Democracy basically means rule of the people living in a state by the citizens of that state. But as not even only two individuals can ever agree exactly what they want, democracy can never be perfect. Indeed, the first democracy in the world –Ancient Athens–was far from a perfect democracy, especially as many of the people living in that “democracy” were slaves and not citizens and had no say at all in how they were ruled.
When once states grew beyond the size of comparatively small City States like ancient Athens , direct democracy in which, in principle, all the people lounged around in a forum and decided what they wanted, direct democracy became impossible. Instead states which aspired to be democracies turned to some form of representative democracy in which, for example, the people elected representatives who were to represent their views in some form of Parliament which itself had some role in electing or controlling a government.
I am not proposing to discuss forms of representative democracy today: these vary greatly in the numerous purportedly democratic states in the world. Nor am I going to discuss limitations of the autonomy of a state’s citizens caused by the diplomatic or military intervention of other states, such as Russia’s current intervention in the affairs of Ukraine.
Rather, I am going to discuss the general decline in the role of democratically elected governments in the governance of the states which they purport to rule, and the rapidly increasing role of large capitalist corporations in that governance.
I am concerned here with the ability of representative democratic institutions to devise and implement policies related to the economic and social welfare of a state’s citizens. The state’s capability in such roles can never be absolute. If, as is general, people in one country work to create products and services to be bought by citizens of other countries; and if they also want to buy some of the goods and services produced by citizens of other states, the terms of such trade cannot normally be determined unilaterally by any one state, or by the citizens who work in it. But the growing power of often huge transnational corporations affects the welfare of people in several states by their unilateral decisions taken in order to increase their own profits.
A central tenet of democracy is that everybody should have equal rights. It might be reasonable to suppose that an “ideal” democratic economic system would take as its first priority the satisfaction of every person in the world’s basic needs before it went on to satisfy people’s less urgent wants and desires. But no conceivable economic system could approach close to such an ideal. However, the central contention of this talk is that the extent to which modern capitalism diverges from such an ideal is excessive; and that, a better world in which movements towards such an ideal would be more rapid and coherent is feasible.
Economic and social inequality is extreme throughout the world, and is becoming more extreme.. To some extent, the world’s economy is moving in the direction of improving the welfare of poor and disadvantaged people through the benefits of economic growth being extended to many more poor people, for example in China and India. But there are several ways in which it is moving in different, far less desirable directions.
I want to talk about five important groups of “ weapons” which large transnational corporations use in combination very effectively to sustain and increase their influence over economic decision making at the expense of democracy.
1. Control over the direction in which technology is developed, exercised by their ownership of Research and Development laboratories and resources used to design and develop new products
2. The enormous and effective effort and expenditure they deploy in lobbying governments and international organisations to influence them to implement policies favourable to capitalism in general and to their own particular industries and activities.
3. Cost reduction. Traditionally, companies have achieved cost reductions by putting increasing pressure on workers to work faster; also through mechanisation, and subsequently automation of production and other processes. Since the 1970s, the transfer of manufacturing operations in particular from developed countries, where labour is relatively expensive, to developing countries where labour is cheap – in some cases, very cheap indeed – has played an increasing role. None of these “weapons” is inherently bad. But it is the ways in which these resources are deployed in combination which has been having an increasingly damaging effect on the interests of people (especially poor people) and on democracy, especially in the last sixty years or so.
4. Arranging transactions between their branches in different countries so as to minimise the total taxes they pay. For example, Amazon has a huge operation in Britain but pays no Corporation Tax because its profits are allocated to countries such as tax havens where much lower taxes are exacted.
5. Decisions whether particular products or services should be provided by private corporations, by public corporations or by voluntary or mutual organisations are surely decisions that should be made democratically by the people in a country. But that is not always so. Health services are a prime example of external influences from other countries and Inernational Organisations being brought to bear on Governments in favour privately provided provision rather than state provision.
1. Technological change
As Joseph Schumpeter wrote about sixty years ago:
“the capitalist engine is first and last an engine of mass production which unavoidably means also production for the masses” It is the cheap cloth, boots, motorcars ,and so on that are the typical achievements of capitalist production… The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.”(Schumpeter, 1954: 67)
Revolution in production methods and in the products available result in “an avalanche of consumer goods”. “the capitalist process…..by virtue of its mechanism, progressively raises the standard of life of the masses.” (page 68). A modern workman can buy a far greater quantity and variety of goods per hour worked than his forefathers could have bought.
