Liberty & Corporate "Personhood"
The joys of Globalism
How is it that proponents of trade agreements can defend them on the grounds that they protect our freedoms, while opponents of the same trade agreements denounce them on the grounds that they take away our freedoms? National Post columnist Andrew Coyne, never one to shy from taking "leftist" analyses head-on, defended trade agreements in this way:
There's nothing inherently subversive of democracy or national sovereignty in a trade agreement...In many ways, moreover, free trade gives individual citizens more control over their lives, not less: When corporations are beating a path to your door from half-way around the world, when consumers are liberated from the tyranny of local monopolies, then in the economic sphere, at least, the power of the ordinary citizen is enhanced (Andrew Coyne, "Free trade's 'democratic deficit'" National Post, April 18, 2001).
Coyne makes globalization sound self-evidently positive, even exciting. See how he starts talking about "individual citizens" and speaks confidently of "democracy," and then gracefully replaces "citizens" with "consumers" and segues from "national sovereignty" over to "the economic sphere." Like an expert magician, he dazzles us with the pretty things on show while quietly pulling a very different rabit out of his hat. Not to be outdone in the dazzling business is WTO Dirctor-General Mike Moore who, perhaps feeling upstaged by the protests in Seattle, pulled out the stops in his identification of trade liberalization with individual freedom, taking hard-nosed economic theories and spinning them into IBM-commercial global peace fantasies:
Remember when the Berlin wall came down, when Nelson Mandela walked to freedom, when the last imperial European Empire collapsed, when the Colonels returned to their barracks in South America. From the Congo to Cambodia, Poland to Chile, we all celebrated these universal values of freedom. No one condemned globalism or the ideals of freedom. Why is it when the smoke clears, people choose freedom? And now these same freedom fighters are in Seattle, demanding opportunity to trade freely [italics mine]. Are you going to tell them the old days and ways were better? I won't (WTO Press Release, 29 November 1999).
I will refrain from commenting too extensively on this quote, trusting the reader to take from it what he or she may. Regrettably, this is not the only example of hyperbolic romanticism in the realm of trade policy punditry. Again and again, trade liberalization is held up as a way to enhance the liberty of citizens by making more opportunities available to them. Trade is often described in the terms of individual rights, as though it entailed, say, me calling my friend Juan in Puerto Rico and asking him if he'll give me a bunch of bananas in exchange for a couple of hockey sticks. Or, as Moore put it, "Where peoples and nations enjoy each other's culture and music, ideas and commerce, they do better" (Mike Moore, "Open societies do better," speech at the 11th nternational Military Chiefs of Chaplains Conference, February 9, 2000).
I found an amazing book, written in 1986 by a US think tank, called Free Trade: The Necessary Foundation for World Peace (no, I'm not making this up), which expounds on the same theme. In the book, an analogy is drawn between two boys, one of whom has marbles and the other of whom has a top. When they exchange what they have for what they want, both find that their lives have improved as a result. This seems to be the basis for the free trade argument, as the authors start with this analogy and then jump right into heavy industry, as though there was no real difference. "In a peaceful society, two neighbors compare their respective supplies and wants, and find opportunity to swap to their mutual advantage. That's really all there is to trade - one person giving up something he has for something he wants more" (W. M. Curtiss, "Serving Consumers," Free Trade: The Necessary Foundation for World Peace, The Foundation for Economic Education, Inc., New York, 1986, p. 9). Or, as another writer describes, "The Detroit worker who has helped to pile up a heap of automobiles in the warehouse is none the better off for his efforts until the product has been shipped to Brazil in exchange for his morning cup of coffee. Trade is nothing but the release of what one has in abundance in order to obtain some other thing he wants" (Frank Chodorov, "The Humanity of Trade," Free Trade: The Necessary Foundation for World Peace p. 3)
The Free Market
Indeed, this defence of free trade flows from the basic assumptions of the free market. The phrase "free market" is meant to refer very specifically to the following system: a market involves an exchange of goods and services between the people who provide them and the people who demand them; it is 'free' in the sense that each participant can seek to produce whater s/he thinks others will want, and acquire whatever others are willing to produce. The basic rule of exchange is that each good or service (called a commodity) has a value, measured in currency, which is a function of the interaction between the quantity of that commodity that sellers can provide and the demand for that quantity that buyers express. That is, the price of a commodity is freely determined by the totality of exchanges among persons, and can be used to compare the relative values of different commodities.
