The idea that anyone might try to take out a patent on life or on any component of life, fills most people with horror. Yet such a development is now facing the world, as transnational corporations extend the control which, over the past fifty years, theyve gained over agriculture and food, into other areas. The author of Greening the Church and Greening the Christian Millennium documents the process by which transnational corporations have gained such power. He lists their methods of stifling supervision by public authorities or criticism by the scientific community.
Fr Sean McDonagh SSC is a Columban Missionary priest. He received a Masters Degree in Anthropology from the Catholic University in Washington DC in 1975. Previous works include To Care for the Earth (Chapman, 1985), Greening the Church (Chapman, 1990) Passion for the Earth (Chapman, 1995) and Greening the Christian Millennium (Dominican Publications, 1999).
- Chapter 1: A World Ruled by Transnational Corporations
Transnational Corporations (TNCs) are the most important economic and commercial organisations in the modern world. They have their roots in the Church and the State. The ecclesiastic roots go back to feudal times in Europe. The ruling class passed on their property to their children. Because the leadership of the Church and, especially of the monastic communities, was composed of celibate individuals, their property was held by the institution collectively. This gave rise to the idea that an institution could own property and be considered a moral person.
Secular corporations go back to state-sponsored corporations set up by colonial powers from the sixteenth century onwards. One of the most prominent of these was the British East lndia Company established under royal charter by Queen Elizabeth I, to trade in spices. Its capital was ?ú70,000. From its foundation until its dissolution in 1858, it grew into a powerful trading, political and military entity. During the eighteenth and nineteenth centuries the Company promoted British interests throughout the Indian subcontinent, reaching as far as Burma. India supplied raw material for the growing industrial revolution in Britain but also became a dumping ground for cheap clothes and industrial goods that were being mass-produced in Britain. These economic policies wiped out local industry by imposing prohibitive duties on indigenous goods. This led to hardship for millions of Indians. The cruel management policies of the Company led to mutiny in 1857. One year later, after a parliamentary enquiry, the company was dissolved and its assets taken over by the British government.
On the other side of the Atlantic, land corporations, given charters by the crown, played an important part in the white settlement of North America. Both the Virginia Company and the New England Company were chartered in 1606. The building of canals and the railway marked another point in the evolution of corporations in North America in the 1820s, 1830s and 1840s.
The transnational phase of modern corporations began to expand dramatically after the Civil War in the United States in the 1860s. The resources of the world - oil, coal, ore, land and timber - were there to be exploited and transported to places where they could be used to make profit. After the 1880s, with the advent of the new electrical, mechanical and chemical technologies, corporations used scientific research to develop a whole variety of products for industry and households. Selling these products gave rise to the advertising industry. Some of the industries that were founded at that time - Standard Oil Company of Ohio (1870), General Electric (1892), Dow Chemical (1897), Johnson &Johnson (1887), Carnegie Steel (1873) and Ford Motors (1903) - are still household names in the US today.
Finally, at the dawning of this new corporate era, a firm and corporate-friendly legal framework was already in place in the US. Corporate goals took precedence over everything else in the legal system. As Morton Horowitz, chair of the History of Law at Harvard University, writes in his book, The Transformation of American Law: 1780-1860: By the middle of the nineteenth century the legal system had been reshaped to the advantage of men of commerce and industry at the expense of farmers, workers, consumers, and other less powerful groups within society. (1) This allowed the nascent corporations to mobilise capital on an unprecedented scale, opening wide the floodgates for horizontal and vertical integration of corporate structures. The national importance of the corporations was summed up in the slogan, What is good for General Motors is good for America.
The crucial element in these newly established trading entities was the notion of limited liability. A shareholder could not be held liable for an amount greater than his or her investment. The purpose of this was to encourage entrepreneurs to take risks. Many commentators at the time were opposed to the limited liability. They argued that it would lead to excessive risk-taking by managers and owners or what is today called moral hazard. Adam Smith, for example, held this view. According to the economist Ha-Joon Chang, limited liability provides one of the most powerful mechanisms to "socialize risk" which has made possible investments of unprecedented scale. (2)
Much of the expansion of TNCs in the last decade of the nineteenth century and right through the twentieth century was through take-overs and mergers. Gradually, they began to dominate key industries - energy, tobacco, chemicals, steel, agribusiness, media, pharmaceuticals, aviation, PR, media and beverages.
