Chapter 11. Emerging Corporate Imperialism

This is a chapter from the book, Economic Democracy; The Political Struggle for the 21st Century. Visit that link for more information about the book.

With corporate fronts established in over 39 tax havens around the world and firm neo-mercantilist control of the national policies of both strong and weak nations (reversible if full and true democracies evolve), corporate industries began moving offshore, essentially becoming stateless, and laying the foundation for corporate imperialism.

To avoid sharing those quasi-aristocratic privileges with labor, control of the economies of other countries from the bastion of protective laws of another nation is the norm. Different forms of this process have constituted proto-mercantilism, mercantilism, and neo-mercantilism for over 800 years. Today it is taking the form of corporate imperialists moving their wealth offshore where they can avoid paying their share of taxes, avoid environmental laws, extort subsidies from desperate communities, pay subsistence wages to extract and process rich natural resources, and sell their manufactured products in any market. Mercantilist unequal trade enforced by the military power of the state is the very signature of a colonial empire.

Fifty years after the Bretton Woods agreement established the rules for post-WWII banking, the respected U.S. News and World Report commented: “Under the Bretton Woods system, the Federal Reserve acted as the world’s central bank. This gave America enormous leverage over economic policies of its principal trading partners:”1

Currencies produced by one group for use by another have been instruments of exploitation and control. For example, whenever Britain, France, or one of the other colonial powers took over a territory during the “scramble for Africa” towards the end of the [18th] Century, one of their first actions was to introduce a tax on every household that had to be paid in a currency that the conquerors had developed for the purpose. The only way the Africans could get the money to pay the tax was to work for their new rulers or supply them with crops. In other words, the tax destroyed local self-reliance, exactly as it was designed to do…. Very little has changed. Over 95 percent of the money supply in an industrialized country is created by banks lending it into existence. These banks are usually owned outside of our areas, with the result that we have to supply goods and services to outsiders even to earn the account entries we need to trade among ourselves. Our district’s self-reliance has been destroyed just as effectively as it was in Africa, and whatever local economy we’ve been able to keep going is always at the mercy of events elsewhere, as the current world economic crisis is making too clear.2

The rules of modern world trade (the IMF/World Bank/GATT/ NAFTA/WTO/MAI/GATS/FTAA) defined by corporations, and those rules enforced by the financial and military might of powerful nations essentially governed by those same corporations, define today’s world trade as corporate imperialism.

Besides the military, which is the final arbiter, the power of the imperial-centers-of-capital to lay claim to the wealth of the developing world rests in their subtle monopolization of finance capital. No bank in the world will loan to a country blacklisted by the World Bank. To obtain funding from any bank, developing world governments must adjust their policies (called structural adjustments) to the dictates of the IMF/World Bank/NAFTA/ GATT/WTO/MAI/GATS/FTAA/military colossus. It is specifically under the imposed structural adjustment rules of that colossus that protections for the fast developing nations were withdrawn.

Not only is the developing world locked within the parameters of the decisions of international capital, if any developed world government veers from the prescribed path, enough capital will flee to turn the economy downward, the politicians (not the subtle finance monopolists) will be blamed and—to maintain themselves within the good graces of the voters—the politicians will bend to the wishes of capital, even if it is to the detriment of the nation of their birth or of the world.

The Cold War was only an instrument of interim control as the world was guided towards the acceptance of rule by corporations with the IMF/World Bank/ NAFTA/GATT/WTO/MAI/GATS/FTAA colossus —backed by their financial and economic power and allied nations’ military power in which corporations had the dominant voice on foreign policy—enforcing its laws.

