In this early 21st century, we are bedevilled by size. Economies of scale have allowed firms to grow until they straddle the globe like colossi, beneficiaries of the last century’s turbocharged capitalism. But it is the sheer expanse of those companies, how they consequently behave and how that affects the countries and continents in which they trade that cause disquiet. Of the top 175 economic entities in the world in 2011, whole nations included, 111 were giant corporates.
There has been diagnosis aplenty, but in the Taming corporate power series this week, the Guardian has sought to pinpoint potential remedies. The debate is often a despairing one. Giant firms, reluctant to have their territorial ambitions or profit potential curbed, will deploy lobbying and sharp PR to persuade lawmakers to think otherwise. They make menacing virtue of their multinational structures, threatening uncooperative states with taking their business elsewhere. The result is a source of power that has grown beyond democracy’s reach.
At one level, transnational businesses are simply structures for organising economic activities. By dint of their border-straddling scale, they do much to foster world trade. But as Prem Sikka of Essex University observes: “Corporations have no loyalty to any place, people or community.” Rage about tax avoidance, predatory competition and environmental despoliation occasionally triggers calls for practical action to temper or even punish corporate irresponsibility. But always the disincentive is the scale of the task. In the real-life face-off between the democratic David and the corporate Goliath, David can look puny indeed.
And yet – then as now – Goliath is not invincible. As our writers have searched for answers, some things have become clear. First, governments already possess many powers that they shrink from using. They could smash monopolies and force firms vying for public contracts to pay a living wage. They could, if they wanted, reform political funding and get a regulatory grip on the lobbying that leads to warped laws. Just as governments have imposed freedom of information on themselves, they could – in principle – shine a light behind the corporate veil. They could also, between them, agree that taxes will be calculated on where sales are made, not where profits are reported.
Local authorities could reassert their territorial power too. This week we highlighted how Enfield council has been campaigning to force utilities to give work to local firms and for banks to lend more to local business, with the threat that those that do not comply will be named and shamed. Prof Sikka called for a rethink of company law, balancing the terrific legal privilege of limited liability with a removal of the duty to advance shareholder interest at the expense of all other stakeholders. That mirrors the line of thinking pursued by our economics editor Larry Elliott, on what he called “the nuclear option”. Namely, the withdrawal of this limit on liability – that’s the L in PLC – from those irresponsible corporates that show negligence to their workers, their customers or their supply chains. All of these would, of course, require great will from legislators. For all the scandals, they seem unlikely to find such resolve on their own.
If there is to be a genuine effort to reshape the relationship between communities, nation states and multinationals, the pressure will have to start in communities themselves, instilling in our representatives the fear that there will be a price to pay for being in hock to corporate interests. The pressure is, perhaps, most likely to start at the grass roots – outside party structures, which are so often compromised by corporate funding. There is some early sign of that in the activities of the better trade unions, and in popular campaigning groups like UK Uncut. There is progress, too, in those parts of Europe where anti-austerity campaigns are increasingly pushing corporates centre-stage.
The status quo endures because there is, at present, too little incentive to assault a system that allows companies unquestioned freedom and unfettered prospects for enrichment. And then we come back to the intimidating scale and the accompanying complexity. These forces for inaction may yet prevail, but let it no longer be said that alternatives do not exist.