The year 1886 marks an important milestone in the evolution of modern corporations. In that year the US Supreme Court, in the case of Santa Clara County v. The Pacific Railroad Company, ruled that the Fourteenth Amendment of the Constitution, which was designed to protect the rights of human beings, also applied to corporations. This gave corporations the natural rights of citizens.
But rights assume that there are corresponding responsibilities. The corporations never assumed their proper share of responsibility - given their economic strength and global reach - towards the well-being of human communities or the natural world. Working conditions were appalling in mines, construction sites and factories. Corporations were seldom held responsible for plundering the natural world by cutting forests and poisoning rivers and the air. Corporations believed that the State had no role in monitoring their behaviour or holding them to account as long as they were not breaking the criminal law. They still believe that the State ought to guarantee their freedom to go about their business of making profits without any hindrance. They continue to exploit every legal avenue in order to avoid basic responsibilities towards humankind or the natural world. When the giant energy corporation Enron collapsed it turned out that they had not paid taxes for four or five years.
The growth and power of Transnational Corporations (TNCs)
After World War 11, the balance of economic and even
political power in the world shifted from territorially bound, nation-state governments to companies that roam the world with a single goal in mind - to maximise profits. Of the top hundred economic entities, over half are now corporations, not countries. For example, General Motors, the worlds largest corporation, has an income similar to that of Austria which is twenty-first in the worlds ranking for Gross Domestic Product (GDP).
The top 500 corporations control almost one third. Of global Gross National Product (GNP) and 76 percen t of world trade. Their influence continues to grow. According to the UN Conference on Trade and Development (UNCTAD), TNCs controlled 17 percent of global GNP in the 1960s. This had jumped to 24 percent by 1984 and pushed ahead to 33 percent by 1995. Presumably this share has increased further since then. Another way to look at this growing control of the global economy by TNCs is to realise that the sales of the worlds ten largest TNCs exceed the combined GNP of the worlds 100 least developed (economically) countries. This includes all of Africa. (3)
Many states offer favourable tax holidays and special corporate tax rates to TNCs. Ireland has one of the lowest rates of corporate tax. In 2003 it is 12.5 percent. The Justice Commission of the Conference of Religious of Ireland (CORl) was one of the few organisations to recommend an increase in corporation tax in the run-up to the 2002 general election. (4)
The justification for lowering corporate tax is that the TNCs provide jobs. But even this notion is somewhat illusory. The number of people employed by the top 500 corporations is 18.8 million. This figure represents less than one-third of one percent of the worlds population and, as we will see later, TNCs shed jobs even when they are very profitable. One way to stop corporations playing one country off against another in terms of environmental legislation and workers rights would be to have a single corporate tax rate globally.
2002 An Annus Horribilis
2002 was an annus horribilis for the corporate world. Scandals at the giant energy company Enron, involving individuals who were both close friends and financial backers of President George Bush, surfaced late in 2001. Enrons demise was the biggest corporate collapse in history. Arthur Andersen, the firm that audited Enron s books, was convicted of obstruction of justice on 15 June 2002.
In June, WorldCom, one of the largest telecom communications companies in the world, was accused of the biggest accountancy fraud in history. Mr Scott Sullivan, the chief financial officer, boosted the companys profits artificially by $3.8 billion. He did this by counting some of the companys costs as capital investment.
Ms Anne Mulcahy, the chairperson and chief executive of Xerox, who assured the public, in May 2002, that the company is completely transparent and the investors know everything, was embarrassed one month later when it was revealed that Xerox had overstated its revenue by $1.9 million over the previous five years. Also in May 2002, the Securities and Exchange Commission (SEC) charged the accountancy firm Ernst and Young with entering into a joint venture with PeopleSoft while auditing the firms books. In June 2002, Omnicom, the worlds third largest advertising group, rejected allegations that it too had employed questionable accounting procedures. Its shares plummeted when its chief executive resigned in the summer of 2002.