We must remember that the pre-WWII power-structure of both Germany and Japan was a corporate-dominated alliance of wealth and government to protect and expand their empires. This alliance and the violence of those empires are the defining attributes of fascism. Transnational corporations have applied the principles of fascism to their attempt at world rule. As they effectively run the major governments of the Western world, the above described banking/trade agreements/military colossus effectively rule the world. Under the umbrella of the Cold War, that colossus established an unseen (except when the military is activated) world government ruled by stateless multinational corporations superseding the laws of the most powerful countries. As it is ruled dictatorially and not democratically (labor and weak nations are essentially voiceless), that is a corporate-ruled empire.

The Legal Structure for Corporate Imperialism

Averell Harriman, Dean Acheson, and George Marshall, three of America’s leading post-WWII State Department Cold War planners, “devoted a great deal of time and energy formulating the legal structure for the transition to corporate imperialism. The General Agreement on Tariffs and Trade (GATT), signed by 28 nations in Geneva on October 30, 1947 (later to become the World Trade Organization [WTO] and to be strengthened further by the Multilateral Agreement on Investments, MAI [stalled when the world learned its true purpose but resurfacing under the General Agreement on Trade in Services {GATS}]), was the continued privatization of the commons, the legal cornerstone of this new world order:”3

[A]ny member can challenge, through the WTO, any law of another member country that it believes deprives it of benefits it is expected to receive from the new trade rules. This includes virtually any law that requires import goods to meet local or national health, safety, labor, or environmental standards that exceed WTO accepted international standards…. [Both national and local governments] must bring its laws into line with the lower international standard or be subject to perpetual fines or trade sanctions…. Conservation practices that restrict the export of a country’s own resources—such as forestry products, minerals, and fish products—could be ruled unfair trade practices, as could requirements that locally harvested timber and other resources be processed locally to provide local employment.4

The equality and transparency in world trade supposedly guaranteed by GATT, NAFTA, The WTO, GATS, or FTAA are fraudulent. While weak nations are forced to open their markets, legal structures, and financial institutions, tariffs between the organized and allied imperial-centers-of-capital remain one-quarter that between the developing world and those imperial centers and the buying power of developing world export commodities and labor continue to fall as the imperial nations continue to tighten the screws of financial, economic, diplomatic, covert, and overt warfare. Cuba was able to develop an education and health system equal to America precisely because it escaped the clutches of the IMF/World Bank and the structural adjustments they would have imposed.5 The purpose of this unspoken and disguised warfare is specifically to hold down the price of developing world resources and labor and transfer that wealth, natural and processed, to the imperial centers.a

With the intention of imposing a fait accompli upon an unaware world, negotiations on the Multilateral Agreement on Investment (MAI) is designed to grant transnational investors the unrestricted “right” to buy, sell, and move businesses and other assets wherever they want, whenever they want. It would ban regulatory laws now in effect around the globe and preempt future efforts to hold transnational corporations and investors accountable to the public. The intent of the backers (the United States and the European Union) is to seek assent from the 29 countries that comprise the OECD (Organization for Economic Cooperation and Development) and then push the new accord on the rest of the world.

GATT/NAFTA/WTO guidelines for food purity standards would be those of the heavily corporate-influenced Codex Alimentarius Commission, an obscure agency in Rome that issues advisory food standards often much weaker than those of the United States.”6 Labor leaders are essentially excluded from designing and negotiating GATT/NAFTA/WTO/MAI/ GATS/FTAA agreements and their rights are only addressed in the breach.7 World banking and trade rules are designed for corporations by corporate lawyers to obscure the real meaning, leaving affected parties all over the world to decipher what those agreements really say. For example, it was a requirement of the 1974 Trade Act that labor be included in trade negotiations but the Labor Advisory Committee was given a text of the NAFTA agreement only 24 hours before their comments were due to be filed (September 9, 1992). Those several hundred pages would have required weeks of study by the world’s best minds to be fully understood.8 The plan then under negotiation, known as the Dunkel Plan,