So far so good, but let us take the case of agriculture and food production.
Soil conditions and climate in developing countries are very different (and diverse) throughout the world. But many millions of people are deprived of opportunities of gainful employment by the control of a high proportion of food amd agricultural production by a few enormous corporations which concentrate it on a very restricted range of crop varieties, produced intensively using capital and input intensive large scale production methods. Technology is developed and deployed on a large scale to support these production methods. This in turn accelerates rural unemployment and stimulates the movement of huge numbers of people from the countryside into already overcrowded huge cities in which there is already massive unemployment. Intensive food marketing efforts result in the creation of markets for foods of little nutritional value.
Perhaps the largest social movement the world has ever known is the Food Sovereignty Movement. Its principal manifestation is La Via Campesina, a loose association of peasants and small farmers which has at least 200 million members, and possibly as many as 300 million. The principles of Food Sovereignty can be summarised as “the right of peoples to healthy and culturally appropriate food produced through ecologically sound and sustainable methods and their right to define their own food and agriculture systems”
But the principal organisations which deploy Research and Development for agricultural production are large multinational corporations. For example, such organisations develop and apply Genetic Modification. principally to meet the demand from food processors and farmers in developed countries.). They use GM to try to develop and market standard solutions (for the whole world) that involve the intensification of agriculture which is often environmentally disastrous.
The enormous numbers of people in the Food Sovereignty movement worldwide have very little power in contrast with the transnational agriculture and food corporations.
2. Lobbying National Governments and the EU
In the United States in the 1920s lobbyists from the oil, tire and automobile industries persuaded federal and state governments to undertake the huge expense of constructing highway networks.(In addition, General Motors took over and dismantled competitive public transport systems , including railways and tramways ).
In November 2013, George Monbiot reported that the British government’s subsidy system for gas-burning power stations is being designed by an executive who has been seconded into the Department of Energy: he works for ESB International which builds gas-burning power stations. And that a government minister, Nick Boles, has privately assured the gambling company Ladbrokes that it need o’t worry about attempts by local authorities to stop the spread of betting shops. His new law will prevent councils from taking action. Lord Green, a government trade minister requires that large companies have ministerial “buddies”, who have to meet them when the companies request it. Previously, Lord Green was chairman of the HSBC Bank.
The European Union and the USA are negotiating a huge trade deal – the Transatlantic Trade & Investment Partnership (TTIP). If agreed, TTIP will give corporations the power to overturn democratically decided laws on everything from environmental protections to food safety, through a system of secret courts that only corporations would have access to. The Transatlantic Trade and Investment Partnership will include investor-state dispute settlement. Where this has been included in other trade agreements, it has allowed big corporations to sue governments before secretive arbitration panels composed of corporate lawyers, which bypass domestic courts and override the will of parliaments.
Thismechanism could threaten almost any means by which governments might seek to defend their citizens or protect the natural world. Already this sort of mechanism has been included in trade treaties. It is already being used by mining companies to sue governments trying to keep them out of protected areas; by banks fighting financial regulation. In Australia, the huge tobacco corporation Phillip Morris is suing the government , challenging its tough anti-smoking laws. The German government is being sued by Vattenfall, a Swedish nuclear power group, for wanting to phase out nuclear power.
The corporations have most of the power over decision-making already, and their power is increasing almost daily.
3 Cost reduction
Especially since the 1970s,companies have outsourced operations –especially manufacturing – from developed to developing countries primarily to increase profitability by lowering employment costs. This has generated huge amounts of employment in developing countries, in particular in China, which are very much to be welcomed. But the power of large companies to offer significant amounts of employment –or to withdraw it –offers companies very considerable power over nation states in relation to a wide variety of policies –from employment, taxation to environmental policies. Companies also achieve lower costs by operating in less regulated environments, and such environments may also involve increased pollution and decreased safety for workers than would be acceptable in developed countries.
The most important industry where this has happened is clothing. The biggest clothing manufacturing country is China, with India and Bangladesh growing fast. Massive employent has been created in sch countries, and rich countries benefit from being able to buy very cheap clothing. But corporations keep wages low, and resist Government regulations and trade union pressure for better working conditions. In the extreme case, this can result in the tragic loss of life which happened as a consequence of the factory collapses in Bangladesh last year.
