy”. But the contradiction is that
the greater the austerity poverty and general un-social conditions the greater
the response for non-democratic controls and oppressions.
attempts to attach more attractive ideas to the myth of the market has the same parallel with “free trade” which
has been presented for more than 150 years as a necessity for political freedom. Yet in 2008 The Director-General of the World
Trade Organisation talked of “restoring citizen’s confidence in trade” because,
as with the market, citizens will no longer accept it as a governing force in
Eight problems of the Corporatism
academic literature “corporatism” is used to mean a political regime
characterised by official representation at the level of the state of
representatives of business and trade unions. The state in the theory was
supposed to preside over mediation between the representatives for the common
good. Its origins are from the Catholic
Church in the late 19th century, a revised version by the fascist
theorists in the 1930s and a further revised liberal version in the 1970s. It
is said that corporatism was launched to prevent the class war predicted by
when this type of mediation was installed there was a tendency for the state to
become dominant hence the expression “state corporatism” which was associated
with the dictatorships in Latin America and Spain. The more political liberal version was named
“social corporatism” and was characterised by bargaining at the state level
between business and trade unions – the so-called “social partner” model of
Continental Europe. There were other
versions of this system – some one-party states in Africa and institutionalised
one-party states in Sweden, Mexico and India were said to also be forms of
history has yielded a “state” corporatism and a “social partner” corporatism
expressing the predominant holders of power in the system but never until the
current period has there been an attempt at a “corporate” corporatism in which
it is the corporation and not the state or the social partners that has the
power to determine the core variables of any society.
creation of dominant corporations, financial extraction, global access and
market justification represent just such an attempt to install a “corporate
corporatism”; an attempt to reconstitute the 18th century model of capitalism as
modified and weakened by the 20th century to make a new form or
structure of extraction by a minority group from the majority for the 21st
century. But it is an attempt not yet an achievement.
new model or construct must, as noted above, be able to deal with the
contradictions inherent in action and counter action. In the current situation the contradictions,
complexities and opposition may be greater than the attempt to move from
capitalism to corporatism.
First, the mid-20th century rise of the
redistributive state may have left a confidence in key populations that social
justice is needed and inequality not acceptable. Major countries have not been
able to completely destroy redistribution and welfare provisions and where it
has been attempted it has been characterised by increasing political
turbulence. Throughout the world populations are taking to the streets and
expressing their anger through political action against corruption and
governments not seen to be delivering social justice. A political reaction may not always be
progressive or effective but for an analyst of political risk it is
nevertheless a political reaction.
Second, the political reactions of the
so-called underclass are not certain.
Corporatism has produced a mass of marginalised and excluded people and
at the national level often identifiable by ethnicity or religion. The greatest mobilising forces known to
humankind – religion, ethnicity and belongingness are more powerful than the
class motive alone as assumed by Marx.
How far these will be used or can be used to disrupt the transition to
corporatism is difficult to predict but this uncertainty itself means that the
architects of the transition are faced with a potential political opposition.
Third, the basis of the corporatist
system is dominant corporations domestically and globally but the monopoly and
oligopoly needed for this dominance raise issues of functional efficiency. Without oversight and regulations based on
the longer term, the efficient delivery of products and services becomes problematic.
How does a corporate executive who is
assured of a lifetime of excessive material benefits judge what he/she should
do for the future and what does the future mean for him/her? Prudent investment for the future is not
noticeable in corporate finance. In addition, in the case of multinationals,
“imperial dysfunction” sets in when designs and decisions are made for a core
market which do not suit the periphery. When material and technical efficiency
declines under conditions when surpluses must be maintained fraud and
criminality increases. The nature of the
corporation at the core of corporatism may be the contradiction which prevents the
complete fulfilment of the system.
Fourth, the opposing force is to global corporatism
is sovereignty. Any competition between
corporations globally is based on nationalism rather than price or quality of
products as in the Marxists and neo-classical view. When many countries in the
world are capable of production and distribution within their own politically
controlled area there is no reason to pass that power to a foreign corporation. Will the emerging corporations from outside
Europe and North America be asked to join the
global power cartel? Even if asked, will
they refuse? The discussion in Europe about “competition” and the fear of
countries increasing their economic power is not based on trade and
productivity but on how long will such countries allow their domestic market to
be controlled by foreign corporations.
Japan has always resisted foreign corporate investment and indeed
foreign investment is referred to as the “black ships” of the original
colonizing attempt of the USA. Western
European and USA
corporations are aware that their dominance in foreign markets is in
decline. The only solution to regain
their power position would be to resort to armed imperialism and that is constrained
in scope by the security potential of the major states of the world. Geo-politics does not favour the advent of
Fifth, the financial form of extraction via personal and
national debt is extremely volatile and precarious and yet it is an important
element of corporatism. It is volatile
because there is always a risk of a collective default. At the personal level the system can only be
sustained with repressive instruments for servicing the debt. At the international level it is dependent on
similar factors. That nations borrow to
purchase essential goods not locally available can always be expected but when
the debt is incurred, as in the many recent cases, to serve patronage demands
and the inefficiencies of corporatism default is always possible.
Sixth, corporatism, lacking as it does
any public good ethic, will continue the production-destruction and consumption
growth paradigms of 20th century capitalism on which it has been
partially built. These practices are at the core of resource depletion and
environmental problems. As long as corporation is able to resist the weak
environmental political pressures their decision-making will be short term and
surplus maximising regardless of external or long term costs. Corporatism will
certainly be as environmentally destructive as 20th century
capitalism. Dealing with environmental restraints will also present challenges
to those attempting the inauguration of the system.
Seventh, and finally, the market
justification for all the problems currently encountered was already weak but
is now defunct. The financial events of
2008 not only showed how the market was not working in finance but revealed on
a daily basis how national elites have become appendages to the corporate world
and were complicit in the development of these events. The serial failures of so-called market-based
policies which usually meant either creating monopolies or passing from a state
monopoly to a collusive private monopoly has finally enabled the myth to be broken.
problems and weaknesses are, and should be, the focus for civil society
opposition to the installation of corporatism.
The modern corporation will not disappear but it may not be able to be
the foundation of a successor to capitalism. From the above analysis it would
seem the world is caught within a transition process in which there can be no
going back but the future aims of global corporate power may not be achieved
and are certainly not socially and humanly desirable.
situation presents opportunities provided that the opposition can be
forward-thinking and creative and not stuck fighting the current battles with
the perceptions and tools of the past.