Politicians, and regulatory agencies like the SEC in the US, condemned the greed of chief executives and promised tough action. In June 2002, President George W. Bush stated that he was surprised and outraged by these revelations on numerous occasions. As Frank Rich explained in the New York Times: the corporate world has no reason to quake in its boots and submit itself to tough, independent regulations at national and global level. The reason is simple - corporations are now more powerful than many governments. Richs article, entitled All the Presidents Enrons, continued: Mr Bush keeps saying all the right things. He is "deeply concerned". He will "hold people responsible". But words, like stocks, lose value when nothing backs them up. It is now six months since the President promised "a lot of government enquiry into Enron". Since then Playboy has done a better job at exposing the women of Enron than the Bush administration has done at exposing the men. (5)
In an effort to steady the financial markets President Bush visited Wall Street on June 9, 2002 to deliver a major speech on corporate accountability. True to form, the President talked tough but promised very little substantive reform. The editorial in the New York Times on June 10,2002, entitled The Corporate Scandals, came straight to the point: at its core, however, the presidents address was disappointingly devoid of tough proposals to remedy underlying problems in accounting, corporate governance and the safety net of federal laws and regulations that is supposed to prevent abuse. (6)
The second editorial in the New York Times on that day raised serious questions about the Presidents own behaviour as a business man before being elected President. It stated: President Bush needs to speak much more frankly about the money he made in selling his faltering oil company to Harken Energy of Texas and later selling Harken shares shortly before the companys stock price collapsed. The company headed by his Vice-President, Mr Cheney, Halliburton, is under investigation by the Securities and Exchange Commission; yet it secured lucrative contracts to rebuild Iraq after the 2003 war.
The political reality in 2003, on both national and global levels, is that corporations have little to fear from governments for the simple reason that they have colonised governments to such an extent that their vested interests take precedence over the rights of ordinary citizens.
We have no political institution commensurate with the global economic reality. Given the dominance of TNCs, the State is seen as an enforcer of the rules of the market, which will always favour the rich and powerful. In a truly just and sustainable world the economic system or systems ought to be subordinate to the political system. Without this, economic considerations become the yardstick to evaluate all other human activities. If something does not have value in the market-place it is seen as having no value at all. What is good for humanity is today defined in monetary terms, unlike the definition of human good in almost every other period of history or culture.
TNCs and Politicians
The political power of TNCs was clearly evident in the aftermath of the US presidential election in 2000. It was obvious that the powerful corporations which had backed President Bush were looking for their rewards. The tobacco giant Philip Morris gave $2.8 million to the new President to fund his inauguration. In all, tobacco companies gave $7 million to the Bush campaign. In response to this it now seems certain that the federal government will abandon lawsuits against tobacco companies. This will save tobacco corporations about $100 billion in compensation. Looked at from a business perspective, this is a huge return on their investment.
Within a few weeks of his election, President Bush rescinded rules that would make mining corporations pay for the clean-up if they contaminated the public water supply. He also dropped safety limits on the levels of arsenic in public water schemes that had been imposed by the Clinton administration. Mining companies contributed $2.7 million to Mr Bushs campaign. At the same time, President Bush overturned a regulation that was aimed at protecting 60 million acres of national forest from logging. Logging firms contributed $3.2 million to the Bush campaign.
In November 2002, the Bush administration announced the most sweeping move for a decade to loosen industrial air pollution rules and further damage the US Environmental Protection Agency (EPA). The former head of the EPA, Carol Browner, described the changes as nothing but a special deal for the special interests and [it] comes at the expense of all who breathe and most particularly our children. (7) .
The oil industry is very close to President Bush. The Vicepresident, Dick Cheney, worked all his life for the oil industry. In repudiating the Kyoto Protocol, President Bush was pandering to big oil companies. These contributed $25 million to the Republican election war-chest and only $7 million to the rival Democrats. But it didnt stop there. In 2001 Exxon Mobil wrote to the White House requesting that Robert Watson, the chair of the UNs Intergovernmental Panel on Climate Change (IPPC), be removed from office because of his strong stand on climate change. President Bush delivered for his friends even though the report he had commissioned from the National Academy of Science stated bluntly that global warming was real and getting worse. Watson was fired in April 2002.
