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The Liberal Dilemma

When Corporations Rule the World
By David Korten, Earthscan, 1999, £14-95
Reviewed by Bill Hopwood

DAVID KORTEN'S book reveals all the tragedy of the compassionate liberal. He has compiled a wealth of facts and eloquent arguments about the multi-national corporations' global mis-rule and paints a picture of a much more attractive and fair world. Yet this powerful case effectively ends in the whimper of a plea for a better world.

Korten's book is one of many by concerned liberals who recognise the problems but have no real answer. They see, often very clearly, a world of mounting inequality, suffering, social disintegration and environmental damage. But the lack of action by the workers' movements in much of the industrialised world and the failure of virtually all political parties to have a vision of, or campaign for, a better future, leaves them searching for utopian solutions.

His general case that the world is dominated by a few hundred corporations whose interest is profit will be familiar to the readers of Socialism Today. But Korten still gives some startling figures. There are, for example, half-a-million child prostitutes in Thailand, Sri Lanka and the Philippines. In 1987 there were 145 billionaires in the world, by 1994 there were 358. They were then 'worth' $760 billion, owning more money than 2.5 billion people. American tax payers paid $500 billion to bail out the savings-and-loans fiddles of the 1980s. In America the income of the richest 1% of the population is higher than the bottom 40%. The average income of chief executives of the largest 1,000 corporations in 1992 was $3.8 million - up 42% on the previous year. In 1960 chief executives received 40 times the pay of an average worker, in 1992 it was 157 times. Large US corporations receive at least $20 billion a year in subsidies (so-called corporate welfare). Corporations worldwide spent $620 billion on marketing in 1989, the equivalent of $120 per person in the world. Twenty million US children use corporate sponsored 'teaching materials', including Channel One which reaches 12,000 schools and shows adverts which teachers are not allowed to turn off. More than $1 trillion a day is exchanged on currency markets, yet only $25 billion worth of goods are exchanged - that's one-fortieth. In the 1950s corporations paid 39% of all taxes collected. By the end of the 1980s that was down to 17%. On average the opening of a Wal-Mart store adds 140 jobs to an area but destroys 230 which were generally higher paid. The percentage of the money spent by consumers on food which goes to farmers has fallen from 41% in 1910 to 9% in 1990. Cuba, with a GDP of $26 billion, is the 72nd largest 'centrally planned economy' - the other 71 are corporations.

How did this happen? Korten's argument is that the big corporations dominate the world. Especially since the 1970s they have launched an attack on every barrier to their power and profit. In the USA (and in most other advanced capitalist countries), wages, benefits and job security have been attacked. The corporations spend huge sums of money on general marketing and publicity, influencing the media and buying politicians.

Internationally, the economic subjugation of former colonies has increased. The International Monetary Fund (IMF), World Bank and the General Agreement on Tariff and Trade (GATT) increased their attacks on the economies of these countries. The World Bank actively encouraged debt to bind the neo-colonial economies to the interests of the corporations. The IMF imposed structural adjustment programmes which include cuts on social provision spending. This helped ensure that debts were repaid and made the economies more dependent on exporting raw materials and cash crops while importing manufactured goods from the industrialised nations. The World Trade Organisation (GATT's successor) enforces trade agreements which are in the interests of the big corporations.

Corporations increasingly make their profits on the financial markets, taking over and asset-stripping other companies, paying less tax while receiving government hand-outs, and cutting employment. Although they have shed jobs and employ only 0.05 of 1% of the population, the top 500 corporations control 70% of world trade and completely dominate smaller firms.

All of this is of no surprise to many people but Korten argues that the core of the problem is not the pursuit of profit but that corporations are out of control. They are the 'dominant governance institutions on the planet'. They have gained legal powers and rights over human beings. Unlike people who have physical bodies and needs, the corporations' bodies are a legal charter and the food they feed on is money. As parasites on humanity, corporations across the globe are driving 'a race to the bottom', cutting wages, damaging the environment and shedding labour.

Korten argues that all of this is in conflict with the ideas of the 19th century economist, Adam Smith, competition and 'effective markets'. He wants the corporations controlled so that the benefits of the market flow to people. He envisages a world of small businesses, co-operatives and municipal enterprises. Among his suggestions are: a 20-hour week and a guaranteed income; a maximum pay differential of 1:20; an end of third-world debt; a 50% tax on advertising; and the banning of arm sales with major armies disbanded.

Korten contends that almost all of the world would benefit from such policies, including many well-off people, which is probably true. They should all unite in a global movement for change. But he is very vague on how the huge power the corporations, with most of the national and international institutions in their pockets, will be challenged. He gives many examples of people struggling across the planet against corporations. Although these struggles are often inspirational, however, Korten sees no way of uniting them other than through a vague change in global attitudes.

Here he wanders into semi-mystic territory. He states that modern philosophy and science is based on materialistic monism: 'matter gives rise to consciousness'. This is in contrast to transcendental monism: 'consciousness or the spirit gives rise to matter'. He argues, correctly, that science is based on materialist monism but that the common, crude and mechanical version of this leaves no room for consciousness, happiness or emotions. He says that this gives rise to Hobbes's view that there is no meaning higher than physical indulgence and economics which is only interested in money. Price is, therefore, the only decider of values and human needs are irrelevant.

The traditional answer of Western philosophy to this dilemma is dualism - the separation of mind and body - which Korten claims still accepts the domination of money in the economy with human needs separated off. His partially valid criticism of some materialist thinkers, however, leads him to mysticism. In fact, although the material world gives rise to consciousness, consciousness is real and human needs and feelings are important.

Korten states that, as there are billionaires in the Third World and extreme poverty in the USA, 'the reality is of a world divided by class lines more than geography'. Yet he argues for an all-class alliance to restore the free market by ending the tyranny of the corporations. How much more clear-sighted were Karl Marx and Friedrich Engels when writing the Communist Manifesto. They said that capitalism created a world market, 'over the whole surface of the globe', which reduced nature and all relations between people to 'cash payments', dividing humanity into two opposed groups: a tiny handful of the rich, and the mass of the population. Unlike Korten, who hopes to return to some imagined era of kind, caring capitalism, Marx and Engels looked forward to a socialist society which would realise the social dreams of Korten and much more besides.