55.
National Policies
Made In Boardrooms As Parliament Takes A Backseat Modern Imperialism - The Corporate Takeover of the World
According to Noreena Hertz, over the last three decades the balance of power between politics and commerce has shifted radically, leaving politicians increasingly subordinate to the colossal economic power of big business. Unleashed by the Thatcher-Reagan axis, and accelerated by the end of the Cold War, this process has grown Hydra-like over the last two decades and now manifests itself in diverse forms. Whichever way we look at it, corporations are taking on the responsibilities of government.
And as business has extended its role, it has actually come to define the public realm. The political state has become the corporate state. Governments are shattering the implicit contract between state and citizen that lies at the heart of a democratic society.
Pursuing a policy of neo-colonialism, the multinational corporations infringe up on the sovereignty of the Third World countries, seek to gain control over their natural resources, impose unequal agreements upon them and impede the development of their independent national economies.
Imperialists, like everyone else, have always sought to justify their actions. In the latter 19th Century and the early decades of the 20th Century, imperialism was more direct than it is today, and it was called imperialism. The basic concept was rather simple. A militarily strong country from Europe would enter a militarily weak third world country and take control of it. The natural resources and human labor of the weaker country were put in the service of the stronger country.
And as business has extended its role, it has actually come to define the public realm. The political state has become the corporate state. Governments are shattering the implicit contract between state and citizen that lies at the heart of a democratic society.
Pursuing a policy of neo-colonialism, the multinational corporations infringe up on the sovereignty of the Third World countries, seek to gain control over their natural resources, impose unequal agreements upon them and impede the development of their independent national economies.
Imperialists, like everyone else, have always sought to justify their actions. In the latter 19th Century and the early decades of the 20th Century, imperialism was more direct than it is today, and it was called imperialism. The basic concept was rather simple. A militarily strong country from Europe would enter a militarily weak third world country and take control of it. The natural resources and human labor of the weaker country were put in the service of the stronger country.
All over the world, concerns are being raised about governments' loyalties and corporations' objectives. Concerns that the pendulum of capitalism may have swung just a bit too far; that our love affair with the free market may have obscured harsh truths; that too many are losing out. That the state cannot be trusted to look after our interests; and that we are paying too high a price for our increased economic growth. They are worried that the sound of business is drowning out the voices of the people.
~ Noreena Hertz (Global Capitalism and the Death of Democracy)
‘White Man’s Burden’
The justification of this process has been captured by the phrase “white man’s burden”. Under this theme, imperialism was justified on the basis that the dominated countries were inhabited by culturally backwards savages who were in need of being “civilized”. Dominating them was not something that the imperialists did in order to enrich themselves, but rather it was a burden that they carried out for strictly ‘altruistic purposes’.
Numerous successful rebellions by the colonized countries in the first half of the 20th Century eventually discredited the concept, so that imperialism went out of favor. The new anti-imperialist world attitude towards imperialism is captured in the preamble to the United Nations Charter, which came into existence in 1945:
We the people of the United Nations determined:
To save succeeding generations from the scourge of war, which twice in our lifetime has brought untold sorrow to mankind, and
To reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small, and
To establish conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained, and
To promote social progress and better standards of life in larger freedom.
But progress has never followed a straight line. Imperialism is alive and well in the world today, but it goes under different names, such as “free trade”, “foreign investment”, or “structural adjustment”.
Naomi Klein, in her book, “The Shock Doctrine – The Rise of Disaster Capitalism”, uses another name for it: Shock therapy. As always has been the case, its practitioners and proponents provide justifications for the new imperialism, just as they did for the old imperialism. But of course they use different justifications than the old ones, in order to conform to the new ideologies.
One of the ideologies at the root of all these policies is supplied by Milton Friedman’s economic theories, developed at the University of Chicago. These theories, when put into practice in several countries over more than three decades, have served primarily to increase the wealth and power of the wealthy, at the expense of everyone else.
Numerous successful rebellions by the colonized countries in the first half of the 20th Century eventually discredited the concept, so that imperialism went out of favor. The new anti-imperialist world attitude towards imperialism is captured in the preamble to the United Nations Charter, which came into existence in 1945:
We the people of the United Nations determined:
To save succeeding generations from the scourge of war, which twice in our lifetime has brought untold sorrow to mankind, and
To reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women and of nations large and small, and
To establish conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained, and
To promote social progress and better standards of life in larger freedom.
But progress has never followed a straight line. Imperialism is alive and well in the world today, but it goes under different names, such as “free trade”, “foreign investment”, or “structural adjustment”.
Naomi Klein, in her book, “The Shock Doctrine – The Rise of Disaster Capitalism”, uses another name for it: Shock therapy. As always has been the case, its practitioners and proponents provide justifications for the new imperialism, just as they did for the old imperialism. But of course they use different justifications than the old ones, in order to conform to the new ideologies.