The biotech industry, which I will focus on in this book because of its plan to control the staple foods of the world, is also well represented in the Bush cabinet. The Secretaries of Defence, Health and Agriculture, the Attorney-General and the Chairman of the House Agriculture Committee have had connections with the biotech company Monsanto and other, similar corporations. The Attorney-General, John Ashcroft, received $10,000 (?ú6,800) from Monsan to in the 2000 elections - the biggest contribution that the company gave to any congressional candidate. He strongly advocated the promotion of genetically engineered (GE) crops in poorer countries during the past few years. The Secretary of Agriculture, Ann Veneman, was formerly a director of the biotech company Calgene. This company, which developed the first genetically engineered tomato, is now owned by Monsanto. Veneman has been promoting GE crops in world trade talks. Donald Rumsfeld, the Defence Secretary, was president of Searle Pharmaceuticals when it was bought by Monsanto.
Many other key players in the Bush White House have come straight from corporations. Mitchell Daniels, head of the White House Office of Management and Budget, is a former vice-president of Eli Lilly, a transnational pharmaceutical corporation. (9) Thomas White; vice-chairman of Enron
Energy when it allegedly hid $500 million in losses and manipulated the California energy crisis, is Secretary of the Army.
The giant construction company Betchtel has very close connections with the Republican Party in the US. George Shultz, a former Secretary of State, was a board member of the company, as was Caspar Weinberger, who was President Reagans Secretary of Defence. Betchtel which contributed generously to Republican candidates in the 2002 mid-term elections, has now won a contract worth around $680 million to rebuild schools, roads, hospitals and other installations which were damaged during the massive bombing campaign by the US and British forces in the 2003 war against Iraq. (10) The reason given for going to war was that Iraq had weapons of mass destruction and had the capacity to use these against their neighbours and even Western Europe. As of mid-September 2003, neither of the occupying forces-the US nor the UK - has been able to prove the existence of any credible weapons programme. The invasion did topple the murderous regime of Sad dam Hussein, but the cost to the physical, social and cultural fabric of the country has been horrendous. Many feel that the real reason for the second Gulf War was to protect oil supplies for western corporations and customers and to give the US military more secure bases in the Middle East.
It is clear that war benefits a variety of armament industries. But there are other benefits. One example of this is what Paul Bremer, now the US-appointed governor of Iraq, did in the wake of the September 11, 2001, terrorist attacks in New York and Washington. One month later, he launched a company designed to capitalise on the fear of terrorism that had gripped corporate boardrooms in the US. Crisis Consulting Practice is a division of the insurance company Marsh and McLennan. Bremers company specialised in integrated and comprehensive solutions to contemporary crises in the corporate world. These range from potential terror attacks to how to deal with demonstrators who protest against the damage which globalisation policies are having on local inhabitants. In a paper entitled New Risks in International Business, Bremer admits that free-trade policies may undermine local economies and result in unemployment, and may have other negative social consequences; but he is adamant that it also leads to the creation of unprecedented wealth.(11) His former company, Marsh, reaped its share of that new wealth in 2002. Operating income was up 31 per cent and the current chairman, Jeffrey W. Greenberg, foresees continuing gains in the coming years. (12)
TNCs are also powerful in Europe
While the links between big business and politics are legendary in the US, people might feel that things are different in Europe. Many people who are favourably disposed to the enlargement and further integration of the European Union are unaware of the power that TNCs wield. The Guardian columnist George Monbiot revealed that a corporate lobby group called the European Round Table of Industrialists (ERT) has been the principal architect of European integration for the past seventeen years. ERT promoted the idea of the Single European Act quite a number of years before it was completed in 1992. The drafters of the Nice Treaty bowed to ERTs demands that national parliaments be bypassed in some trade negotiations. In future, the Commission will negotiate such international treaties. (13) The ERT has set its face against the new constitution being proposed for the EU and especially the proposal to have a President of the EU. (14)
Given this connection between politicians and corporations, many people are worried about the concentration of the production and marketing of the worlds food in the hands of a small number of biotechnology and agribusiness companies. George Monbiot bemoans the astonishing rapidity [whereby] a tiny handful of corporations are coming to govern the development, production, processing and marketing of our most fundamental commodity, food. He believes that the power and strategic control they have amassed will make the oil industry look like a corner shop. (15)
It is frightening to think that, within a few years, the worlds food supply could be dominated by eleven or fewer giant TNCs. Agribusiness, biotech and pharmaceutical companies have increased their control through the provisions on intellectual property rights contained in the Uruguay Round of the General Agreement on Tariffs and Trade (GATT). We face the appalling possibility that, within a few years, the entire genome of many species, including humans, could be owned by a handful of companies and corporations.