if approved, would give GATT a “legal personality,” known as the Multilateral Trading Organization (MTO) [later organized as the World Trade Organization or WTO], that could strictly enforce global trading laws…. MTO [now WTO] will have the power to pry open markets throughout the world…. The proposed agreement would also extend GATT oversight from “goods” (machinery for instance) to “services” (insurance, banking). In order to protect trade in services, GATT would guarantee intellectual property rights—granting protection for patents and copyrights…. MTO would have the authority to restrict a developing nation’s trade in natural resources (goods) if it didn’t allow a first world country’s financial service company sufficient access to its markets…. GATT panels may some day rule on the trade consequences of municipal recycling laws or state and local minority set-aside programs. In any trade dispute, the nation whose law is challenged must prove its law is not a trade barrier in secret hearings. The new GATT says plainly, “Panel deliberations shall be secret.” Under this system, newly elected federal executives could allow the trade or environmental laws of their predecessors to be overturned by mounting a lackluster defense of the laws. And since the defense would occur in secret, without transcripts, interest groups and the public would never know the quality and vigor of the defense. Environmental or health and safety laws (and possibly labor rights and human rights laws) affecting another nation’s commerce, no matter how well intended, will be more easily challenged. Again, the executive branch from the challenged nation would defend the law in star-chamber proceedings in Geneva—out of view of media and interest groups back home.9

David C. Korten titled his book When Corporations Rule the World,b pointing out,

the burden of proof is on the defendant to prove the law in question is not a restriction of trade as defined by the GATT…. Countries that fail to make the recommended change within a prescribed period face financial penalties, trade sanctions, or both…. The WTO is, in effect, a global parliament composed of unelected bureaucrats with the power to amend its own charter without referral to legislative bodies…. [It] will become the highest court and most powerful legislative body, to which the judgments and authority of all other courts and legislatures will be subordinated.10

With developing countries having equal representation, it would appear the WTO is democratic. But the developing countries go into those meetings knowing exactly what they want and “among the one hundred or so developing countries hardly five to 10 get a place in these informal discussions and negotiations.” Weak nations’ representatives are isolated and individualized at the meetings, if that fails pressure is brought in a nation’s capital for a positional change, and the end results are plans of the developed world are enacted almost unopposed. (The above analysis was taken from a Third World Network paper at http://www.twnside.org.sg/title/bgl3-cn.htm. If unavailable, run a search for “WTO decisions.”)

As each representative supposedly has an equal voice, this can quickly change and may account for the current, 2005, plan for removal of most tariffs. The wealthy world will only have made such an agreement if they felt their monopolization of finance and technology, plus their military, was strong enough to maintain control. On the other hand, if the world is ever to gain its freedom and full and equal rights those monopolies must fall. These are momentous times in history.

Through the above-described colossus, multinational corporations have gained control of other countries’ internal policies, a reestablished colonialism that has colonized both the developed and undeveloped worlds. These laws, essentially created by corporations, can bypass national laws protecting environments and economies throughout the world. Legal challenges are now starting to come in and the rulings—all made behind closed doors and not subject to challenge or appeal—have sided with the corporations. Early examples are the governments prevented from protecting Pacific salmon runs; forced to abandon strengthening pesticide laws; blocked from enacting laws to reduce emissions of lead, zinc, and copper from smelters; blocked from banning dangerous chemicals in fuels; and prevented from setting up a single-payer automobile insurance plan modeled on Canada’s national health insurance system, which could have saved consumers 50% in insurance costs.11 Nations’ laws denying the right to market fish catches by trawlers who use netting methods that fail to protect turtles, dolphins and other endangered species and thousands of other environmental protection laws can be overruled by what amounts to a court system established, run, and the decisions made, by corporations.

The legal changes necessary to break the multinational corporations’ control of world resources and profitable markets, and their control over labor, are not permitted under corporate-utopian world banking and trade agreement guidelines. Those guidelines, backed by financial and military power (exercised through control of foreign policy of governments), lock the world into the corporate imperialist system of siphoning the world’s wealth to these enormous blocks of international capital that have no loyalty to any country, or anyone, except themselves.