One of the ideologies at the root of all these policies is supplied by Milton Friedman’s economic theories, developed at the University of Chicago. These theories, when put into practice in several countries over more than three decades, have served primarily to increase the wealth and power of the wealthy, at the expense of everyone else.
“I have traveled across the length and breath of India and I have not seen one person who is a beggar, who is a thief, such wealth I have seen in this country, such high moral values, people of such caliber (of noble character), that I do not think we would ever conquer this country………..unless we break the very backbone of this nation which is her spiritual and cultural heritage.”
-Lord MCLau, British colonial, on February 2, 1835
Invading The World - One Economy At A Time
Antonia Juhasz, in her book, “The Bush Agenda – Invading the World One Economy at a Time”, describes how force and violence are used by third world governments to protect corporate interests:
“Cochabamba is the 3rd largest city in Bolivia. In late 1999, the World Bank required that Bolivia privatize Cochabamba’s water in return for reduction of its debts. Bechtel – one of the top ten water privatization companies in the world – won the contract.
Immediately after Bechtel took over the Cochabamba water system, and before any of the promised investments in infrastructure were made to improve or expand services, the company raised the price of water by 100%... Many were simply forced to do without running
water. The same law that privatized the water system also privatized any collected water, including rainwater collected in barrels.
The majority of the people voted for the cancellation of the contract with Bechtel. When this demand was met with silence from government officials, the citizens went on a citywide strike. The Bolivian government defended Bechtel’s right to privatize by sending armed military troops into the streets to disperse the crowds. At least one 17-year-old boy was shot and killed and hundreds more were injured.”
Petras describes the role of the U.S. military as the ultimate guarantee that their preferred policies will be realized:
‘The responsibility of the US for the growth of Latin American billionaires and mass poverty is several-fold and involves a very wide gamut of political institutions, business elites and academic and media moguls. First and foremost the US backed the military dictators and Neoliberal politicians who set up the billionaire economic models.’
“Cochabamba is the 3rd largest city in Bolivia. In late 1999, the World Bank required that Bolivia privatize Cochabamba’s water in return for reduction of its debts. Bechtel – one of the top ten water privatization companies in the world – won the contract.
Immediately after Bechtel took over the Cochabamba water system, and before any of the promised investments in infrastructure were made to improve or expand services, the company raised the price of water by 100%... Many were simply forced to do without running
water. The same law that privatized the water system also privatized any collected water, including rainwater collected in barrels.
The majority of the people voted for the cancellation of the contract with Bechtel. When this demand was met with silence from government officials, the citizens went on a citywide strike. The Bolivian government defended Bechtel’s right to privatize by sending armed military troops into the streets to disperse the crowds. At least one 17-year-old boy was shot and killed and hundreds more were injured.”
Petras describes the role of the U.S. military as the ultimate guarantee that their preferred policies will be realized:
‘The responsibility of the US for the growth of Latin American billionaires and mass poverty is several-fold and involves a very wide gamut of political institutions, business elites and academic and media moguls. First and foremost the US backed the military dictators and Neoliberal politicians who set up the billionaire economic models.’
The New Imperialism
Under the new imperialism, various strict and related conditions are imposed upon a country in return for a loan, usually structured by international financial institutions that are largely under the control of the United States. In addition to a strict schedule for repaying of the loan, the conditions generally include: opening the country to private investment; the privatization of national resources, services, and industries; various favors towards those industries, like selling off state assets at bargain prices, tax breaks, subsidies, a paucity of regulation, and laws that greatly favor capital over labor; and drastic cuts in social services for the country’s inhabitants.
The primary result is that the foreign corporations and investors make vast profits while the country’s inhabitants become even more impoverished than they were. The process is something akin to loan sharking.
The rationalization used to justify this process is that the privatized industries, through the process of the unfettered “free market”, will be far more efficient and productive than they were when they were under government ownership. This will result in improved goods and services for the country’s inhabitants, and will provide tons of jobs as well. However, it rarely works like that.
The bottom line is that rather than serving as a financial asset to the country, profits accrue to the MNC and its investors while draining the country of its financial and other resources.
Foreign investors have successfully secured control over some of the most lucrative oil and gas fields from compliant rulers. The obvious result has been a huge transfer of wealth from the national economy to the MNCs under the assumption that the new investments will provide compensatory benefits. The problem is that energy corporations are notorious for not fulfilling their investment obligations.
The primary result is that the foreign corporations and investors make vast profits while the country’s inhabitants become even more impoverished than they were. The process is something akin to loan sharking.
The rationalization used to justify this process is that the privatized industries, through the process of the unfettered “free market”, will be far more efficient and productive than they were when they were under government ownership. This will result in improved goods and services for the country’s inhabitants, and will provide tons of jobs as well. However, it rarely works like that.
The bottom line is that rather than serving as a financial asset to the country, profits accrue to the MNC and its investors while draining the country of its financial and other resources.
