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The company's road to dominance

Politicians are no longer society's high priests and oligarchs.


[essay] Over the past 150 years, the company has gone from being a rarity to becoming the world's dominant economic institution. Today, companies control our lives. They decide what we eat, what we watch, what we wear, where we work and what we do. We are invariably surrounded by their culture, symbols and ideology. And like the church and the monarchy of old, they appear to be infallible and omnipotent, shining their splendor on their monumental buildings and elaborate facades. Companies are increasingly dictating the decisions of state agencies that are set to control them, and they control sectors of society that were previously an undisputed part of the public sphere. (...)

When Margaret Thatcher became Prime Minister of the United Kingdom in 1979, and Ronald Reagan then became President of the United States in 1980, it was clear that the economic era inspired by New Deal ideas and politics was over. Over the next two decades, governments followed with increasing zeal the neoliberalism's main policy of deregulation, privatization, cost cuts and inflation. By the beginning of the 1990s neoliberalism had become the right economic doctrine.

Race to the bottom.

In the meantime, technological advances in transport and communication had significantly improved the companies' reach and mobility. Fast and large jets and new container cargo technology (which enabled maritime transport to be seamlessly integrated with train and trailer networks) drove down costs and increased the speed and efficiency of transport. Communication was also improved through innovations in long distance calls, telex and fax technology, and more recently the development of the Internet.

The companies were now no longer bound to their immediate areas, and could seam the globe for production sites for goods and services with significantly lower costs. They could buy labor in poor countries, where wages were low and environmental standards poor, and sell the products in the rich countries, where people had disposable income and were prepared to pay well for them. The costly tariffs had been gradually lowered since 1948, when the General Agreement on Tariffs and Trade (Gatt) was established. Thus, the companies could use their newly acquired mobility without being penalized by financial obstacles.

By exploiting the freedom of the local ties, the companies could now dictate the economic policies of governments. Clive Allen, vice president at Nortel Networks, a leading Canadian high-tech company, explains that the company “does not feel any obligation to Canada. Just because we [Nortel Networks] were born there, we do not necessarily have to stay there. The place must continue to be attractive for us to be interested in staying there ». In order to remain attractive, either to attract investment within their sphere of activity or to attract new investment, the authorities now had to compete with each other to convince companies that they offered the most business-friendly conditions. A resulting "race to the bottom" led them to cut regulatory regimes – especially those that protected workers and the environment – reduce taxes and withdraw social programs, often with ruthless contempt for the consequences.


With the establishment of the World Trade Organization (WTO) in 1993, the deregulation logic of economic globalization was expanded. With a mandate to enforce existing Gatt standards, as well as create new ones that could stop regulatory measures limiting the flow of world trade, the WTO was poised to become a major staple of the nation's economic independence. Before tens of thousands of people poured into the streets of Seattle in 1999 to protest a meeting between WTO leaders and member states,

the organization has evolved into a powerful, secretive and business-controlled controller of the government's mandate to protect citizens and the environment from corporate behavior.

When Enron collapsed and accounting firm Arthur Andersen's role in the grants was revealed, people called for better regulatory oversight of the accounting and auditing industry. What few then realized, however, was that the United States government, through its membership of the WTO, had already waived some of the authority to remedy the problem.

Driven by an expressed belief that "regulations can be an unnecessary and usually unintended barrier to trade in services," and as a result of intense lobbying by industry groups and companies, the WTO had established a number of "disciplines" in the late 1990s to ensure that member states do not regulate the accounting industry in ways that are "more barriers to trade than necessary to meet a legitimate objective". In 1998, member states, including the United States, agreed to comply with these new rules, which formally did not enter into force until 2005. And thus, they submitted to standards imposed by, and soon enforced by, an outsider and undemocratic body . (...)

The informal channels.

The regulation of the accounting industry is not unique as an area in which the WTO has the authority to limit governments' political choices. In several cases, the organization has demanded that nations, under the threat of punitive action, change or revoke laws designed to protect the environment, consumers or other public interests. In one case, for example, a US law that prohibits the import of shrimp from manufacturers that refuse to use equipment that prevents sea turtle trapping has been considered to be in violation of WTO standards. The same fate met an EU measure that banned the production and import of beef from cows treated with synthetic hormones.

However, the full scope of the WTO's work cannot be seen from the formal decisions alone. As with all sets of legal standards, WTO rules exert the greatest influence through informal channels. Governments can self-censor to make sure they comply with the rules – as the state of Maryland did when it dropped a bill that would have banned the purchase of products from companies trading with Nigeria (when this country was in the hands of a brutal dictator), after warnings from the US State Department that such a law could lead to a WTO case against the US. Governments can also use WTO standards to pressure other governments to change their policies, and threaten to launch a WTO complaint if they refuse to do so. The United States and Canada did this to get the EU to abstain from bills that would ban the import of fur from animals taken with scissors traps, and of cosmetics tested on animals.

