See Also: The Enemies Of Democracy, RACHEL's Environment & Health News #725,
5/24/01 --
A key feature of the corporate anti-democracy strategy of the past
20 years is reduced government funding for needed research, thus
inviting corporate funders to step in. This is what "tax cut"
really means. Tax cuts are not primarily aimed at giving families
another $300 to spend -- they are mainly intended to reduce the
capacity of governments to fund needed public services, such as
medical research. As a result, corporations are asked to provide
the funds and thus they gain an opportunity to influence the
national research agenda and the results.
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ESSAY
WHY WE MUST STAY SILENT NO LONGER
Noreena Hertz
Sunday April 8, 2001
The Observer
Noreena Hertz is one of the world's leading young thinkers, whose
agenda-setting new book on corporate power [The Silent Takeover:
Global Capitalism and the Death of Democracy] is already sparking
intense debate on both sides of the Atlantic. In this remarkable
special essay for The Observer she argues that governments'
surrender to big business is the deadliest threat facing democracy
today.
In the hullaballoo following the American presidential election,
with hanging and pregnant chads, and ballot forms that needed a
PhD to decipher, it was easy to forget something that was in many
ways even more alarming than confusion over who won. More than 90
million Americans had not bothered to vote -- that is, more than
the combined population of England, Ireland and Scandinavia.
Low turnout is not just a US phenomenon. In the UK, the landslide
victory for Labour in the election of 1997 was achieved on a
turnout of 69 per cent -- the lowest since the war. During the
European elections in 1999, less than half of the electorate
voted, and less than a quarter came out in the UK. In the Leeds
Central by-election last year only 19 per cent of those eligible
to vote did so. Predictions for the forthcoming general election
are that turnout will fall to the lowest level yet.
People have lost faith in politics, because they no longer know
what governments are good for. Thanks to the steady withdrawal of
the state over the past 20 years from the public sphere, it is
corporations, not governments, that increasingly define the public
realm.
Unregulated or under-regulated by governments, corporations set
the terms of engagement themselves. In the Third World we see a
race to the bottom: multinationals pitting developing countries
against each other to provide the most advantageous conditions for
investment, with no regulation, no red tape, no unions, a blind
eye turned to environmental degradation. It's good for profit, but
bad for workers and local communities. As corporations go bottom
fishing, host governments are left with little alternative but to
accept the pickings. Globalisation may deliver liberty, but not
fraternity or equality.
At the headquarters of the World Trade Organisation on the banks
of Lake Geneva we see rulings being made in the names of the free
market that limit states' abilities to safeguard their people's
interests. When the European Union tried to ban synthetic hormones
from beef on the basis of strong evidence that they could cause
cancer, reduce male fertility and in some cases result in the
premature onset of puberty in young children, it found itself
unable to do so thanks to a WTO ruling which put the interests of
Monsanto, the US National Cattlemen's Association, the US Dairy
Export Council and the National Milk Producers Federation first.
Time and time again the WTO has intervened to prevent governments
from using boycotts or tariffs against companies that they find to
be acting in ethically or environmentally unacceptable ways.
In Germany, where revenue from corporate taxes has fallen by 50
per cent over the past 20 years, despite a rise in corporate
profits of 90 per cent, a group of companies, including Deutsche
Bank, BMW, Daimler-Benz and RWE, the German energy and industrial
group, thwarted in 1999 Finance Minister Oskar Lafontaine's
attempt to raise the tax burden on German firms, threatening to
move investment or factories to other countries if government
policy did not suit them. `It's a question of at least 14,000
jobs,' threatened Dieter Schweer, a spokesman for RWE. `If the
investment position is no longer attractive, we will examine every
possibility of switching our investments abroad.' Daimler-Benz
proposed relocating to the US; other companies threatened to stop
buying government bonds and investing in the German economy.
In view of the power these corporations wield their threats were
taken seriously. Within a few months Germany was planning
corporate tax cuts which would reduce tax on German companies
below US rates. As one of German Chancellor Gerhard Schröder's
senior advisers in Washington commented at the time, `Deutsche
Bank and industrial giants like Mercedes are too strong for the
elected government in Berlin.'