Foreign investors have successfully secured control over some of the most lucrative oil and gas fields from compliant rulers. The obvious result has been a huge transfer of wealth from the national economy to the MNCs under the assumption that the new investments will provide compensatory benefits. The problem is that energy corporations are notorious for not fulfilling their investment obligations.
Why Do Countries Allow This To Happen To Them?
Payoffs
These corporations have given rise to a big question mark whether political freedom will continue to exist when economic power is getting more and more concentrated in fewer and fewer hands.
They lobby for a particular interest. They finance individual members of a political party and parties themselves in elections. These days money plays a major role in elections. Any party that can manipulate funds has better chances of victory. Naturally they get political control of the developing countries.
In this context we can mention Lockheed scandal in which top officials in Western European countries and Japan were involved. When the facts came to light, the Japanese Prime Minister had to resign on corruption charges in the aeroplanes deal.
Dr. V. Gauri Shanker makes startling disclosures in his research thesis, “Taming the Giants: Transnational Corporation” which he wrote under the auspices of Jawaharlal Nehru University.
He writes how the Multinationals operating in India and Indonesia set apart secret funds for bribing officials and making political contributions. Sometimes the Multinationals act as fronts for their governments and interfere in the internal affairs of the host countries and cause political destabilization.
They lobby for a particular interest. They finance individual members of a political party and parties themselves in elections. These days money plays a major role in elections. Any party that can manipulate funds has better chances of victory. Naturally they get political control of the developing countries.
In this context we can mention Lockheed scandal in which top officials in Western European countries and Japan were involved. When the facts came to light, the Japanese Prime Minister had to resign on corruption charges in the aeroplanes deal.
Dr. V. Gauri Shanker makes startling disclosures in his research thesis, “Taming the Giants: Transnational Corporation” which he wrote under the auspices of Jawaharlal Nehru University.
He writes how the Multinationals operating in India and Indonesia set apart secret funds for bribing officials and making political contributions. Sometimes the Multinationals act as fronts for their governments and interfere in the internal affairs of the host countries and cause political destabilization.
"The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than the democratic state itself. That in its essence is fascism: ownership of government by an individual, by a group or any controlling private power."
~President Franklin D. Roosevelt.
Persuasion
Persuasion is often the preferred initial method to convince countries to accept the conditions required by international lending institutions. Persuasion of course is apt to be more effective when countries are desperate for money. And it can take many forms.
First there are the ideological arguments about the wonders of the “free market”. Such arguments may have held some sway with well meaning people in the past. However, by now the fallacy of these arguments has become well known, as least among those who have studied their effects on developing countries.
John Perkins, in “Confessions of an Economic Hit Man”, explains how persuasion is often used, from the perspective of an insider who formerly did the dirty work that he describes in his book. Perkins explains that economic hit men (EHM) are paid by multinational corporations to develop economic projections for major development projects in third world countries. Their projections are supposed to predict substantial economic growth and thereby justify huge loans from international lending institutions. The money from the loan then is immediately funneled into U.S. oil, engineering or construction companies (which is a precondition of the loan) to develop their projects.
Sometimes there are darker aspects to persuasion, for which we will probably never know the full extent. Perkins describes these aspects in his second book, “The Secret History of the American Empire – Economic Hit Men, Jackals, and the Truth about Global Corruption”, quoting an anonymous source, who was a fellow EHM:
“I walked into El Presidente’s office two days after he was elected and congratulated him. I said “Mr. President, in here I got a couple of hundred million dollars for you and your family, if you play the game – you know, be kind to my friends who run the oil companies, treat your Uncle Sam good.” Then I stepped closer, reached my right hand into the other pocket, bent down next to his face, and whispered, “In here I got a gun and a bullet with your name on it – in case you decide to keep your campaign promises.” I stepped back, sat down, and recited a little list for him, of presidents who were assassinated or overthrown because they defied their Uncle Sam: from Diem to Torrijos – you know the routine. He got the message.”
First there are the ideological arguments about the wonders of the “free market”. Such arguments may have held some sway with well meaning people in the past. However, by now the fallacy of these arguments has become well known, as least among those who have studied their effects on developing countries.
John Perkins, in “Confessions of an Economic Hit Man”, explains how persuasion is often used, from the perspective of an insider who formerly did the dirty work that he describes in his book. Perkins explains that economic hit men (EHM) are paid by multinational corporations to develop economic projections for major development projects in third world countries. Their projections are supposed to predict substantial economic growth and thereby justify huge loans from international lending institutions. The money from the loan then is immediately funneled into U.S. oil, engineering or construction companies (which is a precondition of the loan) to develop their projects.