Most citizens of industrialized nations would tend to agree that the free market system is alright, but there are certainly different strains schools of thought regarding the role that the free market should play in economics. One school holds that the free market is alright, but cannot sustain social stability and well-being without the balancing forces of family, tradition, and the rule of law. These thinkers are generally called conservatives. Another school holds that the free market is alright, but tends to create inequalities and abuses that need to be mitigated by state intervention. These thinkers used to be called progressives but are now generally known as liberals. Some people think that the free market is alright - wonderful, in fact - and that with a few basic rules protecting person and property, the free market system is sufficient in itself to sustain society and bestow prosperity on whomever is prepared to work for it; and that, further, any attempt by the state to interfere with the workings of the free market system will actually hinder its effectiveness at creating prosperity. These thinkers used to be called liberals until the progressives took over that name; now they are generally referred to as neo-liberals.
Where are the corporations in all this?
One of the things you may notice about proponents of trade liberalization, and liberalization in general, is that they generally talk as if corporations don't exist. Instead, free persons participate in free exchanges among themselves, and it's all warm and fuzzy. Indeed, Friedrich Hayek, an archetype for neoliberalism, wrote of liberty that it means "freedom from coercion, freedom from the arbitrary power of other men, release from the ties which left the individual no choice but obedience to the orders of a superior to whom he was attached" (Friedrich Hayek, The Road to Serfdom, University of Chicago Press, Chicago, 1944, pp. 25-26), and that while "the pursuit of the selfish aims of individual will usually lead him to serve the general interest, the collective action of organized groups is almost invariably contrary to the general interest" (Allan Engler, Apostles of Greed, Fernwood Publishing, Halifax, 1995, p. 80). That these statement effectively condemn the existence of corporations seems to slip past the notice of most market liberals. University of Chicago economics professor Milton Friedman also made a career out of cautioning against the dangers of large organizations: "Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power" (MIlton Friedman, Capitalism and Freedom, University of Chicago Press, Chicago, 1962, p. 2).
Of course, Hayek and Friedman were not talking about corporations when they warned us about the concentration of power; they were talking about government. Indeed, Friedman writes that "By relying primarily on voluntary cooperation and private enterprise...we can insure that the private sector is a check on the powers of the government sector and an effective protection of freedom" (Friedman, p. 3). But their warnings are just as applicable to corporations as they are to governments. The one thing that neoliberals all ignore is that the concentration of power in private hands can be just as injurious to individual freedom as the concentration of power in public hands. Indeed, the last century has seen the power and influence of corporations vis-a-vis people explode.
Going back to trade agreements, its proponents always talk as though it is individuals trading among another - or, rather, that it is nations trading. Clearly, this is not the case. The real trade is not among people or among governments; it is among corporations. A working paper from Investment Canada a decade ago indicates this: "Transnational corporations are leading the process of globalization; they constitute a crucial link between trade, capital and technology" (International Investment and Competition, Working Paper No. 9, October 1991, Investment Canada, p. ii). Transnational corporations, to which I will return in more detail in a few minutes, have been driving the agendas of trade agreements for some time.
There is no question that the concentration and consolidation of Canada's economy through NAFTA is just a continuation of trends that were already in place. For example, in 1988, the top 25 corporations in Canada controlled 41.2 percent of all corporate assets. By contrast, in 1975, the top 25 corporations controlled only 29 percent of all corporate assets. Looked at differently, the top 0.01 percent of all Canadian corporations controlled 56.3 percent of all corporate assets (Statistics Canada Cat. #61-210). As economist (and, later, politician) Jacques Parizeau explained in 1988, "That kind of concentration of assets has brought about a few groups that now find the Canadian 'pond' a bit small for them and therefore tend to go to the United States" (Jacques Parizeau, "Corporate Concentration & Changes in the Regulation of Financial Institutions," R. S. Khemani et al, Eds., Mergers, Corporate Concentration and Power in Canada, Institute for Research on Public Policy, Halifax, 1988, p. 383). This is also indicated by economist Sylvia Ostry, who points out that "The executives of Canada's 150 largest corporations, including prominent US subsidiaries, pressed for free trade long before either government was committed to the idea" (Sylvia Ostry, "The NAFTA: Its International Economic Background," North America Without Borders University of Calgary Press, Calgary, 1992, p. 72).
