Tony Clarke, 1996, “Mechanisms of Corporate Rule”

Tony Clarke, 1996, “Mechanisms of Corporate Rule”

On the left is a map of McDonalds in Rome. The picture above is only partly in jest.

How much more powerful today? • 47 of the top 100 economies are transnational corporations (TNCs) also referred to as multinational corporations (MNCs) • 192 countries in the world, so 139 countries have a GDP that is less than the revenues of any of these 47 TNCs (in 1996) • 70% of global trade is controlled by just 500 corporations • 1% of TNCs own half the stock in Foreign Direct Investment (FDI) Clarke wrote 16 years ago

Clarke is stating that the TNCs know no sovereignty. If it is better for their bottom line to be a Dutch company today and an American company tomorrow, then that is what they will do. Nation-states compete with other states to lure corporations and their capital to their countries. This often means enacting policies that benefit the TNCs at the detriment of the public interest. “Through this process, stateless corporations are effectively transforming nation-states to suit their interests.” We also see the same thing happening between states in our country. “Race to the bottom” sovereignty

“In the 1980s, the World Bank and the IMF (International Monetary Fund) used debt renegotiations as a club to force the developing nations into implementing structural adjustment programs (SAPs) in their economies…The SAP measures included large-scale deregulation, privatization, currency devaluation, social spending cuts, lower corporate taxes, expansion of the export of natural resources and agricultural products, and removal of foreign investment restrictions…In effect, the SAPs have become instruments for the recolonization of many developing countries in the South in the interest of TNCs and banks.” These policies are the Washington Consensus policies spoken of at the beginning of the course. SAPs: Free-market, Washington Consensus policies that poor countries are required to adopt in order to receive loans or favorable terms from the World Bank or the IMF. IMF and the world Bank

Joseph Stiglitz in Globalization and its Discontents (2002) blamed these policies for the East Asian Economic Crisis of 1997, which occurred one year after Clarke published this article. Critics of the economic policies and ideologies of the IMF and World Bank argue that their policies increase poverty and reduce the standard of living in countries where these policies are implemented. Since 1980 there has been a push to implement these same policies in the United States with much the same effect. Other criticisms

“In country after country there has been a massive deregulation of finance and mergers between commercial and investment banking.” This was written in 1996. In 1999, Congress repealed the Glass-Steagal Act which had prevented these mergers. The Glass-Steagal Act had been put in place in the aftermath of the Great Depression in 1933 to control speculation. Global finance

“…transnational manufacturing firms can quickly move their operations around the world, in search of cheap labor, more profitable investment opportunities, and freedom from the demands of unionized workers…there is a very real danger that the forces of global competition will drag workers everywhere down to the lowest common wage standards.” Global industrial production

“Undercutting the capacity of nations to meet the basic food needs of their people.” Transnational food corporations are demanding an end to the system of agricultural subsidies, regulation, and protection that has maintained a relatively cheap food policy in the industrial North. To pay debts, poor countries in the South “are forced to turn over valuable agricultural lands to transnational agribusinesses and to convert to cash-crop production.” “’Export or die’ is the message, but ‘export and die’ is the reality.” Similar to Southern sharecroppers during reconstruction forced to grow cotton to maintain their credit. Because they could not eat their cotton, they were forced to buy food on credit from the same general store who was extending the credit. Global agricultural production

Corporations taking on healthcare and education • This was one of the symptoms of impending nation-state failure that Rotberg talked about. • “Most people now feel that they have lost control over their economic, social, and ecological future. This is not only true among the poor majority in the South, following the damage done by massive SAPs, but increasingly among the majority of working, middle-class peoples in the North.”

“The emergence of the corporate state, however, wherein the reins of democratic governance have been taken over by corporations and banks, has completely disfigured and distorted the responsibilities of the national governments. The moral and political obligations of nation-states to intervene in the market economy have been eliminated (think Gailbraith and the absence of power in economic thought) in order to ensure that the entire national system – economic, fiscal, social, cultural, environmental, political – functions for the purpose of providing a profitable climate for transnational investment and competition in the new global economy.”

