When Corporations Rule the World
……………..…..the impact felt
Globalization & Development
Submitted To: Prof. C.Shambhu Prasad
Submitted By: Ms.Suchismita Sinha (43)
PGPRM-II
Abstract
David Korten in When Corporations Rule the World offers redemption from the corporate wars. He prophesies: Drink filtered instead of bottled water, eat fresh produce from farmers' markets, encourage corporations to act nice. His mantra, "Localize economies, globalize consciousness!"
Corporations, originally designed to improve work collaboration and business financing, have become Frankenstein monsters that we inadvertently allow to corrupt democracy, diminish citizen rights, impinge on human freedoms, and weaken democracy because with no checks and balances and no implicit morality, the single-minded pursuit of profit, growth and competitive advantage compels them adamantly to do so. Human survival depends on a community-based, people-centered alternative beyond the failed extremist ideologies of communism and capitalism. When Corporations Rule the World provides an agenda of national and global reforms by which we may reclaim our power to localize economies while globalizing consciousness.
The key questions discussed in the text are
•What ails our economics and associated politics, and
• How to improve the health of our increasingly global systems?
Also the role of globalization in this aspect has been covered precisely. Questions like whether someone is for imperialistic globalization or not or how the position of US can be looked upon or what actuallythe information we need to know, all these debatable issues were also been focused.
Introduction
When Corporations Rule the Worldby David C. Korten was published by Kumarian Press, USA.In addition to all the contents of the first (1995) edition, the new 2001 edition contains a new introduction, epilogue and three new updated chapters.
Contents ………
- Cowboys in a Spaceship
- Contest for Sovereignty
- Corporate Colonialism
- A Rouge Financial System
- Reclaiming our Power
- From Corporate Rule To Civil Society
Basically, this book was written as a project of the PCDForum to help take the analysis and vision of the alternative development movement into the mainstream
“A searing indictment of an unjust international economic order."- Archbishop Desmond Tutu
David C. Korten is board chair of the Positive Futures Network, publishers of YES! A Journal of Positive Futures, and founder and president of The People-Centered Development Forum. He is a former faculty member of the HarvardBusinessSchool and the author of nine previous books including the bestselling When Corporations Rule the World and The Post-Corporate World.
Korten's background includes an MBA and Ph.D. from StanfordBusinessSchool, teaching at HarvardBusinessSchool and working with the U.S. Agency for International Development in Asia. He has over thirty-five years of experience in preeminent business, academic and international development institutions as well as in contemporary citizen action organizations. Disillusioned by the evident inability of USAID and other large official aid donors to apply the approaches that had been proven effective by the nongovernmental Ford Foundation, Korten broke with the official aid system. His last five years in Asia were devoted to working with leaders of Asian nongovernmental organizations on identifying the root causes of development failure in the region and building the capacity of civil society organizations to function as strategic catalysts of national- and global-level change. He is a major contributor to the report of the International Forum on Globalization on Alternatives to Economic Globalization.
Criteria for judging the book……….
From the very first day of joining Rural Management the theory of injustice was incorporated among ourselves. The main objective of this course is to help the rural managers towards the just world in every sense.how can we as a rural manager can create a more sustainable, and at the same time a more economically and socially just world? In his revised edition of When Corporations Rule the World, David Korten presents us with a brilliant and incisive analysis of the problem, the challenge, and the opportunity.
The first (1995) edition of When Corporations Rule the Worldawakened many Americans to the destructive systemic impacts of the global economic system and the depths of the structural problems. Coming from a self-described conservative with an extensive background in international development and economics,it offered a thorough and extensively documented analysis capable of swaying even hard-core laissez-faire advocates.
The new 2001 edition has analyzed the growing gap between the rich and poor, the global citizen movement against corporatization and provides a context within which to discuss the role of spirit and culture in distinguishing between a society oriented towards capital versus one oriented towards people.
For anyone who wants to know the hard facts about globalization, this is a real “must read” book which has a good exposure with fabulous statistics. The book is full of statistics like the following:
“A Nike shoe costing from $75-$ 135 actually costs Nike just $5.60 to produce. Of this entire price the 3rd world worker gets $0.15 h!!!!.”
Summary
When Corporations Rule the World explains how economic globalization has concentrated the power to govern in global corporations and financial markets and detached them from accountability to the human interest. It documents the devastating human and environmental consequences of the successful efforts of these corporations to reconstruct values and institutions everywhere on the planet to serve their own narrow ends. It also reveals why and how millions of people are acting to reclaim their political and economic power from these elitist forces and presents a policy agenda for restoring democracy and rooting economic power in people and communities.