In the US, the quid pro quo being exacted by George W's corporate
backers is becoming all too clear. Since being elected, the
President has opened up the Arctic National Wildlife Refuge to oil
drillers, retreated from his promises of protecting forests, made
moves to weaken the requirement on mining companies to clean after
themselves and in recent weeks both reversed a campaign pledge to
regulate CO 2 emissions from power plants and trashed the Kyoto
treaty on global warming. The interests of the US people suborned
to those of the major US energy giants that bank-rolled him: $47
million was all it cost.
Here in the UK public services are increasingly being handed over
to private corporations to manage and fund. The Government has
already withdrawn from running the railways, soon it'll be
withdrawing from air traffic control. Private health insurance is
being pushed by the Conservatives as a way of staving off the
collapse of our National Health Service. Even the education of our
children, once the most sacred preserve of the state, is
increasingly delegated to the private sector.
Although it remains too early to see the consequences of the
privatisation of public services played out in full, initial
indications are troubling. The rail crashes, for which Gerald
Corbett, when chief executive of Railtrack, put the blame on the
way the railway `was ripped apart at privatisation'; Angel School
in Islington, a primary school now being run by the private
company Cambridge Education Authorities, under threat of closure
despite the fact that it has constantly improved its educational
results, with the parents and staff left with no real means of
redress or recourse; Nottingham University's acceptance of £3.8m
from British American Tobacco to set up, of all things, a school
of corporate social responsibility; and the US model of healthcare
proposed as a blueprint for our health reforms, despite the fact
that 45 million Americans currently do not have health insurance
and 25 per cent of the chronically ill there do not have adequate
coverage.
This is the world of the Silent Takeover, a world in which
governments can no longer be relied on to protect the people's
interests. Blinded by the allure of the market, they now put
corporate interests first.
So it is left to us, through individual action, to take the lead.
In a world in which power increasingly lies in the hands of
corporations rather than governments, the most effective way to be
political is not to cast one's vote at the ballot box but to do so
at the supermarket or at a shareholders' meeting.
Because, when provoked, corporations respond. While governments
dithered about the health value of GM foods, supermarkets faced
with consumer unrest pulled the products off their shelves
overnight. While nations spoke about ethical foreign policy,
corporations pulled out of Burma rather than risk censure by
customers. George W may have backed down on his campaign pledges
to limit CO 2 emissions, but BP, a corporation, continues to
spearhead their reduction. And when stories broke over the world
of children sewing footballs for Reebok for a pittance, what did
governments do? Nothing. But the corporation, fearing a consumer
boycott, stepped in with innovative plans for dealing with the
child labour problem.
Delivering a quality product at a reasonable cost is not all that
is now demanded of corporations. The key to consumer satisfaction
is not only how well a company treats its customers, but
increasingly whether it is perceived as taking its
responsibilities to society seriously. People are demanding that
corporations deliver in a way that governments can't or won't.
It is not just the brown-rice-eating, sandal-wearing brigade who
are making demands: 60 per cent of UK consumers are prepared to
boycott stores or products because they are concerned about their
ethical standards. Three-quarters of British consumers would
choose a product on green or ethical issues. More than 75 per cent
of Americans would boycott stores selling goods produced in
sweatshops. Monsanto was brought to its knees by a coalition of
eco-warriors and Britain's Women's Institute members. In America,
the Interfaith Centre on Corporate Responsibility, with $110
billion at its disposal, is among the ethical investors now using
shareholder power to `regulate' corporate manoeuvres and get
corporations to do good.
Can we entrust the public interest to consumer and shareholder
activists? Can shopping adequately replace voting? No, it cannot.
The world cannot be simplified to the extent that consumer
politics tends to demand. Is GM food necessarily always bad for
consumers or the environment? Or could this technology be
harnessed for good? Child labour may be distasteful to Western
expectations, but does boycotting goods made with child labour
improve or exacerbate the lot of Third World children?
Trusting the market to regulate may not ultimately be in our
interest. Moreover, populist politics can easily result in
tyranny, not necessarily of the majority, but by those who can
protest most effectively. Rather than empowering all, consumer and
shareholder activism give greatest voice to those with the most
money in their pockets, those with the greatest purchasing power,
those who can switch from seller to seller with relative ease.