Sometimes there are darker aspects to persuasion, for which we will probably never know the full extent. Perkins describes these aspects in his second book, “The Secret History of the American Empire – Economic Hit Men, Jackals, and the Truth about Global Corruption”, quoting an anonymous source, who was a fellow EHM:
“I walked into El Presidente’s office two days after he was elected and congratulated him. I said “Mr. President, in here I got a couple of hundred million dollars for you and your family, if you play the game – you know, be kind to my friends who run the oil companies, treat your Uncle Sam good.” Then I stepped closer, reached my right hand into the other pocket, bent down next to his face, and whispered, “In here I got a gun and a bullet with your name on it – in case you decide to keep your campaign promises.” I stepped back, sat down, and recited a little list for him, of presidents who were assassinated or overthrown because they defied their Uncle Sam: from Diem to Torrijos – you know the routine. He got the message.”
The Multinationals concerned with food have succeeded in weaning the developing countries away from grain production so that they could make profitable grain exports to them.
On the land so released from food, the Multinationals themselves set up frontal vegetable growing business, earning big profits by exporting these items back to the West.
Mexico, which once grow a variety of local food grains, has been converted into an exporter of fruits and vegetables.
Financial Manipulation Or Indifference
Naomi Klein explains in her book that countries are much more susceptible to requests to alter their laws and economic policies to benefit foreign corporations when they are in shock. The shock can result from war, assassination or overthrow of a head-of-state, natural disaster, or financial calamity. In any of these cases, the shock can provide great opportunities for opportunistic foreign scavengers.
The Southeast Asian financial crisis of 1997 – the economic collapse of the so-called Asian Tigers – provides a good example of how international financial institutions have used their financial powers to facilitate a financial crisis to benefit powerful corporations. Just prior to their collapse, the Asian Tigers were being held up as great success stories of globalization. Klein explains the role of international financial institutions in the crisis.
The Southeast Asian financial crisis of 1997 – the economic collapse of the so-called Asian Tigers – provides a good example of how international financial institutions have used their financial powers to facilitate a financial crisis to benefit powerful corporations. Just prior to their collapse, the Asian Tigers were being held up as great success stories of globalization. Klein explains the role of international financial institutions in the crisis.
‘The business of America is business.'
~1920s US President Calvin Coolidge’s dictum
In the mid-nineties, under pressure from the IMF and the newly created World Trade Organization, Asian governments agreed to lift barriers to their financial sectors, allowing a surge of paper investing and currency trading.
As for the IMF, the world body created to prevent crashes like this one, it took the ‘do-nothing approach’ that had become its trademark since Russia. It did eventually respond – but not with the sort of fast, emergency stabilization loan that a purely financial crisis demanded. Instead, it came up with a long list of demands, pumped up by the Chicago School certainty that Asia’s catastrophe was an opportunity in disguise.
Klein also explains in great detail the motivation for the financial elites wanting the Asian economies to fail. Here is part of that explanation:
If the crisis was left to worsen, all foreign currency would be drained from the region and Asian-owned companies would have either to close down or to sell themselves to Western firms.
The IMF was exclusively focused on how the crisis could be used as leverage. The meltdown had forced a group of strong-willed countries to beg for mercy; to fail to take advantage of that window of opportunity was, for the Chicago School economists running the IMF, tantamount to professional negligence.
To ‘take advantage of the opportunity’ the IMF required the Asian countries to adopt a host of Milton Friedman’s Chicago School economic ‘reforms’:
The IMF also demanded that the governments make deep budget cuts, leading to mass layoffs of public sector workers in countries where people were already taking their own lives in record numbers. They were now ready to be reborn, Chicago-style: privatized basic services, independent central banks, low social spending and, of course, total free trade. Indonesia would cut food subsidies.
As for the IMF, the world body created to prevent crashes like this one, it took the ‘do-nothing approach’ that had become its trademark since Russia. It did eventually respond – but not with the sort of fast, emergency stabilization loan that a purely financial crisis demanded. Instead, it came up with a long list of demands, pumped up by the Chicago School certainty that Asia’s catastrophe was an opportunity in disguise.
Klein also explains in great detail the motivation for the financial elites wanting the Asian economies to fail. Here is part of that explanation:
If the crisis was left to worsen, all foreign currency would be drained from the region and Asian-owned companies would have either to close down or to sell themselves to Western firms.
The IMF was exclusively focused on how the crisis could be used as leverage. The meltdown had forced a group of strong-willed countries to beg for mercy; to fail to take advantage of that window of opportunity was, for the Chicago School economists running the IMF, tantamount to professional negligence.
To ‘take advantage of the opportunity’ the IMF required the Asian countries to adopt a host of Milton Friedman’s Chicago School economic ‘reforms’:
The IMF also demanded that the governments make deep budget cuts, leading to mass layoffs of public sector workers in countries where people were already taking their own lives in record numbers. They were now ready to be reborn, Chicago-style: privatized basic services, independent central banks, low social spending and, of course, total free trade. Indonesia would cut food subsidies.
Multinationals have been exploiting the Third World countries in the field of pharmaceuticals.
This is particularly the in case of India. Such Multinationals have been propagating the use of non-essential drugs and making large profits through over-pricing. An expert committee insists that of the 43,600 drugs registered and sold in India, three-fourths are non-essential.
