American corporation

American corporation

Introduction

Within the last 150 years the American corporation proves that it is more than the business-model, it is the organizational principle of entire society. As the world starts to globalize the issue of corporations as the central actors becomes the subject of public debates. On the one hand, many researches consider sovereign states as the main players in the world of “post-Westphalian transition” (Kobrin, 2008). Among other arguments they provide thesis of the property rights regulations as the necessity for international market. On the other hand, their opponents tell that even nowadays, when the process of globalization is just on the halfway, 51 of the 100 largest economies in the world are corporations, and only 49 are countries (ISP report, 2001). Multi-national corporations integrate markets, production and distribution all over the world and the globalization is overly corporate-led trend. Transnational corporations are the primary shaper of the global economy, and the question is whether the corporation as organizing principle is suitable for the entire world (Dicken, 2007).

This research reviews the latest data about the transnational corporations and their influence on governmental, non-governmental organizations and private organizations, and provides the “pro and contra” arguments regarding the corporative power.

Corporations rule the world

Starting the discussion of corporative power it is necessary to mention the book “When Corporations Rule the World” by David Korten. In his anti-globalization book Korten examines “myths” about the global economy - the myth of free trade, the myth of GDP relevance, etc. - and claims that “corporate libertarians” spoilt the ideas of Adam Smith. Thus, he writes:

“The corporation is an institutional invention specifically and intentionally created to concentrate control over economic resources while shielding those who hold the resulting power from liability for the consequences of its use. The more national economies become integrated into a seamless global economy, the further corporate power extends beyond the reach of any state and the less accountable it becomes to any human interest or institution other than a global financial system” (Korten: 63, 1995).

The main idea of the book is that current methods of economic development are unnatural because they are enforced by consolidated corporate power. The ideology of consumerism is the product of trans-national corporations, too, and it is intended on involving people in self-contained process of consuming goods and services.

The report “Top 200: the Rise of Corporate Global Power” by the Institute for Policy Studies contains data confirming the statements of Korten. Along with the proportion of corporations and states among the large economies in the word cited above the report provides other shocking data, such as “while the sales of the Top 200 are the equivalent of 27.5 percent of world economic activity, they employ only 0.78 percent of the world's workforce” (ISP report, 2001).

Together with financial power transnational corporations have the civil power. The term “corporative citizenship” has been used increasingly by scholars, consultants and corporations within the recent two decades, after the debate over campaign finance reform in 1990s. More then century ago, at the very beginning of the culture of capitalism, the U.S. Supreme Court added the Fourteenth Amendment to the Constitution, and nowadays this amendment broadens the power of powerful as it is corporation. “Relying on the Fourteenth Amendment, added to the Constitution in 1868 to protect the rights of freed slaves, the Court ruled that a private corporation is a natural person under the U.S. Constitution, and consequently has the same rights and protection extended to persons by the Bill of Rights, including the right to free speech” (Robbins:100, 1999) Thus, corporations have the rights to use the mass media, to found charitable organizations, to establish educational institutes, to lobby legislatures - that is to influence the government as individual citizens.

The “corporate libertarianism”, the object of criticism by David Korten, is the economic philosophy, which puts the interests and values of corporation above the values and interests of individuals. In theory the advocates of this ideology strive for sustained economic growth, free market, economic globalization and other social benefits. In real life the domination of corporative interests leads to the active interference in the internal and international politics and indirect impact on market regulation laws. Thus, in 2001 after the collapse of Enron Company, investigators proved that Enron and its CEO Kenneth Lay donated to the administration of President Bush, hypothetically in exchange to some legislative changes on the energy market. More recent example is the 2008 presidential elections, where Finance, Insurance and Real Estate Industries donated over $132 million on political contributions to candidates. Thus, the corporations actively use their corporate citizenship buying the political support of their private interests. In this situation the presidential elections in the U.S.A. turns to be the struggle between different corporations, and the interests of other citizens and their democratic right to choose the power becomes questionable.

Korten writes that along with manipulations with the national governments corporations created “three multilateral institutions: the World Bank, the International Monetary Fund (IMF), and an international trade organization» (Korten: 113, 1995). These institutions protect the corporate interests all over the world, eliminate barriers for free movement of capitals and goods, and act as world's highest legislative and judicial bodies. The protection of these powerful organizations allows global corporative power to socialize costs along with privatizing gains.

The increasing influence and popularity of corporation as the organizing principle in society couldn't leave untouched the non-profit organizations. The principles of corporate governance commonly appear in different non-profit activities. For example, the golf club can be the mutual benefit nonprofit corporation, if it adapts some basic principle of corporate government: the barrier of entrance and exit, the distribution of property and so on. It is worth noting that corporations adopt some principle of non-profit organizations, too, for example, the government through the small group of individuals or companies instead of being publicity traded corporation.