David Korten argues effectively that corporations, originally designed to improve work collaboration and business financing, have become Frankenstein monsters that we unwittingly allow to corrupt democracy, diminish citizen rights, impinge on human freedoms, and weaken democracy because with no checks and balances and no implicit morality, the single-minded pursuit of profit, growth and competitive advantage compels them inexorably to do so.
The solution, once we educate people that corporate power is a problem, is to revoke some corporate charters and change corporation laws so that corporations once again become our obedient servants instead of our masters, and once again serve their intended and important purpose: to facilitate investment in business and to allow people to work effectively ' in company'.
Are you against Imperialist Globalization?
Korten sounds that alarm that globalization like the WTO takes away the sovereign rights of individual nations. Along with many others he sees Corporations as “sitting above” the nation state.
This is where I would disagree. While globalization is the process through which these mega corporations go around ripping off the third world—we have yet to see corporations mounting their own military armies when they come into conflict with other corporations(that we are going to see in subsequent reading).
We see imperialism as a world process, not just capitalism on a world scale. Imperialism is the next higher stage of capitalism. While corporations can be spreaded in different countries—they remain rooted in their own nation state. In fact the state is an important arena of struggle between contending national corporations—with the state often stepping in to bail out industries, bankrupt companies etc.—all dependent on what is in the national interests. The state is an extremely important arena in the struggle between corporations. Here battles go on over Gov. policy towards ailing industries, or bankrupt countries, over how monetary, financial and trade agreements are determined. That said, as anti-imperialists we were surprised to find only one reference to “imperialism” in the entire book—and this was a quote by someone else.
Locating the U.S. in the Larger World
The fact that can never be refused to be confessed the predominance of America in shaping the global economy & its institutions since World WarII. All the strengths & dysfunctions of the global system have got the tendency to be revealed in the USA, then in the rest world.
The United States has a special role in globalization, a role to which we have paid scant attention so far. The role is this: The United States is the dominant player.
When politicians talk about securing a grand destiny for the U.S. in this century, they are not speaking as representatives of a country of under-dogs seeking finally to make good in the world. They are talking about a national economy that consumes a terribly disproportionate share of the world's resources, and one that enjoys a standard of living so high that the poor of the U.S. "enjoy" resources that make them seem rich by the standards that prevail throughout the developing world.
Ironically, another answer is a failure of Americans to think globally.
Korten exhibits an American distaste of big government, without noticing that the U.S. has one of the most decentralized state systems on earth. This decentralization has accomplished not local "empowerment" (a word that deserves a long vacation) but fragmentation, duplication, and bidding wars for corporate investment
A ROUGE FINANCIAL SYSTEM
In his book, Korten has analyzed the delinking money from the real value, in the context of global financial system. The historic Bretton Woods conference that gave birth to World Bank &IMF & the melding of computerization & globalization in a broader manner.
Do you want to create money without creating value? You have two options either by creating debt or by bidding up asset values.
The Money Game
The world's most powerful instrument of governance is not a government. Nor is it a global corporation. Rather it is a global financial system that is running dangerously out of control.
Each day half a million to a million people--primarily Western Europeans, North Americans, and Japanese--arise as dawn reaches their part of the world, turn on their computers, and leave the real world of people, things, and nature to immerse themselves in playing the world's most lucrative computer game: the money game. As their computers come on line, they enter a world of cyberspace constructed of numbers that represent money and complex rules by which those numbers can be converted into a seemingly infinite variety of financial instruments, each with its own distinctive risks and reproductive qualities. Through their interactions, the players engage in competitive transactions aimed at acquiring for their own accounts the money that other players hold.
Not only is the money game challenging and fun, the play money it generates can be exchanged for real money to buy things from people who work in the real world--lots of things. Unfortunately for the rest of us, though it is played like a game and the transactions involve nothing more than moving numbers from one electronic account to another through a global web of computers, the money game has enormous real consequences. Take the recent Mexican peso crisis as an example.