Wealthy citizens domiciled in mother countries and subject to the laws of that country are being replaced by a legal system to siphon the wealth of both the developed and developing world to stateless corporations domiciled in offshore tax havens and subject to no law but their own. For example, suppose country A has wage rates averaging $10 an hour, environmental laws that prevent pollution and increase the cost of production, and equal property and income taxes on corporations. And suppose country B’s wage rates are $1 an hour, it has no environmental laws, and it has low taxes for corporations.

The corporate boardroom response, and the foundation which gives corporate imperialists more power than nations, would be transfer pricing:

(1) On paper, move their headquarters to, or establish a subsidiary in, a third country tax haven;

(2) build their factory in a low-wage developing country with a low unit cost of production, say $10;

(3) invoice (bill) their production to the offshore tax haven at a price that leaves no profit, that same $10 production cost;

(4) invoice that production from the tax haven to a high-wage country at a price that will show a profit in the paper corporation in the tax haven and none in the real corporation in the high-wage country, let’s say $30 per unit;

(5) ship their products directly from the low-wage developing country to the high-wage developed country;

(6) and bank those tax-free profits in the tax haven which is nothing more than a mailing address and a plaque on a door.

No products touch that offshore entity; even the paperwork is done in corporate home offices. There are over 11,000 such corporations registered in the Cayman Islands alone, which has a population of only 10,000. William Walker says, “We are directors of about 500 of them…. We funnel a lot of money out of Central and South America.” Corporate imperialists are doubly insulated from accountability. “Of the thousand American holding companies that control U.S. firms and their subsidiaries throughout the world, six hundred have their registered offices in Switzerland.”12 With over 39 tax havens worldwide, this is a conservative analysis.13

A corporation practicing this “transfer pricing” (and almost all trans-nationals do, 40 to 50% of world trade is intra-firm trade between corporation transnational subsidiaries) could pocket the greater share of the value of production. The wealth of the low-wage country would continue to be siphoned to the imperial-centers-of-capital, and the high-wage country would have its wealth siphoned to the powerful company’s bank account in the offshore tax haven. Corporations have formed enclosed and controlled trading systems which create comparative advantage within corporate structures (complex words to say they have created monopolies.)14 This is neo-mercantilism restructured into corporate imperialism functioning to perfection, siphoning both the wealth of the imperial center and that of the impoverished periphery.

A friend purchased a power tool for $75 from Harbor Freight that was advertised by another store for $250. Another friend paid $330 for a rotary drill press that he knew should cost $800. Obviously the tools at Harbor Freight were manufactured in China and had only a modest price markup. This bypassed the above-described monopoly process and permitted the final buyer to gain that wealth. Assuming the tools were imported for the same low import price but the traders lowered the retail price only a little, it is they who would have gained that wealth, not the final consumer. But in both instances that wealth would have been gained by the imperial center. If the final buyer ends up with most of those gains in value, their gain is only in use-value. If the trader ends up with those gains, they end up with capitalized values which is roughly 10 times that of use-values

Expand that concept theoretically to all consumer products and America and Europe will be rapidly accumulating wealth. Only a few high priced products and services exported would pay for those enormous imports. This accounts for the great wealth accumulated by the imperial centers during the decade of the 1990s. This simple mechanism for transferring wealth from the underpaid to the well-paid needs to be better addressed in economic literature.

Those corporate owners will abandon any country that restricts what they view as their rights and move that wealth to a country that has few, or no, financial scruples. The reason is greed. “Transnational entities [are] loyal only to themselves. To continue making exaggerated profits, they are quite willing to sell the U.S. economy [or any other economy] down the drain.”15 If capital maintains control of the world’s legislative bodies, labor’s earnings will continue their rapid decline and capital will pull ever more of the world’s wealth to itself.