And as far as representation goes, big business in Canada is usually able to achieve its broad policy and regulatory objectives. Private sector lobbying groups like the Business Council on National Issues (BCNI), the Fraser Institute, and the C.D. Howe Institute crowd public forums with publications and press releases that advance corporate interests. W. T. Stanbury, a professor of commerce and business administration at University of British Columbia, explained it this way: "One of the principal objectives of efforts by big business to assert political influence is to create a general climate favourable to its endeavours so that it may grow and prosper. Political power can also be used to obtain specific regulatory, tax or procurement decisions that are advantageous to a specific firm or to an entire industry" (W. T. Stanbury, "Corporate Power and Corporate Influence," R. S. Khemani et al, Eds., Mergers, Corporate Concentration and Power in Canada, Institute for Public Policy Research, Halifax, 1988, p. 396). The means through which corporations exercise influence include: direct lobbying of politicians, participation in government advisory bodies and task forces, strategic use of the legal system through corporate lawyers, media and PR campaigns, political contributions, personal interlocks with politicians, political alliances through industry organizations, and funding of policy research organizations (Stanbury, p. 398).
Now, this argument is often denounced by neoliberals as a conspiracy theory. However, one does not have to look to conspiracies to explain why a corporation would seek to protect and enhance its interests. It is the very purpose of corporations to increase market share and maximize investor returns. If a corporation pursues these goals through a variety of means, including campaigns to change the regulatory environment, then the corporation is simply behaving in a rational manner. If Revenue Canada allows corporations to deduct pro-FTA advertising from their taxable income, then it would be ludicrous not to take out four page ads in every major Canadian daily. For that matter, why would corporations invest in institutes like the BCNI or the Fraser if these institutes did not measurably advance the interests of the corporations? Are we to assume, then, that they are managed by incompetents?
Of course not. These companies are managed by some of the most educated people in our society. They are simply trying to establish a regulatory framework that will allow them to make use of the entire hemisphere in the execution of their operations. As Stephen Blank explains, "the Canada-US FTA was not about trade. Much, probably the largest share, of Canada-US trade occurs within companies [my emphasis]. It is more accurate to talk about complex, cross-border production and marketing networks than trade in a classic sense of arm's length transactions across national borders. What results is a much 'deeper,' more 'structural' integration" (Stephen Blank, "The Emerging Architecture of North America," A.R. Riggs & Tom Velk, Eds., Beyond NAFTA The Fraser Institute, Vancouver, 1993, p. 23). This integration is happening on a global basis, and regional trade deals like NAFTA simple reinforce existing trends.
So why would a corporation want to create "complex, cross-border production and marketing networks" in the first place? To answer this, we need to understand the economics of a transnational corporation. The key is that when corporations go transnational, they are consequently able to transcend local markets and hence shield themselves from the very market discipline they wish to force on everyone else. Market discipline, that is, competition, can only occur within a market. An example might help to clarify what I mean. Say there are two companies in Anytown, and both manufacture widgets (I don't know what the heck a widget is, but every economics text I've ever read uses at least one, and often several, widget examples, so who am I to overturn a tradition?). Located in Anytown, they both hire their employees from the same labour pool, and they both sell their product to the same market. Now, there are some competitive factors that neither company can ignore: the skill level of the job, the rate of unemployment, and the costs of production.
If the jobs are skilled, then both companies will have to pay a high enough wage to attract qualified employees. If one company tries to cut wages, then the employees will jump to the other company. However, if the jobs are unskilled, then workers will bid each other down and both companies will be able to pay relatively low wages. In the end, both companies will tend to end up paying similar wages.
If unemployment is high, then both companies will have a large pool of workers to choose among, so wages will tend to be depressed. If, however, unemployment is low, then both companies will have to offer more money to attract already employed workers from other companies. Once again, both companies will probably end up paying similar wages based on these factors.