Clarke expresses concern with the potential for a rise in right-wing nationalism. Is the Tea Party a right-wing nationalist group? Final thought

Ideally, we have quality statesmen implementing our foreign policy. With effective foreign policy, there is no need for defense policy. From this perspective, military actions are the result of failed foreign policy. Unfortunately, this is a naïve and idealized vision of international relations. There will always be disagreements between nations with both sides seeing themselves as holding the moral high ground. For decades, imperial powers dominated colonies with the rationalization of their bringing them civilization and Christianity. Later, this justification was replaced with industrialization and democracy. Like Jack Abramoff we see ourselves as the good guy. Chapter 18 Foreign and defense policy

Protectionism – “A trade policy wherein a country closes off its markets to foreign goods.” Usually these policies are used to protect infant industries as countries attempt to develop new industries through Import Substituting Industrialization (ISI). The goal is to reduce the developing country’s trade imbalance with Western countries. Usually they take the form of tariffs, duties, quotas and other barriers to entry. In a mercantilist scheme the goal is to have the economic injections of exporting while limiting the leakages of importing. US as isolationist

Non-interventionism – A policy position that avoids alliances with other countries and avoids war except in self-defense. Diplomacy is still pursued, but there are no agreements that might drag the country into war in defense of an ally. • The US initially followed a non-interventionist policy in both WWI (1914-1918) and WWII (1939-1945), although we did supply arms to the Triple Entente and the Allied armies. • US enters WWI following sinking of US merchant ships and release of the Zimmermann telegram (1917) • US enters WWII following the attack on Pearl Harbor (1941) US as isolationist

Isolationism – “A national policy of avoiding participation in foreign affairs.” It would be reasonable to look at the relationship in this manner: Protectionism (economic policy) + Non-interventionism (military policy) Isolationism (foreign policy) US as isolationist

Monroe Doctrine: “1823 pledge that the United States would oppose attempts by European states to extend their political control into the Western Hemisphere.” It is generally believed that the policy was relatively meaningless as the US likely did not have the firepower to enforce the Doctrine. France and England were busy fighting between themselves, the Spanish had squandered their wealth, and other nations had little interest in imperial conquest in the Western World. US as isolationist

Alexander Hamilton, the 1st Secretary of State outlined a plan for the industrialization of the Northeast with protectionist tariffs to help infant industries. Tariffs: “Taxes on imported goods.” Protectionist policies

Reciprocity: to treat foreign traders in the same way that foreign countries treat American traders. This is what people are usually talking about when they talk about “fair trade”. Most favored nation status: Guarantees “that a country’s imports into the United States would be given the lowest possible tariffs, or taxes on imported goods.” Granting most favored nation status without reciprocity is unilateral disarmament. Free trade terminology

“Concept developed by President Theodore Roosevelt early in the twentieth century declaring that it was the responsibility of the United States to assure stability in Latin America and the Caribbean.” This was the beginning of US interventionist policies in Latin America and East Asia. It was the beginning of American imperialism as US military force was used to back up the economic power of US corporations. Roosevelt corollary (of the Monroe Doctrine)

Roosevelt corollary

“To President Taft, this was not economic imperialism because the United States was not trying to exploit others, but rather aiming to bring prosperity to both the local population and American investors.” It was the president of United Fruit, Sam Zemurray, who infamously said of Honduran officials; “A mule costs more than a deputy.” Campos and Root Dollar diplomacy

Collective security: “The idea that an attack on one country is an attack on all countries.” A theory of defense that replaces the balance of power. Wilson’s 14 points and the Treaty of Versailles. Wilson was a major player in the writing of the peace agreement. Many of the 14 points were unworkable, only three remained. Ratification was delayed by concerns regarding Article 10 which involved collective security. The Treaty was held up in the Foreign Relations Committee by Republican Majority Leader, Senator Henry Cabot Lodge who openly admitted he hated Wilson. Wilson went on a nationwide tour to promote the Treaty with the public (bully pulpit) when he suffered a stroke. Without Wilson and the bully pulpit, Lodge was able to defeat the Treaty. League of Nations

Hiroshima and Nagasaki – Not the most civilian deaths in Japan. The US bombed the wooden cities of Japan with incendiary bombs for 7 months with an estimated 500,000 Japanese deaths. Truman’s decision to drop the bomb is believed to have been timed for two purposes. Achieve surrender quickly in order to halt the forward progress of the Soviet Union, and to demonstrate to the Soviets that the United States now had an atomic weapon. World war II

Bretton Woods System – International financial system developed after WWII to stabilize economic relationships and hopefully avoid future wars. Economic stability = political stability. Developed the IMF, the World Bank and GATT (WTO) United Nations: Remained largely ineffective due to US and Soviet veto power in the UN security council Internationalism replaces isolationism

“to stabilize international currency transactions.” Focus on exchange-rates, international trade, and economic co-operation. Headquartered in Washington DC, Director is from Europe. International monetary fund (IMF)

“to provide loans for large economic development projects.” HQ in Washington DC President nominated by US President. Former Chief Economists include Larry Summers and Joseph Stiglitz World bank

“facilitate international trade negotiations and promote free trade.” World Trade Organization (WTO) was added as new obligations to members. GATT was a set of rules, WTO was an institutional organization with a court for arbitration. GATT was about the trade of goods, the WTO expanded into agreements on trading services and enforcing intellectual property rights. Brazil and India had had property rights and state owned drug companies. These countries saw access to medication as being a basic human right and drug patents as inappropriate. They were forced to change their laws regarding generic drug manufacturing. Once India changed its laws, American companies were quick to buy Indian companies, outsourcing manufacturing and rapidly increasing the price of generic medications. General Agreement on Tariffs and Trade (GATT)