It is not very surprising that the WTO's policies and decisions often support the interests of the companies, given the privileged place and the formidable influence of industrial groups in the organization. The business and trade ministers representing the member states are usually “close allies of the commercial and financial interests of those from the advanced industrialized countries,” as the Nobel laureate in economics, Joseph Stiglitz, notes, and they are thus an easy target for corporate influence.

The companies and industry groups also benefit from their close ties to the organization's bureaucrats and management. "We do not want to be the WTO's secret girlfriend, nor for our group to have to arrive at the World Trade Organization through the servant entrance." This is how a member of the International Chamber of Commerce, an influential group at the WTO, expresses the special relationship between his organization – and, one might think, industrial groups in general – and the WTO. (…)

Economic globalization, where the WTO is just one element, has significantly increased the companies' ability to turn away from government authority. "The companies have grown strong enough to pose a threat to the authorities," said William Niskanen, chairman of the Cato Institute. And this applies in particular to the multinational companies, which to a much lesser extent depend on the attitude of the individual governments, and are therefore far less loyal. Ira Jackson is a former director of the Center for Business and Government at Harvard's Kennedy School of Government. She believes the company and corporate management have "replaced the politics and politicians like the new high priests and the ruling oligarchs in our system". And according to Samir Gibara, former chief executive of Goodyear Tire, governments "have become powerless in relation to companies, compared to what they were before".

Sunshine and magic.

The companies now govern society, perhaps more than the governments themselves. Yet, ironically, it is their own power, which they have largely gained through economic globalization, that makes them vulnerable. As with all governing institutions, the company is now faced with distrust, fear and demands of accountability, from an increasingly anxious audience. Today's business leaders understand, like their predecessors, that efforts must be made to win back and safeguard people's trust. And like their predecessors, they try to portray the company as softer by describing it as human, charitable and socially responsible.

"It's very basic today that a company has just as human and personal traits as everything else," says PR guru Chris Komisarjevsky, Burson-Marsteller's chief executive. “The smart companies understand that people draw comparisons on human terms, because that's how people think, we think in ways that are often very, very personal. If you walk down the street with a microphone and camera and stop people on the street, they will describe the companies in very human terms. "

Today, companies use "branding" to create unique and attractive personalities. Branding is about more than just creating strategies to connect companies to real people – such as AT & T's early campaigns with workers and shareholders, or the recent use of celebrity statements (like Nike's Michael Jordan commercials) and company mascots like Ronald McDonald, Tony the Tiger , The Michelin man and Mickey Mouse). The companies' brand

Identities are "personifications" of "who they are and where they come from," says Clay Timon, chairman of Landor Associates, the world's oldest and largest branding company.

"Family magic" for Disney, "inventions" for Hewlett-Packard, "sunshine food" for Dole are some examples of what Timon calls "brand drivers". "As brands, companies have souls," says Timon. This is what enables them to create "intellectual and emotional bonds" with groups they depend on, such as consumers, workers, shareholders and legislators. Timon refers to Landor's brand drivers for British Petroleum – "progressive, performance, green, innovative" – ​​as proof of how the companies' environmental and social responsibility is now becoming a major theme in the branding.

Irresponsible power.

But, he says, even companies that do not explicitly portray themselves in this way must now embrace social responsibility. "Of necessity," says Timon, "companies must either take social responsibility or not." And that's partly due to their new status as dominant institutions. They must now show that they deserve to be free from government regulation and to participate in the governance of society. "Companies need to become more credible," said Sam Gibara, one of the heirs of corporate social responsibility pioneer PW Litchfield. “The authority has been transferred from the government to the company and the company has to take that responsibility and really behave as a citizen of the world. It must respect the neighborhoods where it is located, and take on the self-discipline that the authorities demanded of it in the past. ”

From the mid-1990s, mass demonstrations against corporate power began to shake European and North American cities. The protesters were part of a broader "civil society" movement, which also included non-governmental organizations (NGOs), local coalitions and trade unions. They focused on the companies' danger to workers, consumers, the local community and the environment. Their concerns were different than in the wake of Enron, where shareholders' vulnerability to corrupt boards was central.

But the two groups had something in common: They both felt that the company had become a dangerous mixture of power and irresponsibility. Corporate social responsibility is offered today in response to such concerns. It is now more than just an advertising strategy, although of course it is, where they present the companies as reliable and responsible in relation to society. In this way they gain legitimacy for their new roles as rulers of society.

This is an excerpt from Joel Bakan: The Corporation – the manic pursuit of power and profit published at Kunnskapsfabrikken in 2006.

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