If production costs are high, then both companies will see their profits squeezed, as they cannot raise the selling price beyond what the market will bear. If, however, production costs are low, then one company can lower its price to get an edge on the competition, and the other company will have to follow suit or else risk losing market share.
There are still many ways that the companies can compete. One company may invest in automating its manufacturing operations so that it requires less or less trained workers. If the wage savings offset the higher capital costs, then the company can lower its prices and gain market share. The other company may be able to develop a manufacturing process that is less wasteful of energy and raw materials, and discover savings there that it can pass on to customers and hence regain market share. One company may try to carve out a market niche by providing some specialized type of widget. Another may try to sell cheap, low-end widgets. Whatever; what these companies can do to compete is limited only by the imaginations of their managers. The central point is that both (or all) competitors are bound by the same basic market conditions. They all have to pay the same prices for raw materials, the same wages for employees, the same taxes, the same real estate and infrastructure costs, etc. Competition refers to what they do to make the most of the resources available to them.
Going transnational changes all that. Let's say one of the companies in Anytown discovers that it can move its factory to another country, where wages are so much lower than Anytown's that they offset both the lower productivity and higher transportation costs of the other country? Suddenly this company has a huge advantage over its competitors, because it has discovered a way to sidestep market discipline. If this company moves its factory, drops its prices and drives its competitors out of business, it has not prevailed through making a superior product, improving production methods or increasing efficiency. It has prevailed by cheating the rules of the game. Instead of finding ways to make workers more productive, it has found new workers in a different labour market with different supply and demand characteristics. It has, in short, transcended the limits of its own market by locating its production facility in a place where the same rules don't apply.
Three prominent economics professors explain the factors that influence a corporation's decision to invest in an economy. This is not radical left-wing analysis; these economists are right in the mainstream.
- Availability of production and distribution technologies
- Prices of the factors of production (material, labour, infrastructure, etc.)
- Effect of exchange rate on local production costs
- Regulatory environment
(B. Curtis Eaton, Richard G. Lipsey, and A. Edward Safarian, "The Theory of Multinational Plant Location in a Regional Trading Area," Lorraine Eden, Ed., Multinationals in North America Industry Canada Research Series, University of Calgary Press, Calgary, 1994, pp. 54-56). This is what transnationals do, and is why they are looking to have regulatory rules changed so that they can create "complex, cross-border production and marketing networks." They don't just do this with labour, but with all the factors of production. Transnationals search the world for the best local markets for everything: raw material, labour, capital, technology, taxation rates, whatever. Essentially, transnationals win in the markets in which they are selling because the selling markets are invariably different from the markets in which they themselves buy the means of production. They cannot help but outperform competitors who have to buy labour in the same market in which they sell goods. The people who can afford to buy the goods are bound to cost more than poor, oppressed third world peasants.
This is profoundly anti-competitive, and should be sending chills down the spines of all good neoliberals. The fact that it doesn't do this is evidence of how completely corporations have managed to replace classic ideas of the free market system with different ideas that better serve their interests. This brings be back to my original discussion on the free market system. Another school of thought quietly holds that the free market system is alright, but can only function properly when large organizations rather than individual persons become its basic unit. These people must properly be regarded as corporatists.
Aside from their insistence against all evidence that trade is among nations instead of among subsidiaries of the same company, transnationals also defend these trade arrangements on the grounds that they take advantage of "comparative advantage." W. M. Curtiss explains. "There is ample evidence that a high level of living in any country cannot be achieved without a high degree of division of labor - specialization...This calls for a high degree of cooperative effort and exchange. Production by this process rests on the principle of comparative advantage - of production where conditions are most favorable" (W. M. Curtiss, "Serving Consumers," Free Trade: The Necessary Foundation for World Peace p. 17-18). That is, the organization of transnationals is just like Adam Smith's division of labour, only bigger. (Incidentally, this implies that the entire planet is simply one huge economy, an idea that marxist intellectuals like Lenin have promulgated for a century. Perhaps John Ralston Saul wasn't kidding when the said that the boardrooms of the transnationals are home to the last functioning marxists in the world.)
Still, it's not too difficult to see what happens when we apply division of labour to entire economies. Robert M. Dunn, Jr. provides a surprisingly honest appraisal of the consequences for workers of NAFTA.