A survey conducted by the Indian Council of Medical Research points out that seven out of every ten purchases of antibiotics made in India are uncalled for.
Recently, there was a controversy over the multinationals marking and selling non-essential baby foods in India.
Government Overthrow
John Perkins explains that if the EHMs are unsuccessful in their efforts to convince a government to play ball, then the “jackals” are sent in to assassinate or overthrow the uncooperative government officials in question, as was done for example in Iran in 1953, Guatemala in 1954, inChile in 1973, or in Indonesia in 1965.
Naomi Klein describes how Milton Freidman’s economic theories and policies worked in tandem with U.S. covert assistance to destroy the economic functioning of several South American countries in the 1970s, following the overthrow of Salvador Allende and his replacement by the brutal dictator Augusto Pinochet in 1973:
‘The Chicago School counterrevolution quickly spread. Brazil was already under the control of a U.S. supported junta. Friedman traveled to Brazil in 1973, at the height of that regime’s brutality, and declared the economic experiment a “miracle”. In Uruguay the military had staged a coup in 1973 and the following year decided to go the Chicago route. The effect on Uruguay’s previously egalitarian society was immediate: real wages decreased by 28% and hordes of scavengers appeared on the streets. Next to join the experiment was Argentina in 1976, when a junta seized power from Isabel Peron. That meant that Argentina, Chile, Uruguay and Brazil – the countries that had been showcases of developmentalism – were now all run by U.S. backed military governments and were living laboratories of Chicago School economics.’
Naomi Klein describes how Milton Freidman’s economic theories and policies worked in tandem with U.S. covert assistance to destroy the economic functioning of several South American countries in the 1970s, following the overthrow of Salvador Allende and his replacement by the brutal dictator Augusto Pinochet in 1973:
‘The Chicago School counterrevolution quickly spread. Brazil was already under the control of a U.S. supported junta. Friedman traveled to Brazil in 1973, at the height of that regime’s brutality, and declared the economic experiment a “miracle”. In Uruguay the military had staged a coup in 1973 and the following year decided to go the Chicago route. The effect on Uruguay’s previously egalitarian society was immediate: real wages decreased by 28% and hordes of scavengers appeared on the streets. Next to join the experiment was Argentina in 1976, when a junta seized power from Isabel Peron. That meant that Argentina, Chile, Uruguay and Brazil – the countries that had been showcases of developmentalism – were now all run by U.S. backed military governments and were living laboratories of Chicago School economics.’
In line with historic conflicts all over the world, the current battle is between the global public and the corporate and political elite over the control of government. Who decides how people organize and live their lives? Who decides if people go with or without water, food, healthcare or education? These rights must rest with the global public and their representative bodies, and not with a tiny minority who directly benefit from an ideology that shrinks public involvement in these central decisions.
Corporations are not people. They do not exist without shareholders and they exist only for profit. They are incapable of demonstrating the same values that people hold and express within their communities. The national constitution was never meant to represent the rights of economic entities; there is no mention of corporations or other such entities in the constitution of any country. The corporation must not enjoy the protection of the Bill of Rights. In a true democracy, corporations must exist at the pleasure of the people and under their sovereignty, not the other way round .
Violence And War
Violence and war blend with government overthrow as a means of getting countries to go along with their wishes. Perkins explains that when other methods don’t work, then they send in the military, as they did in Panama in 1989 or in Iraq in 1991 and 2003.
Klein explains that the preferred economic policies are often so painful to a country’s population, that peaceful means are not enough to maintain them. She describes the role of systematic violence in persuading Chileans to accept new economic policies following the installation of Pinoche’s regime:
‘The generals knew that their hold on power depended on Chileans being truly terrified. The trail of blood left behind over those four days came to be known as the Caravan of Death. In short order the entire country had gotten the message: resistance is deadly. In all, more than 3,200 people disappeared or were executed, at least 80,000 were imprisoned, and 200,000 fled the country.’
Klein explains that the preferred economic policies are often so painful to a country’s population, that peaceful means are not enough to maintain them. She describes the role of systematic violence in persuading Chileans to accept new economic policies following the installation of Pinoche’s regime:
‘The generals knew that their hold on power depended on Chileans being truly terrified. The trail of blood left behind over those four days came to be known as the Caravan of Death. In short order the entire country had gotten the message: resistance is deadly. In all, more than 3,200 people disappeared or were executed, at least 80,000 were imprisoned, and 200,000 fled the country.’
Examples Of The Consequences Of New Imperialism
The books described above provide numerous examples of the consequences of new imperialism in a wide range of countries. Here are just a few of them:
Russia 1991
Following the break-up of the Soviet Union, Russia was in dire financial straights as it attempted to convert to capitalism. Under pressure from the United States and international financial institutions, Boris Yeltsin decided to go the economic shock therapy route:
After only one year, shock therapy had taken a devastating toll: millions of middle-class Russians had lost their life savings when money lost its value, and abrupt cuts to subsidies meant millions of workers had not been paid in months. The average Russian consumed 40% less in 1992 than in 1991, and a third of the population fell below the poverty line. The middle class was forced to sell personal belongings from card tables on the streets.