Here is where the logic of capital, as currently structured and taught, falls apart and exposes this massive accumulation of the world’s wealth as necessary for an efficient economy is only a cover for the same greed that has collapsed societies since time immemorial.16 As the buying power of the middle class declines, capital will continue to destroy capital battling for that limited or even shrinking market. The world will continue its equalization march towards the lowest common denominator, which is the subsistence wages of the steadily declining labor requirements necessary to operate the steadily declining economic system.

Corporate imperialists moving to areas with cheap labor, tax breaks, ransom payments, and no environmental protections are transferring to society what are properly industrial production costs and banking those unpaid costs as profits. So long as capital sets it own rules, as current developed and developing world labor remain at a higher level for one and a lower level for the other, the logic of capital grasping for every surplus in every niche in the economy will reach into the mass of unemployed humanity for lower-paid labor and the march towards the lowest common denominator will continue.

The flaw is in capitalism’s foundation philosophy. Surplus, by Adam Smith’s law of wages, is nothing more than wealth produced above subsistence. If labor is to be paid only a subsistence wage, we are following a philosophy of no middle class; there will only be the impoverished masses, the enormously wealthy, and a few well-to-do managing the wealth confiscation (surplus appropriation) system. The massive wealth accumu-lated by the greedy is only temporary, when economies collapse those values collapse.

Thinking in terms of Units of Production

To understand that today’s competitive monopolies are a massive throwing away of wealth, one need only think in terms of “units of production,” such as a farm. No one would shut down and abandon a farm (a unit of production) and move to an equally-productive farm (an equal unit of production) on the other side of the world because labor is cheaper. The farm is sold to another farmer, the first farmer moves, and both units of production are kept producing food for their regions and selling their surplus to the world. Idle land alongside of hungry people would be an oxymoron. Yet that is what happens when industries are abandoned and rebuilt across borders or on the other side of the world.

Hunger while a region’s most productive land is producing for export to the developed imperial-centers-of-capital outlines the obvious: the developed world has firm control over the resources of its countryside, the impoverished developing world. Pick any consumer item—stoves, refrigerators, utensils, tractors, trucks, shoes, cloth, clothes, cars, or steel—virtually any item you think of is desired and typically badly needed by people in many parts of the world. If the previous perfectly good factory producing any one of those consumer items had continued producing instead of shutting down, the productive capacity of those “units of capital” would be double over today’s subtly-monopolized system and (through payment of adequate wages so labor could have buying power and the circulation of money within the local economy would produce more buying power, the multiplier factor), those new factories could be producing for the impoverished world.

The concepts that need reevaluation are: measurement of that wasted capital, rights of all people to their share, and the logic of productively increasing the buying power of needy people to expand the market to them rather than shutting down perfectly good factories (productive units), rebuilding those factories in the impoverished world, and then shipping the production back around the world to the original consumers. The system, as structured, is designed to monopolize the tools of production, maintain the flow of resources to developed world industries at a fraction of their value, and maintain the flow of manufactures to the same wealthy world consumers. This is identical to the monopolization of the tools of production and control of industrial capital, resources, and trade that took place when siphoning the wealth of the countryside to imperial-centers-of-capital was designed centuries ago (see Chapter 2).

Although using the comparative advantages of soil and climate to trade bananas, grapes, wool, cotton et al. is fine, shipping manufactured products halfway around the world to another industrial society, when that region has the surplus resources and labor to produce its own, is economic (and ecological) insanity. There is no gain to the world in destroying an already efficiently operating factory and rebuilding an identical one elsewhere because the corporate imperialists wish to move to areas without labor rights, environmental protection laws, or adequate taxes to build and maintain social infrastructure. Today’s policies only look efficient because the primary measurement used is the corporate bottom line, which measures excessive accumulation of wealth produced by, and siphoned from, others.