Consumer and shareholder activism is a form of protest that
favours the middle classes and the outpouring of dissatisfaction
of the bourgeoisie.
Nor should the takeover by corporations of governments'
responsibilities be viewed as a reason for governments to
withdraw. Despite the roles corporations are beginning to play in
the social sphere, despite the fact that they may be able to play
some role in alleviating poverty and inequity and protecting the
environment, social investment and social justice will never
become their core activity. Their contribution to society's needs
will always remain at the margins. Corporate social responsibility
cannot be thought of as a reasonable proxy for state
responsibility.
In Japan's Mitsubishi Villages, Nissan Towns, and Toyota Cities
the Japanese keiratsus -- trading companies -- used to provide
school vouchers, housing, and health care. In the wake of the
Asian financial crisis, the firms are withdrawing support from the
community. The head of Toshiba says that they are no longer `a
charity': entire communities are suffering. The suicide rate in
Japan rose by a third between 1997 and 1999, a testament to the
social strain.
As more and more of the public realm is handed over to the private
sector to manage, we need to see the Japanese case as a cautionary
tale. If this move by Western corporations towards greater
responsibility and care is predicated solely on the continuing
strength of the global economy, on the fact that philanthropic
acts are essentially tax write-offs against balance sheets firmly
in the black, is it not likely to be reversed when times once
again become difficult? Companies will simply not be able to
justify staying involved to their shareholders, unless they
calculate that withdrawal from their social commitments will be so
damaging to their reputation as to be more costly than maintaining
them. The corporate provision of welfare risks dependence on the
continued generation of profits.
We must also ask ourselves whether a price will be exacted for
acts of corporate benevolence. Today Microsoft puts computers in
our schools; will it tomorrow determine what our children learn?
When Mike Cameron, a 19-year-old student, turned up at Greenbriar
High School in Evans Georgia on official `Coke Day' wearing a
T-shirt with a Pepsi logo he was suspended. Channel One Network is
now notorious for having provided 12,000 American schools with
money and goods in exchange for beaming their commercials directly
into the classroom. But do we want to live in a world in which
commercialisation takes advantage of shortages in funding and
rides on the back of children's' learning? This is not about
ethics, this is about business. Sometimes the two will coincide,
but clearly not always.
Corporations are not society's custodians: they are commercial
entities that act in the pursuit of profit, not ethical
considerations. They are morally ambivalent. Often their business
interests happen to coincide with society's, but this is by no
means always the case. Governments on the other hand are supposed
to respond to citizens. Downgrading the role of the state in
favour of corporate activism threatens to make societal
improvements dependent on the creation of profit. And governments
that stand back while corporations take over, without being
willing to set the terms of engagement or retain the upper hand,
are in danger of losing the support of the people, whose feeling
of lack of recourse or representation is showing itself in a wave
of protest that goes beyond individual acts of consumer and
shareholder dissent.
Take the 40,000 Frenchmen who gathered outside the trial of French
farmer José Bové or Granny D, the 91-year-old American
great-grandmother who walked across America to protest against the
relationship between big business and politics and was greeted by
thousands upon her arrival at Washington DC or the Seattle Prague
and May Day rioters that we saw on our television screens last
year -- all are examples of a global uprising of people who now
see themselves as politically disposed.
All over the world, people are beginning to lash out against
corporations, governments and international organisations alike.
In a world in which politicians now all sing from the same hymn
sheet, people who want to change the hymn have to go outside the
church.
But like consumer and shareholder activism, other forms of protest
should not be idealised. Their limitations are clear. The
commonality of interests often centres on a shared general
disillusionment, rather than specific concerns or proffered
solutions. In some cases protesters are motivated by a sense of
common good, but in others they are concerned only with
safeguarding their own interests, or those of a limited group as
in the British fuel protests of autumn 2000.
Pressure groups need to play to the media, which encourages
posturing, the demonisation of `enemies', a massive
oversimplification of issues and the choosing of fashionable
rather than difficult causes to champion. Issues such as forest
biodiversity, nitrate leaching or soil erosion in Africa hardly
ever get a look in. And, as one of London's May Day protesters
told me: `There has to be trouble, otherwise the papers won't
report it.'
