68.
Corporations
Bringing About Inequality And Unemployment
Seventy percent of world trade is controlled by just 500 of the largest industrial corporations, and in 2002, the top 200 had combined sales equivalent to 28% of world GDP. However, these 200 corporations only employed 0.82% of the global work force, highlighting the reduction in employment created by excessive economies of scale.
In the US, ninety-eight percent of all companies account for only 25 percent of business activity; the remaining two percent account for nearly 75 percent of the remaining activity.
The top 500 industrial corporations, which represent only one-tenth of one percent of all US companies, control over two-thirds of the business resources in the US and collect over 70 percent of all US profits. Thus there is also a disproportionate distribution of financial benefit from economic activity, which clearly does not pass to local communities through opportunity or wages. It is retained instead by a small number of major shareholders of an even smaller number of corporations.
Whereas corporations are based mainly in affluent countries such as the US, the EU, Japan, Canada and Australia, their key markets, productive facilities and many of their resources are based in or extracted from developing countries. According to the International Finance Corporation (IFC), inflows of foreign direct investment to the emerging markets have grown by an average of 23 percent per year between 1990 and 2000. The combined value
of stock markets in emerging economies is set to exceed $5 trillion in 2006, and has more than doubled in the past decade.
As corporations grow, they find it economically beneficial (profitable) to operate in multiple countries, seeking out favourable conditions such as low labour costs, fewer regulations and other financial or tax incentives. Many of these multinational corporations can now be described as ‘transnational', as they have ‘globalized' their operations and retain no particular affiliation to any country. This allows them greater flexibility in operative structure and greater leverage over governments who compete for their business.
The convergence of economic power has created a concentration of political influence in society which is reflected nationally and globally. The resulting influence of the private sector has manipulated global economic, political and public thinking and established an unsustainable, consumerist culture.
As a result of mergers, acquisitions and jobs being transferred abroad (in line with globalized market forces), job losses even in affluent countries are common. Between 1980 and 1993, over four million jobs were shed by the largest 500 industrial corporations in the US. Since President Bush took office, two million lost their jobs and in 2004 nearly one in ten could not find a full time job.
The International Labor Organization (ILO) calculates that global unemployment rates are at an all time high. Of the 2.8 billion workers in the world in 2005, nearly 1.4 billion still did not earn enough to lift themselves and their families above the two dollars a day poverty line - the same proportion as ten years ago.
In the US, ninety-eight percent of all companies account for only 25 percent of business activity; the remaining two percent account for nearly 75 percent of the remaining activity.
The top 500 industrial corporations, which represent only one-tenth of one percent of all US companies, control over two-thirds of the business resources in the US and collect over 70 percent of all US profits. Thus there is also a disproportionate distribution of financial benefit from economic activity, which clearly does not pass to local communities through opportunity or wages. It is retained instead by a small number of major shareholders of an even smaller number of corporations.
Whereas corporations are based mainly in affluent countries such as the US, the EU, Japan, Canada and Australia, their key markets, productive facilities and many of their resources are based in or extracted from developing countries. According to the International Finance Corporation (IFC), inflows of foreign direct investment to the emerging markets have grown by an average of 23 percent per year between 1990 and 2000. The combined value
of stock markets in emerging economies is set to exceed $5 trillion in 2006, and has more than doubled in the past decade.
As corporations grow, they find it economically beneficial (profitable) to operate in multiple countries, seeking out favourable conditions such as low labour costs, fewer regulations and other financial or tax incentives. Many of these multinational corporations can now be described as ‘transnational', as they have ‘globalized' their operations and retain no particular affiliation to any country. This allows them greater flexibility in operative structure and greater leverage over governments who compete for their business.
The convergence of economic power has created a concentration of political influence in society which is reflected nationally and globally. The resulting influence of the private sector has manipulated global economic, political and public thinking and established an unsustainable, consumerist culture.
As a result of mergers, acquisitions and jobs being transferred abroad (in line with globalized market forces), job losses even in affluent countries are common. Between 1980 and 1993, over four million jobs were shed by the largest 500 industrial corporations in the US. Since President Bush took office, two million lost their jobs and in 2004 nearly one in ten could not find a full time job.
The International Labor Organization (ILO) calculates that global unemployment rates are at an all time high. Of the 2.8 billion workers in the world in 2005, nearly 1.4 billion still did not earn enough to lift themselves and their families above the two dollars a day poverty line - the same proportion as ten years ago.
Extensive legislation now exists internationally and within countries to protect corporate rights. Therefore, wide-ranging structural and regulatory changes are essential if we are to transform the corporate led economy into one centered on communities that actively participate in political and economic life. The prioritization of community based enterprise and the curtailing of mega corporate entities will inevitably create greater social equity in both the East and West.
The substantial benefits gained from streamlining operations serve mainly to increase profits, and are channelled into bonuses for directors and CEOs. Chevron's CEO received $37 million in total compensation in 2005, whilst Exxon's CEO received a $400 million pay and retirement package. In the meanwhile the minimum wage in a country like America (£5.15 per hour) is at a 50 year low.
Sadly, the prevalence in recent years, of huge corporations has significantly impacted on small businesses and communities, and is creating a homogenization of culture throughout the world. These corporations have created huge economies of scale which result in a downward levelling of job numbers, wages and employment standards. The most visible culprits are agri-business, giant fast food chains and retail outlets such as supermarkets. The goods supplied by these companies have quickly replaced local businesses who often supply the same goods with greater levels of nutrition and with negligible social and environmental consequences.
The effects are visible and measurable in society. For example, in the 10 years that Wal-Mart moved to Iowa, in the USA, 7326 local business closed as a direct result. In the UK, the supermarket giant, Tesco, currently opens one new ‘Tesco Express' (a smaller, local version of their larger stores) each day. This results in a local grocer going out of business each day, and 50 local specialist stores close each week. The impact on the developing world is also stark as corporations move steadily into emerging markets. India has recently experienced a surge in contracts to large agri-business firms as the government pursues the high output agricultural policies of the US and EU. This has resulted in entire villages being put up for sale in some states and, according to the National Sample Survey Organization (NSSO), more than 40 per cent of Indian farmers are keen to quit agriculture altogether as a result of these market pressures. In addition, the competitive activity of multinationals has helped to sustain an unfair international trading regime that increases global inequality through biased trade rules and increases global warming through inefficient import and export networks.
It is imperative that these trends are reversed, and that community involvement in economic life is strengthened and safeguarded.
Whilst global economic growth remains slow, at around three percent, corporate growth is around four times as high, again reflecting the concentration of financial gain from a global economy led by corporations. In the year 2005, the number of millionaires globally swelled to a phenomenal 8.7 million, 5.7 million of whom are based in North America and Europe. In addition, Forbes reported a 15% rise in the number of billionaires since last year alone, virtually all have made their fortune from their involvement in various sectors of industry and are now worth a combined $2.6 trillion.
(Source: Rajesh Makwana, October 2006)
(Source: Rajesh Makwana, October 2006)
“There is a spiritual hunger in the world today - and it cannot be satisfied by better cars on longer credit terms”
- Adlai E. Stevenson