Footnotes

  1. Most tariffs worldwide are to be removed in 2005. Corporate imperialists signed such an agreement only when feeling they had firm financial and economic control [money and technology safely monopolized]. All that will quickly change if the developing nations sign agreements to provide resources to Russia, China, and India in trade for their industrial development. World events of the next few years could be even more momentous than the French, American or Russian Revolutions. A successful World Revolution shattering current monopolies could be imminent. Powerbrokers understand this well which accounts for the violent suppressions practiced covertly for 50 years now being done openly under cover stories. Back to text
  2. Very few corporations will be directly involved in covertly controlling thoughts of others. But there is a hard core that does. Trace the covert and overt foreign policy violence to its source and one will arrive at that hard core. Trace the funding of the think-tanks which pour out the books and articles and the lobbyists which essentially write our laws and one arrives at the door of the same hard core. So David Korten’s book title, When Corporations rule the World, is quite accurate. Back to text

Endnotes

  1. Bookworld, Washington Post (April 14, 1994), p. 14 (From McGehee’s Database). Back to text
  2. Richard Douthwaite, “Community Money,” Yes (Spring 1999), pp. 35-37. Back to text
  3. John Ranelagh, The Agency: The Rise and Decline of the CIA (New York: Simon and Schuster, 1986), p. 120. Back to text
  4. David C. Korten, When Corporations Rule the World (West Hartford, CT, Kumarian Press and San Francisco, Berrett-Koehler, 1995), pp. 174-75; Susan Strange, The Retreat of the State: The Diffusion of Power in the Global Economy (Cambridge, UK: Cambridge Studies in International Relations, number 49, 1998); Chakravarthi Raghavan, Recolonization: GATT, the Uruguay Round & the Developing World (London: Zed Books, 1990). Back to text
  5. Speech by Cuban President Fidel Castro at the Group of 77 South Summit Conference, April, 2, 2000. Back to text
  6. Korten, When Corporations Rule, p. 179; Kathy Collmer, “Guess Who’s Coming to Dinner?” Utne Reader, July/August, 1992, pp. 18-20. Back to text
  7. Brian Burgoon, “NAFTA Thoughts,” Dollars and Sense, September/October 1995, pp. 10-14, 40. Back to text
  8. Noam Chomsky, The Prosperous Few and the Restless Many (Berkeley: Odonian Press, 1993), p. 23. Back to text
  9. Don Wiener, “Will GATT Negotiators Trade Away the Future?” In These Times, February 12-18, 1992, p. 7. See also Raghavan, Recolonization. Back to text
  10. Korten, When Corporations Rule, pp. 174-77. Back to text
  11. Noam Chomsky, Year 501: The Conquest Continues (Boston: South End Press, 1993), pp. 57-58; Andrew A. Reding, “Bolstering Democracy in the Americas,” World Policy Journal (Summer, 1992), p. 410; J.W. Smith, The World’s Wasted Wealth 2 (http://www.ied.info: Institute for Economic Democracy, 1994), Chapter 1. Back to text
  12. Jean Zeagler, Switzerland Exposed (New York: Allison & Busby, 1981), p. 35, emphasis in original. Back to text
  13. Ingo Walter, The Secret Money Market (New York: HarperCollins, 1990), p. 187, Chapter 8. Back to text
  14. Alfred E. Eckes, Jr., Opening America’s Markets: U.S. Foreign Trade Policy Since 1776 (no city named: University of North Carolina Press, 1995), p. xviii; Richard C. Longworth, Global Squeeze: The Coming Crisis of First-World Nations (Chicago: Contemporary Books, 1999), pp. 31, 259-60. Back to text
  15. John Stockwell, The Praetorian Guard (Boston: South End Press, 1991), p. 129. Back to text
  16. William H. Kötke, The Final Empire: The Collapse of Civilization and the Seed of the Future (Portland, OR: Arrow Point Press, 1993). Back to text
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Chapters for “Economic Democracy; The Political Struggle for the 21st Century

This is a chapter from the book, Economic Democracy; The Political Struggle for the 21st Century. Visit that link for more information about the book.