Preoccupations

Countries vs corporations

Print edition : April 28, 2017

Logos of the biggest global corporations whose revenues were greater than the total revenues of governments in the 180 "poorest" countries.

DOES size matter? If so, we may be in trouble. Data put together by the Global Justice Network (formerly the World Development Movement) show that in terms of revenues, big multinational companies dominate over governments in most countries. In fact, of the top economic entities in the world in terms of revenues, more than two-thirds are large corporations, most of which are privately held. This, in turn, has very significant implications for the distribution of economic power and, therefore, of global power more generally.

The study (http://www.globaljustice.org.uk/news/2016/sep/12/10-biggest-corporations-make-more-money-most-countries-world-combined) relates to 2015 and compares the total revenues of national governments (from the CIA Factbook) with the total revenues of corporations (from the Fortune Global 500 list). This is probably a more meaningful comparison than the one that has been made in the past by the World Bank, between gross domestic product (GDP) of countries and total sales of corporations, for several reasons. First GDP data, which relate to economic activity within a country over the period, typically are based on many assumptions about transactions within the economy and cover all sorts of economic agents within the country. If we are comparing specific institutions for their economic strength, this would not be comparable to the turnover of corporations.

On the other hand, if the idea is to gauge the economic strength of an institution, then one way to capture it would certainly be in terms of its revenues—which is why it makes sense to compare the total revenues received by governments with the revenues of corporations. It should be noted that this changes the ranking of several countries from that based on national income because of the differing shares of government revenues in GDP (which can range from 10 per cent to more than half of GDP). But certainly it provides some insight into the broader economic power of these entities, including their ability to spend in different ways.

This comparison throws up some really striking results, some of which are indicated in the table. Of the top 100 economic entities in the world in 2015, 69 were corporations. This number had increased from 63 in the previous year, indicating the growing economic power of companies. Several governments in developing countries had fallen off the list of the top 100, indicating the problems faced by emerging markets in this period. In the top 200, the number of corporations was even greater at more than three-fourths—they accounted for 152 out of the top 200 in terms of revenues. (Incidentally, India’s government barely makes it into the top 25, squeezing in ahead of Apple, but that too may have changed by 2016.)

The ten biggest corporations in terms of turnover, which included Wal-Mart, Royal Dutch Shell, Exxon Mobil, Volkswagen (despite its much publicised problems), Toyota, Apple and BP, received more revenues than the total revenues of governments in the 180 countries at the bottom of the list. There could not be a more succinct indication of global relative power.

Why should this matter, though? After all, it is well known by now that large multinational corporations have grown significantly over the years; is that necessarily a cause for concern? Should we worry more about this than about the rise of some countries relative to others (as those in the North, for example, obsess about the rise of China)? One obvious point is that it is ultimately governments that are responsible for ensuring the realisation of social and economic rights of their citizens, and their capacity to do so is obviously constrained by their resources. So, the fact that they are slipping in relative size matters from the point of view of all the people in the world who need their governments to deliver essential public services and amenities. But there are other reasons why this indication of relative power that is an outcome of sheer size is deeply worrying and should bring much greater focus on public attempts to rein in such excessive power of large private companies.

First, corporations are generally and fundamentally oriented towards profit-making, rather than any other social or broader motivation. Even in the case of publicly owned companies (such as several Chinese companies that figure prominently in the list), the profit orientation is never absent. Second, even such profit orientation is increasingly short-term in nature, partly because of the impact of financial markets and institutional changes, and partly resulting from increasing economic uncertainties. Third, these two features combine to mean that other crucial considerations, such as concern for the human rights of those affected by corporate actions, or the impact upon the environment, or seeking to ensure that people are not marginalised, do not enter into corporate calculations and can, therefore, deliver outcomes that are adverse for society.

Fourth, power begets power: the greater spending power of corporations means that they can exert greater influence, through lobbying, threats and bullying, cajoling and bribing, and similar means to ensure their goals. In particular, they can influence government decisions very easily when the governments are tiny in relation to their own size, and quite effectively even when faced with large governments. Fifth, this influence then extends globally to affecting the orientation and strategies of major international organisations, ranging from the International Monetary Fund to the World Trade Organisation to the legal institutions that enforce various trade and investment agreements. This is why systems of corporate grievance redress, such as the Investor-State Dispute Settlement (ISDS) mechanisms that are now part of so many international agreements, have become such a problem, because the associated tribunals have been disproportionately inclined to favour the business interests of large corporations over the social goals and human rights of citizens in the countries in which these companies operate.

In this context, it is not surprising that there are so many cases of corporate overreach or socially harmful behaviour. The examples proliferate, from inadequately compensated displacement of people from their lands and expropriation of their resources, to environmental damage with no thought for the medium-term or long-term damage, to exploitative treatment of workers. Both in the past and more recently, large corporations have collaborated with repressive governments to violate the rights of people not just directly but indirectly and in surreptitious ways, such as when communications companies shut off operations in particular areas or when they allow government surveillance of dissenters to enable crackdowns. In the contemporary period, the misuse of monopolies and control over knowledge enabled by the recognition of intellectual property rights have become major sources of both excessive corporate power and exploitation.

But all this is not inevitable: just as all this situation is the result of human actions, it can also be undone by human action. Indeed, some attempts to undo this unfortunate state of affairs are already under way, for example, in the United Nations. In June 2014, the United Nations Human Rights Council passed Resolution 26/092, which established the need for “an international legally binding instrument to regulate, in international human rights law, the activities of transnational corporations (TNCs) and other business enterprises”. A working group led by Ecuador has been examining ways of establishing such an instrument. This has been supported by a number of developing countries, including China, India and South Africa, and the recent presidential victory of the progressive candidate in the Ecuador elections creates hope that this attempt will continue. However, this is also being opposed by the major developed countries (United States, United Kingdom and several European countries) that are the home of the largest multinational corporations, despite the fact that such corporations also act in ways that are harmful to their own citizens.

The need for greater regulation of large corporations—and for international agreement on such regulation—is essential. Otherwise, it may well be the case that the huge imbalances in relative size and in economic power between corporations and national governments will only grow further.

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