After only one year, shock therapy had taken a devastating toll: millions of middle-class Russians had lost their life savings when money lost its value, and abrupt cuts to subsidies meant millions of workers had not been paid in months. The average Russian consumed 40% less in 1992 than in 1991, and a third of the population fell below the poverty line. The middle class was forced to sell personal belongings from card tables on the streets.
Chile 1973
As described in Klein’s book, following the overthrow of Allende and his replacement by Pinochet:
In 1974, inflation reached 375%. The cost of basics such as bread went through the roof. At the same time, Chileans were being thrown out of work because Pinochet’s experiment with “free trade” was flooding the country with cheap imports. Unemployment hit record levels and hunger became rampant. Chicago boys argued that the problem didn’t lie with their theory but with the fact that it wasn’t being applied with sufficient strictness.
In 1974, inflation reached 375%. The cost of basics such as bread went through the roof. At the same time, Chileans were being thrown out of work because Pinochet’s experiment with “free trade” was flooding the country with cheap imports. Unemployment hit record levels and hunger became rampant. Chicago boys argued that the problem didn’t lie with their theory but with the fact that it wasn’t being applied with sufficient strictness.
Poland – 1988
Poland won its independence from the Soviet Union in 1988, and it was in dire financial straights at that time. It was made clear to them that they could expect little or no help unless they agreed to economic shock therapy. Klein describes how that worked out:
Shock therapy in Poland did not cause “momentary dislocations,” as predicted. It caused a full-blown depression: a 30% reduction in industrial production, unemployment skyrocketed, and in 1993 it reached 25% in some areas – a wrenching change in a country that, under Communism, for all its many abuses and hardships, had no open joblessness.
In 1989, 15% of Poland’s population was living below the poverty line; in 2003, 59% of Poles had fallen below the line. Shock therapy, which eroded job protection and made daily life far more expensive, was not the route to Poland’s becoming one of Europe’s “normal” countries.
Shock therapy in Poland did not cause “momentary dislocations,” as predicted. It caused a full-blown depression: a 30% reduction in industrial production, unemployment skyrocketed, and in 1993 it reached 25% in some areas – a wrenching change in a country that, under Communism, for all its many abuses and hardships, had no open joblessness.
In 1989, 15% of Poland’s population was living below the poverty line; in 2003, 59% of Poles had fallen below the line. Shock therapy, which eroded job protection and made daily life far more expensive, was not the route to Poland’s becoming one of Europe’s “normal” countries.
The Asian Tigers – 1997
Klein describes what happened to the Asian people following the financial crisis described above:
24 million people lost their jobs in this period. What disappeared in these parts of Asia was what was so remarkable about the region’s “miracle” in the first place: its large and growing middle class. 20 million Asians were thrown into poverty in this period of what Rodolfo Walsh would have called “planned misery”. Women and children suffered the worst of the crisis. Many rural families in the Philippines and South Korea sold their daughters to human traffickers who took them to work in the sex trade. The crisis saw a 20 percent increase in child prostitution.
24 million people lost their jobs in this period. What disappeared in these parts of Asia was what was so remarkable about the region’s “miracle” in the first place: its large and growing middle class. 20 million Asians were thrown into poverty in this period of what Rodolfo Walsh would have called “planned misery”. Women and children suffered the worst of the crisis. Many rural families in the Philippines and South Korea sold their daughters to human traffickers who took them to work in the sex trade. The crisis saw a 20 percent increase in child prostitution.
Iraq – 2003
Antonia Juhasz explains in her book that economic plunder was one of the chief reasons, and probably the chief reason, for the U.S. invasion and occupation of Iraq. In that sense, it was a great success, not the failure that it is often made out to be.
Three hundred multinational corporations now account for 25 per cent of the world's assets. The annual values of sales of each of the six largest transnational corporations, varying between $111 and $126 billion, are now exceeded by the GDPs of only twenty-one nation states.
Corporate sales account for two thirds of world trade and a third of world output (Coca-Cola, Toyota and Ford derive nearly half of their revenues outside their base in the USA), while as much as 40 per cent of world trade now occurs within multinational corporations.
~ Noreena Hertz
The Foreign Investment Order provided the legal framework for the invasion of U.S. corporations into Iraq. It provided for the privatization of Iraq’s state-owned enterprises, foreign ownership of Iraqi businesses, tax-free remittance of all profits, immunity of foreign businesses from Iraqi courts, and much else. As with everything else about the U.S. occupation, these provisions did great damage to the Iraqi people, for the benefit of U.S. corporations. Juhasz describes the effects of privatization of Iraqi industries:
In Bremer’s own words, “Restructuring inefficient state enterprises requires laying off workers.”. Even those workers who still had jobs in Iraq at the time only received about half of what they made before the war. At the same time, prices skyrocketed.