“US policy initiated in 1947 to provide economic assistance and military aid to countries fighting against communist revolutions or political pressure.” The primary goal of the Truman Doctrine was the containmentof communism through a system of sticks and carrots. The common concern of the time was the “domino theory” – a belief that if one country falls to communism that its neighbors will be soon to follow. The Cold war and the Truman Doctrine

The United States used its economic power to extend loans to those countries that remained Pro-American and anti-communist through the Cold War. Loans could be used for reconstruction or repressing opposition. We often found ourselves supporting authoritarian regimes in this period out of fear that they would become communist otherwise. Marshall Plan: The provision of US economic aid for the rebuilding of Western Europe after WWII. Soviets did not participate, Warsaw Pact nations were not rebuilt to the scale of NATO nations. The carrot

Two forms: • Support for revolution, civil war, or coups. Often covert and usually operating through the CIA. CIA covert operations for regime change were usually the response to socialist regimes, the nationalization of the oil industry, or both. Too many to name here, but the list includes Cuba, Chile, Argentina, Brazil, Venezuela, Iran, Iraq, and Afghanistan. • Proxy wars: The US and the Soviet Union are patrons for third parties who act as substitutes for a conflict. Direct engagement between the nuclear powers is unthinkable and avoided. The Arab-Israeli Conflict is an example of a proxy war with the Israelis being our proxy and the Arab states being the proxy for the Soviet Union. This involvement led to the 1973 oil embargo of the US. The stick

As we discussed earlier, the use of military means is often seen as a failure of diplomacy. The job of the State Department is peace, the job of the Department of Defense is war. These separate departments have different perspectives, interests, and agendas. The purpose of a National Security Adviser is to provide the President with an objective opinion of an appropriate course of action. Republicans tend to appoint National Security Advisers with experience in the military or the Defense Department. Democrats favor those with knowledge relating to international trade, economic development, or foreign relations. IE Johnson had WW Rostow whose expertise was in 3rd world economic development. LtGen Brent Scowcroft served in this capacity for both Gerald Ford and George HW Bush. http://en.wikipedia.org/wiki/National_Security_Advisor_(United_States) National security adviser

Lobbying for better arrangements through foreign policy. For example, PhRMA heavily lobbied the United States Trade Representative (USTR) to stand fast on WTO negotiations regarding intellectual property rights. This proved to be embarrassing for the US when we stood alone in opposition to an amendment that would allow country’s with a serious AIDS crisis to get cheaper generic medications. Bill Clinton passed EO 13155 http://www.commondreams.org/headlines/051100-01.htm Business interest groups

1942-1964 Workers would migrate north for work, work the agricultural season, then go home. This was the only way that farmers of the time could get their crops harvested. American workers made substantial wages and women and children did not need to work (the only time in our history this is true) This is the kind of policy that they are talking about when we hear about worker programs. However, it could also apply to engineering jobs that foreign workers would be willing to take at a much lower wage. While most other nations have socialized or subsidized higher education, American students typically leave school tens of thousands of dollars in debt. Mexican Contract Labor Program

Strategic Arms Limitation Talks – President Obama had negotiated a treaty for arms reduction with Russia but the Republicans in Congress were blocking its passage. These Republicans were chastised by former Republican secretaries of State Henry Kissinger (Nixon) and George Schultz (Reagan) Obama and the salt treaty

Hard power – coercion through military might or economic power. (sticks) Soft power – Persuasion through diplomacy and economic assistance. (carrots) power

A student once asked why the Russians would stand in the way of a UN resolution to intervene in Syria. This is a good example of conflicts of interest. The Russians would probably prefer not to be seen as supporting a brutal dictatorship, however, the Russian Naval Facility in Tartus is the last Russian military installation outside of the former Soviet Union and Syrian military officers often have Russian wives, married when they attended military training in Russia. The United States supported the corrupt Marcos regime in the Phillippines largely due to our Naval bases there. We have and/or are supporting brutal regimes throughout the world to retain access to important resources (oil, uranium, titanium, lithium, etc.) or for geopolitical strategic reasons (support for Hosni Mubarak in Egypt in exchange for support of Israel) We routinely supported brutal dictators who were pro-American for fear they might be replaced by anti-American socialists or reactionaries. When Anti-American regimes gained control we often worked for their removal via coups or revolutions. Typically, we offered assistance, via the CIA, to local strongmen. American interests abroad???

Tony Clarke, 1996, “Mechanisms of Corporate Rule”