"The United States and Canada are relatively abundant in capital, land, and human capital (highly skilled professional, technical labour), while Mexico is relatively abundant in unskilled and semi-skilled labour, and in tropical land...[T]he trade that will grow up under NAFTA...will be based on these large differences in relative factor endowments...This means that, despite the complaints of my colleagues in the economics profession, the AFL-CIO is neither irrational nor short-sighted in opposing the NAFTA pact. Those unions represent primarily unskilled and semi-skilled labour who would be hurt by NAFTA...union members will come out on the losing end of this pact...In the United States and Canada, NAFTA would increase total incomes but would also make the distribution of income within the United States and Canada more unequal. The people who would gain from NAFTA are overwhelmingly those whose incomes are already above average: owners of human capital, temperate climate land, and other capital. Losers from NAFTA would be overwhelmingly those whose incomes are already below average, namely unskilled and semi-skilled labour (Robert M. Dunn, Jr., "Winners and Losers from NAFTA," Beyond NAFTA pp. 90-92).
Here are some of Canada's winners. The number of millionaires tripled between 1989 and 1997 to 220,000 (Toronto Sun, November 11, 2000, p. 37). The CEOs of the TSE 300 companies saw an average 14% raise in 1996 over 1995 (Globe & Mail, October 10, 1997, p. B7). In 1997, those same CEOs enjoyed an average salary before bonuses and options of $862,000 (Globe and Mail October 2, 1998, p. B23).
We know who the losers are.
Tom D'Aquino, head of corporate lobby the BCNI, notes that NAFTA is only further entrenching a hemispheric structure that is already coming into place. "The outlook is poor in Canada for relatively low-wage, low-skill industries, regardless of whether NAFTA comes into effect" (Tom D'Aquino, "The Economics of NAFTA: A Canadian Business Perspective," Beyond NAFTA p. 118). That is, he is implicitly arguing that there is no point in opposing NAFTA since it is just one part of an inevitable hemispheric integration orchestrated to serve the interests of transnational corporations. But what if the hemispheric integration itself, of which NAFTA is only the most obvious component, is more injurious than beneficial to the citizens who are affected by it? Further, is it really "inevitable" that wages should fall and production should be moved to low wage areas, or is this phenomenon more a result of strategy than fate?
Certainly the evidence regarding employment and wage levels in manufacturing is confirming the callous predictions of the Tom D'Aquinos and the Robert M. Dunn, Jrs. The answer to these concerns about wage losses is always the argument that the free flow of investment will allow for productivity growth, which will ultimately help workers. Unfortunately, recent history does not confirm this theory. Productivity growth in the US averaged 1.2 percent a year over the 1980s, but production wages actually fell an average of 0.6 percent a year (Donald Gordon, Fat and Mean, The Free Press, New York, 1996, p. 69). A lot of this has to do with the huge corporate offensive against unions in the 1970s and 1980s. Between the late 1960s and the early 1980s, corporate decertification petitons tripled while, at the same time, employee complaints of unfair labour practice tripled as well (Gordon, p. 207). Ultimately, union density shrank from a 1954 high of 35 percent to a low in 1994 of 14 percent. This decline would be even lower if you ignore public sector unionization, which increased over that period (Gordon, pp. 220-221). It also indicates that wages dropped through the 1980s as a result of a corporate offensive against workers rather than an inevitable economic trend. It starts to look less like trade relations are driving economic restructuring, and more like economic restructuring is driving trade relations, as well as labour relations.