And with respect to the lack of any constraints on foreign corporations:
U.S. corporations are therefore invited to enter the Iraqi economy, exploit a nation at its most vulnerable point, with no obligation to reinvest in the country at a time when rebuilding Iraq is professed to be the Bush administration’s most vital assignment. U.S. corporations have reaped staggering revenues from their Iraqi operations. Chevron, Bechtel, and Halliburton have each experienced skyrocketing returns to their Iraqi endeavors.
In the hands of U.S. corporations, the effort to rebuild Iraq was a miserable failure:
The Bush administration failed in this mission because it did not focus its efforts on the immediate provision of needs, but rather on the opening of Iraq to private foreign corporations. Iraqis have continually pointed to the lack of electricity as a primary source of unrest. Electricity has remained far below prewar levels and significantly below U.S. stated goals.
The result was frequent blackouts and the availability of electricity for only a few hours a day, with air conditioning unavailable much of the time in the face of outside temperatures of 130 degrees. Lack of potable water and sewage treatment has been another continuing and major problem:
The full failure of the reconstruction was revealed in a January 2006 U.S. government audit. Although more than 93% of the U.S. appropriation has been spent or committed to specific companies and projects, as much as 60% of all water and sewer projects will not be completed.
In Bremer’s own words, “Restructuring inefficient state enterprises requires laying off workers.”. Even those workers who still had jobs in Iraq at the time only received about half of what they made before the war. At the same time, prices skyrocketed.
And with respect to the lack of any constraints on foreign corporations:
U.S. corporations are therefore invited to enter the Iraqi economy, exploit a nation at its most vulnerable point, with no obligation to reinvest in the country at a time when rebuilding Iraq is professed to be the Bush administration’s most vital assignment. U.S. corporations have reaped staggering revenues from their Iraqi operations. Chevron, Bechtel, and Halliburton have each experienced skyrocketing returns to their Iraqi endeavors.
In the hands of U.S. corporations, the effort to rebuild Iraq was a miserable failure:
The Bush administration failed in this mission because it did not focus its efforts on the immediate provision of needs, but rather on the opening of Iraq to private foreign corporations. Iraqis have continually pointed to the lack of electricity as a primary source of unrest. Electricity has remained far below prewar levels and significantly below U.S. stated goals.
The result was frequent blackouts and the availability of electricity for only a few hours a day, with air conditioning unavailable much of the time in the face of outside temperatures of 130 degrees. Lack of potable water and sewage treatment has been another continuing and major problem:
The full failure of the reconstruction was revealed in a January 2006 U.S. government audit. Although more than 93% of the U.S. appropriation has been spent or committed to specific companies and projects, as much as 60% of all water and sewer projects will not be completed.
Human civilizations should depend on the production of material nature without artificially attempting economic development to turn the world into a chaos of artificial greed and power only for the purpose of artificial luxuries and sense gratification. This is but the life of dogs and hogs.
~ Srila Prabhupada (Srimad Bhagavatam 1.10.4)
Why So Much Concern About Multinationals?
Big business elicits strong reactions. In his book The Corporation, now a successful television series and film, the Canadian academic Joel Bakan argues that the corporation is ‘a pathological institution, a dangerous possessor of the great power it wields over people and societies’. The multinational corporation, because of its apparent mobility and assumed lack of loyalty to any one jurisdiction, is particularly mistrusted. But how did this mistrust come about?
In Europe, the controversy surrounding multinationals can be traced back to the post-war years. This was a time of huge expansion for corporations, particularly those originating in the USA. Many Europeans were beginning to resent the level of reliance by local industry on US foreign investment and worried, too, about the ‘Americanisation’ of culture, tastes and management methods. By the late 1960s, opposition to US-owned multinationals was high, as evidenced by the popularity of books critical of the ‘American invasion’.
In the USA, on the other hand, multinationals appear to have been regarded relatively benignly by the public until the 1960s. But by this time the reputation of corporate America had begun to wane, as Hood vividly describes:
Investigative journalism became a heroic, even romantic, calling, with the name of the game being to catch greedy corporations in the act of polluting the water, selling shoddy and overpriced products, exploiting workers and families, and sacrificing the public’s health, safety and welfare to make a quick buck. On television and in the movies, business executives increasingly became villains, to be challenged by heroic lawyers, policemen, reporters and activists.
By the 1970s, the multinational had become synonymous, around the world, with power and wealth and, to many, a potent symbol of the economic and political dominance of the USA. What is striking about much of the literature on multinationals from that time, compared with today, is the extent to which the interests of the multinational are identified with the interests of its state of origin, or ‘home state’. Multinationals were viewed, perhaps simplistically, as economic agents of their home states, with no particular allegiances to the states in which they chose to invest. With this mindset, the nationality of the foreign investor was of crucial importance. Foreign-owned multinationals were regarded as a threat to the sovereignty of their host states in two ways: first, because of fears that they might exercise undue influence over the host state’s national policies and, second, because they helped to perpetuate inequalities between states. But while foreign ownership of local industry was a concern for all host states, these issues had particular significance for less developed countries.
