Corporate sovereignty is trumping national sovereignty, representative democracy, and civil society around the world, with ill effects. It transfers sovereignty from individuals and governments to transnational corporations (TNC's). As a result, relationships between civil societies and governments and between many governments and TNC's have deteriorated. "Free trade" instruments are replacing the rule of law with unaccountable and inaccessible trade group laws and treaties, changing government functions from serving the public to serving the corporations. This new regime is the marketocracy. Currently, 18 to 20 somewhat successful strategies have been deployed to counter the marketocracy, including litigation, legislation, and overthrow of governments. But the resolution lies in new global forms of governance.
"Marketocracy" means the overpowering and replacement of national laws and sovereignty by corporate laws and sovereignty, without the consent of the governed and without civil society's access to redress. At an accelerating rate since the 1970's, "free trade" instruments are replacing the rule of law with unaccountable and inaccessible trade group laws and treaties, changing government functions so that serving the public and the common good are diminished in favor of serving the corporations. This shift in values is reflected in lawmaking, budgets, regulatory activity, and legal decisions.
Led by U.S. corporate actors, the overthrow of national sovereignty, with its inconvenient consent of the governed, has been pursued as a deliberate policy since the Nixon administration, some thirty years ago. "Free-market" policies, which eliminate trade barriers, labor laws, subsidies to the poor, public enterprises, and restrictions on land sales, appeared in earnest globally in 1980, and in the next 20 years spread widely, bringing environmental destruction, global warming, and economic inequality in their train.
During the Nixon administration, Barnet and Muller interviewed corporate commanders for their book Global Reach. Several quotes from the interviewees reveal their vision for the world.
"The world's political structures are completely obsolete. The critical issue of our time is the conceptual conflict between the search for global optimization of resources
and the independence of nation-states."
--Jacques Maisonrouge, Senior Vice President, IBM.
"The nation-state, unfortunately, is a very old-fashioned idea and badly adapted to our present complex world. . .
Working through great corporations that straddle the earth, men are able for the first time to utilize world resources with an efficiency dictated by the objective logic of profit." - George Ball, former undersecretary of state, former chair of Lehman Brothers International.
[The global corporation is creating a world economy,] "a global shopping center." --Peter Drucker, business consultant.
The global corporation "is the most powerful agent for the internationalization of human society."
--Aurelio Peccei, Board of Directors, Fiat, Club of Rome organizer.
Barnet and Muller also reported that at the Roundtable for Chief Executive Officers organized by Business International in Jamaica in 1971, global corporate executives "vowed to take a more active political role in suggesting a constructive role for nation-states in developing the Global Shopping Center. . . The global corporation must also make a "huge" effort to "educate people who would prefer not to be educated and who so deeply feel that the nation state is necessary for their happiness."
Those remarks were made thirty years ago. In this decade the perspectives have not changed. According to Cyrill Stewert, Chief Financial Officer of Colgate-Palmolive Corporation, "The United States does not have an automatic call on our resources. There is no mind-set that puts this country first."
And here is the proof:
In 1973 the top 298 US- based global corporations studied by the U.S. Department of Commerce earned 40% of their entire net profits outside the US. In 2002, large companies, encouraged by powerful law and accounting firms, began using tax treaties to cut taxes on profits made in the United States. In the "tax treaty triangle," a company transfers the profit it earns in the United States to a second company that exists only on paper, based in a second country (such as Barbados or Luxembourg), that has a tax treaty with the United States. The tax treaties allow companies to transform taxable profits into expenses deductible on their U.S. tax returns.
Tax-deductible expenses include interest payments to the overseas company and royalties for use of the company's logotype and fees for management advice. The "paper" company then sends the money to the U.S. company's worldwide headquarters in a third country such as Bermuda, which has no income tax. What once were taxable profits have become untaxed dollars, for use anywhere in the world. Publicly traded companies can use this method to reduce taxes on American profits to as little as 11 percent.
The principle of national sovereignty is a principle in retreat from the trade arena.
While it seemed revelatory thirty years ago, it now seems commonplace to observe that:
* global corporations intend to manage the world as a planetary enterprise, one vast centralized economy with the goal of maximizing global profits.
* The ability to do so emerged from the post-World War II technological explosions in communications, law, and banking, and the instant communications available through the internet.
* The One Great Market vision directly challenges national sovereignty. The world's corporate managers now see national sovereignty as either an obstacle to worldwide development or as a tool to facilitate and legitimize its own emasculation, and reduction of nations to the status of client states. They are succeeding exhaustively at the overthrow of national sovereignty.
* Corporate sovereignty operates primarily through the U.S. Presidency, the U.S. Congress, the U.S. Trade Representative, U.S. Chamber of Commerce, the World Trade Organization, the International Monetary Fund, and the World Bank. Through these instruments, transnational corporations transfer public wealth and sovereignty from individuals, peoples, and governments to the TNC's. These subsidies and the rules of the IMF and World Bank ("restructuring" requirements, e.g.), by which Third World nations borrow money under conditions requiring neoliberal economic policies and the privatization of the commons, facilitate the economic, cultural and political hegemony of the marketocracy, and increasingly create inequality and failing and failed states.
* The role of private financing, necessary but not sufficient for TNC's economic hegemony, may be necessary and insufficient in changing the marketocracy.
More in Part Two