Often, corporations negotiate with national governments, and put pressure on them to compete with other governments to offer “good terms” to secure employment for creating employment in their countries. “Good terms” for the corporations include avoiding the need to spend money on the health and safety of workers and avoiding the need to spend money on reducing pollution of the environment, and, of course, paying low wages to workers. What does that do to the democratic rights of workers in those countries to enjoy safe ,healthy and fulfilling lives?
The Headquarters of most such corporations are based in developed countries, but increasingly that are based in rapidly developing countries such as India and China. Tata, a huge Indian conglomerate, owns a vast variety of companies in 80 countries, including Jaguar Rover which manufactures luxury vehicles in Britain and Tata Global Beverages which own Tetley Tea. Tetley Tea owns tea plantations in Northern India where people, including children, are paid less than $3 a day to pick tea .they work very long hours, often have to spray noxious pesticides with little protection. Their homes are decrepit, open to wind and rain. Overflowing latrines have created cesspools in the areas where employees and their families live. The Human Rights Institute at Columbia Law School, which visited 17 of 24 Tata plantations during two years of its own investigation. Senior plantation managers told the researchers not to listen to the workers because they had “low IQs” and were “like cattle.” These comments reflect the caste system which exists in the plantations in Assam. The tea workers come from two marginalized communities — Adivasis (indigenous people) and Dalits (the so-called “untouchable” caste). They remain trapped in the lowest employment positions on the plantation, where they are routinely treated as social inferiors, even though discrimination against lower castes is illegal in India.
Such appalling conditions are not confined to developing countries Slaughterhouse and meat packing workers are poorly paid for long hours and for tedious, dirty, repetitive work using dangerous tools. They often work in excessively hot or cold temperatures and sustain injuries from animals, other workers and their own errors in a pressurized environment in which speed is of the essence.
Is all this democracy at work?
The World Bank is launching a full investigation into what it calls the “potentially significant adverse” environmental and social impacts on plantations owned by Tata. But the influence of international organisations such as the World Bank is not generally benign. They have exerted influence in favour of low priority for expenditure on health care in relation to expenditure on promoting economic growth based on stimulating international trade. The influence of international organisations –and pressures exerted by them – have generally favoured private delivery over public delivery of goods and services such as clean water and health care, and this has generally been against the interests of poor people and especially of those living in developing countries. The World Trade Organisation believes that public services should be opened up to international capital and that this would benefit both globalization and education However, further opening up the markets of poor nations to transnational corporations is liable to create greater inequalities between rich and poor nations. Education is increasingly treated as a tradable commodity as opposed to a public good in wealthier parts of the globe, with learners increasingly referred to as customers, clients or consumers. Indeed international organisations actively promote policies which look after the interests of capitalism rather than the , intersts of people , because a high proportion of the leaders of these organisations are now committed to the mistaken belief that close co-operation with major trans national corporations is invariably beneficial to the economies of developing countries.
In addition, International organisations such as the World Bank have often backed massive programmes of dam building in developing countries so as ot stimulate economic growth. This has meant displacing millions of people from areas which have to be flooded to permit construction of dams. The displaced people have little scope to express their resistance to such projects which usually wreck their lives.
4..Allocation of Corporations’ profits between the various countries in which they operate.
States compete with other to offer lower taxes to corporations to encourage them to locate in their countries. This denies the democratic rights of people.to set the taxes they pay.
5. Decisions whether services should be provided privately or not
The World Bank, the World Health Organisation, the Pan Amercan Health Organisation and the U.S, National Institutes of Health have been influential in persuading developing country governments, especially in Latin America to adopt voluntary health insurance as the best way of coping with developing countries’ problems of health provision. Privatisation has not generally succeeded in improving access to health services for vulnerable groups in Latin America. Although its impact has differed among Latin American countries, expansion of private insurance has generally worsened access to needed services. Privatisation, either through conversion of public sector to private sector insurance, or by expansion of private insurance through enhanced participation by corporate entrepreneurs, has usually improved conditions for private corporations and has led to higher administrative costs.
State –run health systems are likely to offer better services to the community as a whole than systems based on private health insurance. But developing countries depend heavily on aid from external donors to provide the resources for improving health, and such donors generally exert influence in favour of private provision. This denies people living in those countries the right to determine whether private or public organisations should provide them with health care.
Do any significant areas of the economy remain where the will of the people –democracy -still has some influence on policy?