Corporatocracy v democracy


Shadowy transnational corporations have seized power and marginalised governments, writes David W. Smith. The democratic process is weak, but there are ways of reclaiming power at both grassroots and political levels.

Governments are democratically elected to serve their electorates, but they are increasingly irrelevant. The real masters are the shadowy corporate bodies pulling the strings behind the scenes. These big businesses determine the tax laws to suit themselves, strip away regulations that cost them money and infiltrate the media to sell their neo-liberal ideology. Modern states are more accurately described as ‘corporatowcracies’ than democracies.

“Big business today has a frightening amount of power, absolutely incompatible with real democracy,” says Nick Dearden, director of Global Justice Now, a campaign group promoting democratic alternatives.

“The direction of the economy since the late 1970s has been to give massive power to corporations at the expense of ordinary people. You see it concretely in the way inequality has ballooned and a far greater proportion of wealth is now taken by capital – money ‘earned’ by the rich – and far less by labour – money earned by the rest. The media and political consensus has propagated an ideology which states ‘leave everything to the market, and we’ll end up with the best possible solutions’.”

Challenges to the stranglehold have been slow in coming because of widespread ignorance about how corporates seize power. The controlling forces hide innocently behind ‘boring’ terminology that turns most people off, including the media. Mention of the ‘International Accounting Standards Board (IASB)’ induces insomnia in many, yet it is a major pillar of the corporate network of power.When the EU formed the IASB, it invited representatives of the world’s Big Four accountancy firms to write the rules. Inevitably, they did so in favour of rich clients and would never introduce the ‘country-by-country reporting’ required to force transnational corporations (TNCs) to pay a fair share of tax.

Even more significant are the more than 3,000 Bilateral Investment Treaties (TICs) in operation globally. Again, these sound like perfectly respectable ways to encourage trade. But 85 per cent of the rules have been written by corporations. They include ‘Investor-state dispute settlement’ (ISDS) provisions. If we get beyond the clunky name, we find out that these ISDS rules give corporations ‘rights’ to sue nation states in secret courts if they believe their profits are threatened by government measures. “That could be anything from putting cigarettes in plain packaging, to

taking railways back into public ownership, to raising minimum wages, to protecting the environment. Big business can say ‘that’s damaged my bottom line, I’m going to sue you’.” said Dearden.

The most important trade deal is the TTIP between the US and the EU, which will make the rules for half the world’s GDP. Its goal is to obtain total freedom for investors by eliminating regulations and introducing ISDS rules. “It will enable them to create a freezing effect on the executive branch of government. They will be able to threaten so many law suits and really influence the direction of politics,” says US author Susan George, who studied the TTIP in her recent book ‘Shadow Sovereigns’.

Dearden points out that whilst the British government supports the TTIP, it refuses to back disenfranchised people battling against corporate power. “They are preventing Latin American governments from passing a new treaty at the UN which would give ordinary people abused by big business the right to air their grievances in an international court,” says Dearden. “For a small farmer in Ghana whose land has been taken by a British corporation, it’s hard to get your voice heard. But the British government regularly vetoes these proposals.”

The barriers between government and the corporate world have become permeable. “In the EU, there’s a revolving door between the Commission and the corporates,” says George. “As soon as they leave the Commission they join the Brussels HQ of a big company. Sometimes they become lobbyists themselves. They know the way things work and can be very useful. “You can see the way the intercon- nections control government behaviour in the way the Volkswagen testing scandal was dealt with. Nothing is going to happen before 2019 and we’re only going to get in-driving conditions readings of pollution rather than strong legislation about emissions testing.”

Fighting back against corporate hegemony is a daunting prospect, but Dearden takes inspiration from great political victories of the past. “Our struggle is no more formidable than the struggle to end slavery, or enfranchise working people, or women. And people were faced with a media and political system even less democratic than ours. So I take heart from the fact they fought and won in even worse circumstances.”

Grassroots community action is one of the keys to taking back power from corporate control. In Germany, for example, citizens have started running their own energy utilities democratically. “Public services should not be taken over and run for profit,” he says. Citizens can also reclaim power from agribusiness by buying food from local producers.

Another good sign, Dearden says, is that the neo-liberal consensus has been breaking down since the financial crash of 2008. “Look at the US presidential debate. A real free trader like Hilary Clinton is saying she doesn’t like free trade deals and corporations having too much power. That’s the influence of the left-wing Democratic candidate Bernie Sanders. And in the Republican Party, consensus is gone too,” he says.

In parts of Europe, anti-establishment political stances are garnering support. In the UK, the new leader of the Labour Party, Jeremy Corbyn, has forced climb-downs on cuts in national welfare from the ruling Tory Party. “The political and media establishment can’t abide Corbyn, but he’s very popular,” says Dearden. “He stands against an economic system that’s failed, and he does it reasonably. He’s discussing stuff that hasn’t been talked about since the 1980s. In Scotland, people have woken up politicwally and local papers are outselling national ones.” Meanwhile, in Southern Europe, an anti-eviction activist was elected as mayor of Madrid and Portugal’s new government has promised to reverse austerity. “Even in Greece, which has suffered the most extraordinary economic brutality and political bullying, things aren’t settled. They’ve embarrassed Syriza, but this isn’t over. We’re looking at the complete transformation of politics. There will be huge setbacks, but really something new and special is happening,” says Dearden. There is still apathy among electorates, but this arises from the disbelief that there are democratic alternatives. “We must spell out how another world is possible – one where we have control over the world’s resources and use them more fairly and sustainably,” Dearden says.

In The Shade

A report from Americans for Tax Fairness (ATF) has revealed that Walmart is hiding US$76 billion in assets in a vast, undisclosed network of 78 subsidiaries and branches in 15 overseas tax havens where it has no retail presence. Walmart’s favourite tax haven, according to the 51-page investigation, is Luxembourg, which has been called “a magical fairyland” for corporations trying to avoid paying tax. The company operates 22 shell companies there without having any stores. The group’s tax experts allege that Walmart has transferred ownership of more than US$45 billion in assets to its Luxembourg subsidiaries since 2011, paying less than one per cent in tax to Luxembourg on US$1.3 billion in profits.

Tipping Point 

The Transatlantic Trade and Investment Partnership (TTIP) is a comprehensive free trade and investment treaty being negotiated in secret between the EU and US. The main goal is to remove regulatory ‘barriers’ which restrict transnational corporations’ profits. Campaigners, such as War On Want, say these ‘barriers’ set important social standards and environmental regulations, such as labour rights, food safety rules, regulations on toxic chemicals, digital privacy laws and banking safeguards to prevent another financial crisis. TTIP also seeks to open up public services and government procurement contracts to competition from corporations, threatening to introduce more waves of privatisations in health and education. Finally, TTIP seeks to introduce the ‘investor- state dispute settlement’ mechanism, granting the right to sue sovereign governments for loss of profits.