But despite the limitations of protest, despite its failure to
balance effective means with democratic ends, despite the fact
that it can never by itself be a long-term solution, the crucial
question is whether protest can change politics in the same way as
it is beginning to change the corporate agenda. Can protest put
the people back into the forefront of politics?
There are signs that perhaps it can, and that perhaps the
political corpse is beginning to twitch. In June of 1999 in
Cochabamba, Bolivia's third largest city, the water authority was
privatised, following recommendations from the World Bank. At once
the price of water tripled, which meant that a typical worker was
spending almost a quarter of his or her monthly wage on water
charges. People gathered on the streets and protested, there was a
four-day general strike, bill payment was boycotted, and 30,000
people marched through the city centre in anger. Finally, in April
2000, the privatisation of the water supply was revoked. Back in
1985, government leaders had asked the Bolivian people for
patience and sacrifice as it implemented neo-liberal reforms.
Fifteen years later, it seemed that their patience had run out.
[See "SOAKING THE POOR S.F.'s Bechtel wants the Bolivian people
to pay for its bad water investment",
../co-globalize/waterBolivia.html --ratitor]
In New Zealand, a country that embraced free market fundamentalism
with enthusiasm in the early 1980s, the new Labour administration
is implementing changes that for the past 20 years would have been
considered heretical. Workplace accident insurance has been
renationalised, a state-run People's Bank will open soon in which
personal banking fees will be 20 to 30 per cent lower than those
charged by private banks, tax cuts for high earners have been
reversed and trade union rights boosted. As Prime Minister Helen
Clark has said, New Zealand's experiment in market fundamentalism
has failed.
In the US we are also seeing the beginnings of a turnaround.
Prompted by the complete failure of California's privately owned
power distributors to deliver electricity at a fair price to
citizens, or often to deliver it at all, and experiencing their
first state-wide blackouts since the Second World War, Californian
politicians are contemplating a once unthinkable change of course:
to regain control of the very transmission system that the state
privatised five years ago. Even Ronald Reaganland is breaking with
its past.
Small signs, it is true, and for now focused on renationalisation
rather than issues of global concern, but they represent cracks in
an ideology that had become hegemonic over the past 20 years, the
beginnings of a recognition that there has to be new thinking.
But while in faraway lands the unthinkable is being thought, here
at home do we have any signs that politicians are questioning
their certainty that the private sector will be our salvation? Any
willingness to admit the dangers of this silent takeover, this
world in which corporations not governments are increasingly
making the rules? No.
Looking at the choices on offer at the forthcoming election, we
see all too clearly the extent of the political consensus. A
reduced state, with an ever greater dependence on corporations for
solutions, has become the standard line touted by all parties.
As far back as 1968, Margaret Thatcher said in a famous speech:
`There are dangers in consensus: it could be an attempt to satisfy
people holding no particular views about anything. No great party
can survive except on the basis of firm beliefs about what it
wants to do.' The irony is that by buying so wholeheartedly into
the form of capitalism initiated by Thatcher and Reagan, British
politics has fallen into this very trap, leaving us the electorate
increasingly alienated from and distrustful of politics, and
providing us with little alternative but to protest rather than
vote. Until the Government regains the trust of the electorate,
the people will continue to scorn democracy. Until the state
reclaims the people, the people will not reclaim the state.
Noreena Hertz is the Associate Director of the Centre for International
Business and Management at the Judge Institute of Management Studies,
University of Cambridge. Now aged 33, she graduated from University College,
London, with a degree in philosophy and economics in 1987, when she was 19,
before taking an MBA at the Wharton School of the University of
Pennsylvania. Dr Hertz then moved to St Petersburg to help set up the city's
stock exchange and help tutor Boris Yeltsin's advisers in market economics
following the overthrow of communism. Returning to Britain, she completed
her PhD at Cambridge and, in 1996, then went to the Middle East to head a
team of 40 researchers developing the role that the private sector might
play in the peace process.
Dr Hertz's book The Silent Takeover: Global Capitalism and the Death of
Democracy, is published by Heinemann at £12.99. The accompanying Channel 4
film, The End of Politics will be broadcast as the curtain raiser to Channel
4's general election coverage.
Guardian Unlimited © Guardian Newspapers Limited 2001