In the meantime, the loss of agricultural protections in Mexico is resulting in a mass migration off the land and into the labour force. Tom D'Aquino, the head of Canada's Business Council on National Issues, explains how "Many critics have claimed that NAFTA will unfairly exploit Mexican workers [Mexico's comparative advantage]. Included in the agreement, however, is a commitment that no NAFTA country should [my emphasis] lower health and safety standards to attract investment" (D'Aquino, p. 119). Of course, D'Aquino neglects to mention that this commitment is non-binding. Right now in Mexico, cheap produce from large agribusinesses are undercutting small, independent farmers in the south and driving them into bankruptcy. The agribusinesses are then conveniently buying the bankrupted land at firesale prices. The farmers themselves are driven off the land and have no choice but to move north to try and find jobs. The maquiladora zones of northern Mexico, around since the 1960s, have exploded in popularity over the last decade, especially as NAFTA has locked in favourable investment conditions. Large US businesses are only too happy to locate factories in the maquiladoras, noting their proximity to US markets. Even though employment is growing rapidly, the migration of displaced farmers is ensuring that there is a large enough pool of unemployed people to keep wages low. Indeed, the average wage in Mexico is about half of what it was ten years ago. As Business International explains, this is good for US investors because it "would permit US manufacturers continued access to a pool of relatively cheap labor that would, in turn, allow them to increase investments in Mexico in labor-intensive operations. These operations are the kind that have fueled maquiladora growth. Maquiladoras, which are becoming increasingly large, modern enterprises that work in tandem with their production-sharing partners in the US, would continue to be popular under [NAFTA]" (Gary Newman and Anna Szterenfeld, Business International's Guide to Doing Business in Mexico, Business International Corporation, USA, 1993, p. 24).
In the end, corporations and investors in all three countries win and workers in all three countries lose.
Rowland Frazee, Chairman of the Royal Bank of Canada in 1981, wrote about Canada's 'need' for foreign investment. He takes issue against those who have "encouraged the myth of the superiority of Canadian capital. That kind of nationalism is economic nonsense. Canada cannot meet its capital needs from within its borders. Unless we want a steady decline in our living standards, there is no choice about importing capital. Provided that the bulk of those funds are productively invested, there is litle reason for concern" (Gordon Laxer, Open for Business, Oxford University Press, Don Mills, 1989, p. 2). Is this true? In 1926, US companies controlled 30 percent of Canadian manufacturing; by 1962 this had risen to 45 percent, mostly through the reinvestment of earnings (Laxer, pp. 13-14). Further, once investment was liberalized through Investment Canada, $99 billion in foreign investments went to acquisitions and a paltry $7.3 billion went to new business investment (Mel Hurtig, The Betrayal of Canada Stoddart Publishing Co. Ltd., Toronto, 1992, p. 65). Perhaps most startlingly, by 1991 the total foreign ownership in Canada amounted to $130 billion, while the cumulative flow of foreign direct investment into Canada was less than $30 billion. That is, about 77 percent of foreign holdings were bought with money that had been made in Canada! (Hurtig, pp. 66-67). As Glen Williams explains,
Funding [for foreign acquisitions] came mainly from retained earnings on operating profits made in Canada, loans from Canadian financial institutions and investors [!], and investment incentives built into the tax system. It is important to note, however, that the advantage of acces to the relatively small share of imported foreign capital used must be weighed against the inevitable return of dividends to foreign parents. During the 1970s, this return flow reached levels twice as great as the value of new foreign capital entering Canada" (Glen Williams, Not for Export, 3rd Edition, McClelland and Stewart, Toronto, 1994, p. 112)
This is confirmed by Investment Canada, which reported in 1991 that "most of increase (80 percent) [in FDI between 1980 and 1990] was due to reinvested earnings by foreign-controlled companies, reflecting a high degree of confidence in the Canadian economy" (International Investment and Competitiveness Working Paper No. 9, October 1991, Investment Canada, p. 9). While I'm relieved at hearing that foreign firms are "confident" enough in Canada's economy that they're willing to take over our industry with the money they made here, this ought to be raising flags about what is happening to Canada's economy. In 1978 the UN did a foreign ownership study: "Nigeria had the most foreign ownership of its industry, followed by Canada, Malaysia, Ghana, and Brazil" (Laxer, p. 9). Now, foreign ownership is much higher in Canada than it was in the late 1970s, when the Foreign Investment Review Agency (challenged by the GATT and replaced with Investment Canada by the Mulroney government) and the National Energy Program tried to change the trend of foreign ownership.
