Sunday, May 3, 2020
First Posted: Thursday, June 16, 2016
Corporatism: 21st Century
Governing System?
Jeffrey Harrod
2020 Note: This essay was written in 2013, posted in 2016 and now re-posted in order to make this note. This post is
unchanged from that as posted in 2016
In my view the seven problems of corporatism –
the last section of the 2016 post— have all been developing in the last seven
years. Some of them emerged in politics
as the attempts to assert power at the national level and the distrust in globalisation
as represented by regional and global trade patterns. But it has taken the unusual
development of a pandemic and the requirements of disruption of routine and
established global networks to highlight the seven problems and to at least
start a discussion of them. It is instructive to read the analysis of
2013 of these seven problems and then the following brief notes on the outcome
7 years later and within the pandemic period.
The seven problems of Corporatism
and how they are now being seen
First: resistance to inequality –
current demands that CEO salaries and bonuses be stopped and surveys indicated
that “the rich must pay” as reported in
France for example, 03/05/2020
Second: an underclass reaction –
the rise of right and left populism in Europe and nationalist movements elsewhere
(eg. India) are fuelled by support from the lowest paid and underprivileged
groups.
Third: efficiency and imperial
dysfunction – the practice of multi-national sources of
essentials such as pharmaceuticals has revealed imperial dysfunction and the
lack of flexibility in recreating national production is extant at least in all
products associated with the health sector.
Fourth: corporation versus
nation? The demands
for national rather than multinational production solutions have raised the
corporation v nation geopolitics to new heights.
Fifth: financial uncertainty – inflation or long-term debt and austerity
or both are possible.
Sixth: environmental limits –
the already emerging problems of pollution and trade-induced environmental destruction
have been demonstrated by the brief halt to the global production machine.
Seventh: weakness of the market
explanation – the pandemic could not be solved by any other instuition
than the state and nation-state.
These
are notes and are not predictions. Those who believe there will be major
changes after the end of the pandemic must look to see what changes in
political coalitions or formation before believing that discussion and rhetoric
will lead to change. So far there is little indication of the dramatic
political changes which would precede any serious transition to new policies.
The only positive factor is that many of the issues identified in the original
article are now making the symbolic front page of information.
2016 Note: A 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 original.)
Abstract
This 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.
Contents
The 18th
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
The 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
The 21st
Century Emergence of Corporatism
1) The Dominant Corporation
2) Finance as a multi-level extraction process
3) Neo-Imperialism/Globalisation
4) The Market as a Justification for Inequality
Seven
problems 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
Introduction
Currently
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.
During
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.
The
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,
In
the 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.
This
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
Sometimes
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.
It
is suggested here that "corporatism" would be a suitable name.
This
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
system.
History seen as a succession of
different ways to empower the Rich
The 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?”
The 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 with/eliminate/neutralize
resistance.
From 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.
But 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 challenged.
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.
If 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.
There 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.
The 18th Century Capitalist Model
The 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.
What 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 which prevailed.
1) Not one Land Owner but Many Capitalists
Under 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.
This 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 individuals.
2) The Factory Form of Production
What 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 years.
3|) Mass of Workers
The 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.
Marx’s 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
Perhaps, 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.
The 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 “present subsistence”.
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.”
The 20th Century Capitalist Model
The 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.
The 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
The 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
redistributed form.
The 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”.
Outside 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 model.
The 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.
Furthermore, 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.
In 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.
The 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.
From 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.
These 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.
The 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 century.
3) The Emergence of “Surplus” Labour
In 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.
It 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
However 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.
The 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 excluded.
While 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.
The 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.
This 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.
Religious mobilisation which 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
century model
4) The weakening of the Hungriness motive
The 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).
So 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 life-destroying poverty.
The 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.
Attempts 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.
No 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 survival.
So 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.
The 21st
Century Emergence of Corporatism
The 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 corporations.
1) The Dominant Corporation
Since 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.
This 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 century.
Seventy 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.
The 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, Japan 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 counterparts.
The 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.
The 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.
The 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 armed conflicts.
One 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.
The 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 corporations.
This 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.
Now 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.
Multinational 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.
Marx’s 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.
The modern corporation has not
only destroyed the market but has also assumed governmental functions.
Neither 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.
The 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
All 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 stated:-
“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”
This account appears at first
sight to reflect almost exactly what is happening in Europe and North America
today.
But in fact this is not what is
happening.
Marx 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 and manufacturing.
This 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”.
This 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.
This 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 Europe.
Marx 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.
3) Neo-Imperialism/Globalisation
The 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 independent states.
The 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.
Control 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.
The economies of these countries
were restructured to suit an imperial mandate which was to have un-impeded
access for foreign banks and corporations.
For 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
The 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.
In 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.
The 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.
The 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”.
Thus 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.
But 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 privileges.
As a justification for poverty
and unemployment then it lacks the all-embracing power of the previous
explanation for these conditions. 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.
These 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 their lives.
Seven problems of the Corporatism
In 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 Marx.
However, 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 corporatism.
So 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.
The 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.
Any 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
global corporatism.
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.
These 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.
This 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.
posted by Jeffrey Harrod Thursday, June 16, 2016
# posted by Jeffrey Harrod @ Sunday, May 03, 2020
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