Thus, the answer on the question “Do Corporations rule the word?” is positive: yes, they do.

The matter of corporate power

Every person who is interested in the latest news could notice a flurry of protests against the globalization, transnational corporations and governments presenting them. According the assurance of corporate libertarians, the corporative power growth has brought only benefits to everyone that is why the protests could seem groundless. However, the situation is more complicated. Corporations act in the interests of their stakeholders trying to earn more money for them. For this reason every corporation has to create or to seek the most profitable conditions for its business. The production in the industrialized countries has the strict limits regarding the minimal wage and social expenses, the environmental standards, the human rights, and so on. Every company has to choose between increasing the capital expenses to meet the business standards of the developed country and shifting its production to other countries with the less strict legislation. Nowadays the goldmine of the most producing companies is China. On the current stage China is the country with developing economy and emerging market. That is why business standards and minimal wages in China are low. The most powerful companies of the world moved their industrial capacity to China. The countries of Central America, India and Philippines are also attractive business-stages for trans-national corporations. It isn't secret that corporations in developing countries don't support the political forces, which are able to decrease the profitability of their business. Unfortunately, every political movement in direction to the human right protection, environment protection and other democratic values is the treat to profitability. Thus, trans-national corporations in developing countries aren't interested in the distribution of democracy.

The shift of production into other country is harmful for the domestic economy, too. First, the workers loose their jobs, and the country has to pay the unemployment benefit. Second, shifting the production form the country, the company makes an end to the taxation, and federal budget looses the significant part of tax revenues. When corporations move their business one by one in the short period of time, it could be the significant damage for domestic economy. And this is the typical example of socializing the costs and privatizing the revenue.

The recent economical turndown increased the competitive tension on the global market. That is why national governments, usually compromising with corporations, propose the residents of the country to lower environmental standards, labor costs and social spending, corporate taxes, and take some other measures to create more attractive business environment for trans-national corporations. In other words, the role of government is to secure profitable investments for transnational corporations.

The possibility to manipulate the government and domestic policy allows corporations to protect their interests within the country. Thus, almost the third part of corporations in the U.S.A. doesn't pay taxes at all, and the taxes' reducing becomes the generally accepted practice in every country of the world, in which the corporative influence is significant.

At the beginning of current decade the corporate share of paid federal taxes made approximately 7 percent of total taxes, though fifty years ago, in 1960s, the share of corporate taxes reached 22 percent. Such shortage in tax revenues happened due to tax sheltering and tax code revisions under the pressure of corporate lobby.

The owners of corporation worry not only about the corporative tax reducing, but also about tax cuts for the individuals with higher income. Nowadays the federal tax code is still progressive, but the proportion of higher incomes in taxes in comparison with lower income earners is less that it has ever been. So far as minimum wage in the U.S.A. is set periodically, it constantly looses its value because of inflation. So there is no need to decrease the minimal wage, it is enough to prevent its growth.

“Today's minimum wage of $5.15 has been stuck since 1997. In inflation-adjusted terms, its current value is almost a quarter less than at its peak in the late 1960s” (“Inequality and Corporate Power”, 2003).

This situation with the rights of workers creates tension on the society. Unfortunately, workers can't protect their interests as by themselves, as by trade unions.

Another problem of corporate influence on the society and economy is the falling level of unionization. Trade unions are still the most effective tool of workers protection and their interests' representation. Nevertheless, the corporate globalization diminishes the worker power and union base, and as Kate Bronfenbrenner describes, “the erosion of the U.S. manufacturing base, vicious anti-union campaigns by employers and inadequate organizing efforts by labor has led to the drop-off in union representation in the United States” (Bronfenbrenner, in “Inequality and Corporate Power”, 2003)

As it seen, the corporate-led globalization promotes the inequality growth in society, the economical slowdown in the country and the concentration of wealth in private ownership.

Korten call to relocate the economic power by region and to prevent further globalization. He thinks all current trends are reversible and can be stopped. His prescriptions include the refuse from the philosophy of consumerism, and focus on money, increase the tax on advertising up to 50%, excluding corporations from political power and creating local economies. Unfortunately his ideas seem to be utopian: there is no power in the whole world that is able to oppose the corporation, and most people prefer their consumerists' ideology. Besides, some of important achievements of our civilization are impossible without trans-national corporations, like trains and computers. So, the power of corporations will grow in the nearest future, despite its negative impact on the economy.

Conclusion

Though the globalization in the world is in the middle stage of its development, it is obvious that trans-national corporations are the greatest locomotive force in this process. Despite the optimistic ideology of “corporate libertarianism” the growth of corporate influence causes the negative consequences for the economic and political structures of different countries. The most obvious result of corporate power is the growth of inequality level, especially in the U.S.A. Nevertheless, on the current stage the growth of corporate influence can hardly be stopped, prevented or decreased, and this trend will save unchanged at the nearest future.

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