Corporate Cannibalism………
The global economy has become like a malignant cancer, advancing the colonization of the planet's living spaces for the benefit of powerful corporations and financial institutions. It has turned those once useful institutions into instruments of a market tyranny that is destroying livelihoods, displacing people, and feeding on life in an insatiable quest for money. It forces us all to act in ways destructive of ourselves, our families, our communities, and nature. This destructive process is driven by a combination of institutional forces and an extremist ideology of corporate libertarianismthat invokes the theories of Adam Smith and market economics to advance policies that systematically undermine both the market and democracy.
In this era of corporate, the quickest way to make the kind of profit that this so called system wants is, to capture & also cannibalize the existing values from a weaker market player.Weaker it is in the sense because it provides own employees a secured well playing jobs with a commitment to invest in the future, running with a fully funded retirement trust fund. Such companies are sustainable over the long run. They are being replaced by a special breed of extractive instructor, namely the corporate rider, specialized in preying on established corporations. These raiders identify a company traded on a public stock exchange & very importantly they are well managed & fiscally sound. After this, the raider may form a new corporation as a receptacle for the acquired company which is financed almost completely with debt & has little or no equity. The borrowed funds are used to buy shares of the target company in a quiet manner at the prevailing market price up to the maximum permitted by law. The last weapon they use is they offer the board of directors to buy the outstanding shares. Thus the acquired company is getting purchased by using its own assets to secure the loans used to buy it.
In spite of all these above mentioned facts if a company goes to meet social responsibility the result may be the same as The Stride Rite Corporation, loosing 65 percent income in the very thirteen tears as a consequence of the initiatives taken by Arnold Hiatt, the then CEO, to serve the minor community of America. Basically it established plants in remote & rural areas offering well-paying jobs for minorities but soon the whole strategy was changed, it moved its plants abroad to take the advantage of low cost labour.
And the result is doubled sales. Ervan Shames expressed, “Putting jobs into places where it does not make economic sense is a dilution of corporate & community wealth”(pg 203)
I think Globalization strengthens tendencies toward global scale monopoly rather increasing the competition, do you? (This is my point of view, not others)
Economists consider a domestic market to be monopolistic when the top four firms account more than 40 percent sales. Aren’t the following data supporting my statement?
92 percent of the US appliance market is controlled by four companies (Whirlpool, GE, Electrolux/WCI & Maytag)
More than 66 percent of US revenue passenger miles is accounted to four airlines only namely United, American, Delta& North west.
In the automotive, airline, aerospace, electronic components, electronics & steel industry, the top five firms control more than 40 percent of sales.
Concentration without centralization………
May be there are variations in approach but the world’s most successful transnational corporationsbe it Japanese or European or American------the formula is same in structuring the global capitalism more or less by those common but fruit giving means, i.e. downsizing staffs & contacting out, using computers in order to bring out the automation (off course to reduce staff & inventory), mergers & acquisitions etc.
Thus it is possible that the aggregate sales of world’s ten largest corporations in 1991 exceeded the total GNPof the worlds 100 smallest countries! General Motors achieved 133 billions revenue in 1992 that roughly equaled the combined GNP of Tanzania, Ethiopia, Nepal, Bangladesh, Zaire, Uganda, Nigeria, KenyaPakistan.
Retail power, the latest drama………
The mass retailers like Wall Mart, Home Depot are playing notoriously against each other & abruptly shifting their sourcing from domestic firms too low- labor cost countries like Bangladesh or China.
The corporations attitude may best be described in concise by referring to Adam Smith,
“People of the same trade meet together, even for merriment & diversion, but the conversion ends in a conspiracy against the public, or in some contrivance to raise prices.”
Why is Corporate Globalization Bad? Other aspects…..
Do you know where garments paid for with your tax dollars were made?
Are cities and states buying products that are made in a socially responsible and environmentally sustainable manner? Or are our public institutions stuck in business-as-usual, carelessly purchasing goods that have been made under poor environmental and social conditions? These are important questions, because if we can convince institutional buyers to commit to purchasing only the most responsible and sustainable products, then we can use the power of the government purse to help build the market for green/fair goods.
Global Exchange has joined a national "Sweatfree" campaign, an effort to ensure that the clothes,
uniforms, and other products bought by our cities and states are not made in sweatshops.
We Have a Right to Know
When major corporations operate in the United States, they are required by law to disclose basic information about the impacts of their business. Companies must provide details about their pollution discharges, the kinds of chemicals they use, and the number and cause of workplace injuries. Although not foolproof for preventing abuses, these disclosure requirements create a measure of transparency that empowers communities to hold corporations accountable for their actions.