In Europe, the controversy surrounding multinationals can be traced back to the post-war years. This was a time of huge expansion for corporations, particularly those originating in the USA. Many Europeans were beginning to resent the level of reliance by local industry on US foreign investment and worried, too, about the ‘Americanisation’ of culture, tastes and management methods. By the late 1960s, opposition to US-owned multinationals was high, as evidenced by the popularity of books critical of the ‘American invasion’.
In the USA, on the other hand, multinationals appear to have been regarded relatively benignly by the public until the 1960s. But by this time the reputation of corporate America had begun to wane, as Hood vividly describes:
Investigative journalism became a heroic, even romantic, calling, with the name of the game being to catch greedy corporations in the act of polluting the water, selling shoddy and overpriced products, exploiting workers and families, and sacrificing the public’s health, safety and welfare to make a quick buck. On television and in the movies, business executives increasingly became villains, to be challenged by heroic lawyers, policemen, reporters and activists.
By the 1970s, the multinational had become synonymous, around the world, with power and wealth and, to many, a potent symbol of the economic and political dominance of the USA. What is striking about much of the literature on multinationals from that time, compared with today, is the extent to which the interests of the multinational are identified with the interests of its state of origin, or ‘home state’. Multinationals were viewed, perhaps simplistically, as economic agents of their home states, with no particular allegiances to the states in which they chose to invest. With this mindset, the nationality of the foreign investor was of crucial importance. Foreign-owned multinationals were regarded as a threat to the sovereignty of their host states in two ways: first, because of fears that they might exercise undue influence over the host state’s national policies and, second, because they helped to perpetuate inequalities between states. But while foreign ownership of local industry was a concern for all host states, these issues had particular significance for less developed countries.
The privilege of influencing policy is one that rightly belongs to the public, not the corporate elite who make up less than 1% of the population. But since political influence increases with economic and financial power, the corporate influence in national and global governance structures far outweighs public influence. Thus, democratic process has been the battle ground whereupon the pubic good has fought the corporate agenda. Only when the global public seize back the democratic process and implement appropriate measures to curb corporate influence on the democratic process will the global economy reflect the needs of the majority.
The public’s attention in many western countries has turned away from government - a fact born out by the very low turnouts during recent elections in the UK and US. Such national apathy to government is to a large extent the result of the failure of political leadership to sincerely represent the public or to convince the public that they are on their side, fighting for public issues. The resulting consensus within society adds momentum to the private sector’s ambitions to roll back government control in favour of market forces. It has also contributed to the strengthening of the ‘partnership’ between the government and the business sector, and this has made it even easier for corporations to successfully lobby governmental to loosen their hold on the economy.
Legal Jurisdiction Of Multinationals
Multinationals are not traditional subjects of international law. Historically, the role of international law in relation to multinationals has primarily been to define the rights and obligations of states with respect to international investment issues. International law has been used to regulate the jurisdiction of states over multinationals, and their rights of diplomatic protection and, through treaties, has provided states with a means by which investment conditions for multinationals could be stabilised, harmonised, and generally enhanced.
But the world is changing fast. Concern about the social and environmental impacts of ‘globalisation’ means that new demands are now being made of international law. Can international law respond to these demands? Does international law provide an adequate framework for the regulation of the social and environmental impacts of multinationals on a global scale? Many people think not. Some have doubted that international law is even ‘conceptually equipped’ to perform such a role.
Public opinion, too, is generally sceptical as to the extent to which multinationals can be regulated effectively. Critics point out the ease with which multinationals can avoid national regulation through their mobility and flexibility of structure and organisation. While each state is entitled to regulate those parts of a multinational incorporated or operating within its territory, many states may not have the resources or political will to do so effectively, giving rise to differences in social and environmental standards between states. These differences, it is argued, are exploited by some multinationals for commercial advantage; that is, multinationals will tend to gravitate to regions in which production costs are lowest because of low regulatory standards and expectations.
But the world is changing fast. Concern about the social and environmental impacts of ‘globalisation’ means that new demands are now being made of international law. Can international law respond to these demands? Does international law provide an adequate framework for the regulation of the social and environmental impacts of multinationals on a global scale? Many people think not. Some have doubted that international law is even ‘conceptually equipped’ to perform such a role.
Public opinion, too, is generally sceptical as to the extent to which multinationals can be regulated effectively. Critics point out the ease with which multinationals can avoid national regulation through their mobility and flexibility of structure and organisation. While each state is entitled to regulate those parts of a multinational incorporated or operating within its territory, many states may not have the resources or political will to do so effectively, giving rise to differences in social and environmental standards between states. These differences, it is argued, are exploited by some multinationals for commercial advantage; that is, multinationals will tend to gravitate to regions in which production costs are lowest because of low regulatory standards and expectations.