NAFTA simply locks in this trend of foreign firms buying up Canadian assets. In the words of the US Department of Commerce in a 1993 report, "NAFTA's foreign investment provisions eliminate virtually all trade-distorting performance requirements such as export performance, technology transfer and product mandating. The foreign investment requirements represent a significant improvement over the current law which allows one hundred percent foreign ownership only after certain performance requirements have been met" (North American Free Trade Agreement: Opportunities for US Industries, NAFTA Industry Sector Reports, US Department of Commerce, October 1993, p. 6). Canada's half-assed proclivity to screen foreign investment has long been a thorn in America's side, and our ratification of agreements that prevent us from doing this was been welcomed south of the border. Again in 1998, the US Department of Energy applauds our abandonment of a domestic industrial policy. "Canada appears to have balanced its need for FDI with its concern over the relatively high level of FDI in the Canadian economy. Canada has moved away from a more burdensome screening process [my emphasis] to a review of only the larger proposed foreign acquisitions of Canadian companies, thereby encouraging a greater flow of new capital and technology (International Direct Investment: Global Trends and the US Role US Department of Commerce, 1998).
Intellectual property rights
Investment arrangements unquestionably factor heavily in the interests of transnational corporations, but so do intellectual property rules like the WTO TRIPs Agreement. Consider that in 1885, nearly 90 percent of all patents were taken out by individuals, but by 1950, 75 percent were taken out by corporations (Engler, p. 39). The trade Romantics tell us feel-good stories about culture sharing. For example, Frank Chodorov writes that "a correlative of the exchange of things is the exchange of ideas, of the knowledge and cultural accumulations of the parties to the transaction. In fact, embodied in the goods is the intelligence of the producers" (Chodorov, p. 5). The reality is that intellectual property rights (IPR) agreements protect the corporations that engage in trade from losing any of their advantage to the spread of information about what they do. As the US Department of Commerce gleefully explains, "Intellectual property rights provisions of NAFTA provide significant new protections for the products of US genius and technological innovation," including Canada's decision in 1993 to drop compulsory licencing for pharmaceuticals and extension of patent protection to 20 years (North American Free Trade Agreement: Opportunities for US Industries, NAFTA Industry Sector Reports, US Department of Commerce, October 1993, p. 3). Edwin Prindle, corporate patent attorney for Bell, G.E. and Westinghouse, goes even farther in his analysis of IPRs. "Patents are the best and most effective means of controlling competition. They occasionally give absolute comand of the market, enabling their owners to name the price without regard to cost and production" (Engler, p. 37).
IPRs also help protect corporations from public scrutiny of their actions. Privatization deals with governments for public utilities often fall under the category of "undisclosed information." For example, the details of the purchase of Cochabamba, Bolivia's water utility by Aguas Del Tunari, owned by a consortium that included US-based Bechtel Enterprise Holdings, was kept secret from Bolivia's citizens, even though the immediate result was a price hike for water between 35 percent and 100 percent. Protests shut the city down and the consortium eventually pulled out, but the fact remains that the deal was protected by international trade agreements and it was only the extreme reaction of the citizens, who shut the city down (the government declared martial law), that stopped the deal from happening.
Where is the liberty in all this?
There is only one way that it is possible to reconcile the rhetoric of liberalization with the reality of corporate control, and I pointed towards it when I mentioned the economic idea that large organizations rather than individuals ought to be the basic economic unit. We can speak about liberalization and corporations in the same breath only if we allow corporations to be regarded as persons under the law, and indeed this is the case. The most famous example that comes to mind is the Supreme Court of Canada decision in September 1995, which ruled that the Tobacco Products Control Act, particularly Section Nine of the act, violated the Canadian Charter of Rights and Freedoms because it placed restrictive labelling and advertising requirements on cigarette companies (see Health Canada for more information: http://www.hc-sc.gc.ca/). Since when have corporations be able to claim protection under a charter of rights and freedoms? That is, when did corporations become persons under the law?
A major reason for the dramatic emergence of corporate dominance in the economy over the last century is that corporations more closely resemble the ideal of a rational, purely self-interested entity that is central to free market theory than do actual humans. A corporation is purposeful by definition in a way that individuals are not. That is, a corporation is created to serve a very specific purpose (to increase profits and market share) and (in principle - sometimes corporations are mismanaged) everything that is orchestrated under the aegis of a corporation is done in such a way that it advances that purpose. Not to put too fine a point on it, corporations are all agenda, all the time, and large corporations have tremendous resources at their disposal. Corporations can lavishly finance lobbying groups that petition governments continuously to make the economic and legal environment more amenable to the corporations' interests. Corporations enjoy "legal person" status under the law, which I doubt most people would have endorsed had they been given a choice, and as a result corporations have all the same rights of expression that people have, only corporations have whole teams of actual flesh-and-bone employees whose sole purpose is to figure out how the world can be made a friendlier place for business. As Martin Benjamin and Daniel Bronstein explain, "corporations are 'planned units, deliberately structured for the purpose of attaining specific goals.' All activities of such organizations are determined by the extent to which they contribute to the realizatoins of particular goals. Thus decision making by a member of an organization, qua member, is determined and constrained by the organizations's structure and purpose" (Martin Benjamin and Daniel A. Bronstein, "Moral and Criminal Responsibility and Corporate Persons," Warren J. Samuels & Arthur S. Miller, eds., Corporations and Society, Greenwood Publishing Group, 1987, p. 277). Being rational constructions, corporations can pursue strictly utilitarian goals in a way that no actual individual could. Globally, corporations are arranging to have laws re-written to protect them from risk, performance requirements, public accountability and, in a very real way, private accountability for their activities. As I mentioned earlier, to do anything other than advance the interests of investors and shareholders would be irrational. In the analysis of Benjamin and Bronstein, it would be "fatuous to expect an industrial organization to go out of its way to avoid polluting the atmosphere or to refrain from making napalm bombs or to disist form wire-tapping on purely [non-instrumental] moral grounds. Such actions would be irrational" (Benjamin & Bronstein, p. 279).
It is surely inappropriate to regard corporations as legal persons. It certainly introduces some bizarre phenomena, like the case of the Ford Pinto, which tended to explode on rear impact because of a design defect. The Ford corporation knew that the car was at higher risk of gas tank rupture from rear collisions, but a cost-benefit analysis found that fixing the defect (at eleven dollars per car) would cost more than paying out death and injury benefits for burn victims of Pinto crashes, so they decided not to do anything. At one point, Ford was charged with the wrongful death of three Pinto crash victims. Kindly note that it was the corporation itself, not any of its employees, that was criminally charged. If corporations are persons, then can we hold them to the same ethical standards to which we hold 'natural' persons? One of the core principles of criminal law is that it is concerned with actions that are wrong in and of themselves. If corporations are goal-driven, then how can they take non-instrumental values into consideration?
Certainly individual employees can do this, but the internal structure of a corporation cannot help but reward people who have internalized the corporation's values and punish people who adhere to external value systems. That is, the people who have no qualms about conducting cost-benefit analysis on people's lives are more likely to be promoted. Unfortunately, as corporations come to dominate every aspect of our lives, we find ourselves forced into roles that are counterproductive and contradictory to our values. People-as-employees sometimes find themselves being expected to participate in activities that are injurious to people-as-consumers or people-as-citizens, while the alternative of quitting in protest is seldom practical and, in any case, usually just results in a job at another corporation that is no better. Further, the pressure to conform increases as occupations become more expert and specialized. If a nuclear physicist speaks out about public risk at a nuclear power generator, she risks sacrificing her career, as well as the years of university that went into training her. Further, she risks civil and criminal liability for violating the intellectual property rights of her place of employment.
Real people are not created to serve a specific purpose. While some people are more goal-oriented than others, none of us are single-mindedly dedicated to a single overriding purpose. We have experiences and desires that are arbitrary and idiosyncratic. We're irrational, flighty, intuitive, driven by passions, and swayed by fashions. We're silly, insecure, destructive and, sometimes, self-destructive and self-defeating. We often make decisions based on feelings rather than reasoning. We also love, support and share with our families and friends. We volunteer our time and energies towards causes that will not directly benefit us but in which we nevertheless believe (corporations, by contrast, view all charity as an opportunity for brand marketing). We often gladly pay taxes towards public services that we believe are worthwhile. We are many things in abundance all at once, and it makes us imperfect candidates for the role of homo economus that free market theory expects of us. In short, we have complex lives, only a portion of which take place in the market. Throughout history, our greatest philosophers and teachers have argued that it is the non-market activities in which we engage ourselves that make life valuable, and meaningful. Actual humans have a lot of competing demands against us, and simply cannot devote the same kind of energy and single-minded resolve to our politics that corporations can. Joining organizations and volunteering time can help, but corporations are still able to outspend and outproduce any voluntary organization.
May 26, 2001