These mammoth institutions are responsible for most of the worlds resources extraction, as well as production processes, financial institutions, computer companies, and media. On the demand side, advertising and PR agencies like Burston Marsteller have created a consumer culture which is unsustainable. These institutions are not above using all sorts of methods to promote their wares. Everyone knows that cigarette smoking is a health hazard. Nevertheless, corporations like British and American Tobacco (BAT) used heavy-handed tactics to ensure that Third World countries opened up their markets to their products. If a country sought to ban BAT imports or impose steep health taxes, then, according to David Leigh, smugglers simply flooded the country with cartons of black-market cigarettes. The files reveal how BAT connived at these smuggling rackets, which were hidden in company reports behind such euphemisms as "GT" for "General Trade". (16)
Corporations have huge budgets for lobbying politicians. In June 2003, confidential budget documents from some leading pharmaceutical companies showed that they plan to spend $150 million lobbying the US Congress and state legislatures, fighting price control around the world. They are prepared to subsidise like-minded organisations and to pay economists for producing op-ed and other articles which promote the drug companies agenda. (17)
TNCs also have intent on cornering the market in services - banking, education, water and sewage provisions, and power plants. In the Uruguay Round of GATT negotiations, giant US TNCs like American Express and Citicorp lobbied heavily for a separate section called the General Agreement on Trade and Services (GATS). (18) The service industry is big business, and dominated mainly by Northern TNCs. These corporations want to expand into the lucrative service-market but feel they are blocked at the moment since many services like health-care, education, transport, water, electricity etc., are provided by the state or heavily regulated by public authorities. Freeing up trade in these services will benefit corporations which are the driving force behind the new wave of privatisation schemes that is now spreading around the globe. In the wake of the Doha meeting of the World Trade Organisation(WTO) in November 2001, the European Union has signalled that it will not be willing to dismantle its tradition of huge agricultural subsidies unless Third World countries open up their health, education, water, and transport services to transnational corporations. Immediately after Doha, the European Union set about targeting specific services in countries as diverse as the Philippines, Paraguay, Peru, India, Malaysia and South America to be opened to foreign competition. By April 2002, the document setting these targets ran to 1,000 pages.(19) In India, for example, the ED wants the markets in waste management and water distribution to be opened up to foreign competition.
Once again, the poor will suffer. If TNCs are seeking to make profit out of public services like water, health and education then it is inevitable that those without money and purchasing power will lose out. Once governments have opened up the service section to the WTO there will be no going back. Democratic control over the decision on how to organise these services will be lost. GATS will cause particular havoc in the South.
Lack of social and environmental accountability TNCs have no loyalty to any people, country or place. Today they can locate anywhere in the world and operate efficiently from there. They are effectively accountable to no one except their shareholders and are not held responsible for the social, cultural and ecological consequences of their actions.
My own town, Nenagh in County Tipperary, was on the receiving end of this kind of TNC behaviour in April 2002. Aventis Parma, the giant French pharmaceutical company, decided to close its factory there, with a loss of 230 jobs. Aventis had been in Nenagh for twenty years. According to the manager Alain Leduc, the move came as a result of a rationalisation programme which involved closing thirty-seven plants worldwide. The sickening thing for the workers was the fact that, according to Leduc, the Nenagh plant had been one of the top performing plants in the European region, operating to FDA and Japanese market standards. However, there were other plants in Britain and France that would manufacture the products that were made at the Nenagh plant; so, savings could be made.
The decision was a body blow to the workers, many of whom have mortgages on their houses or are putting their children through third level education. The loss of 230 jobs is also a tragedy for a town of six thousand people. But none of this figured in the decision of the Aventis bosses to abandon Nenagh. The engine that drives it and every other TNC is the search for more and more profits so that the shareholders are happy and the stock market smiles benignly on the company. Everything else - the welfare of the community, the contentment of workers and the prosperity of the wider community, and, finally the health of the local ecosystem and the planet are all secondary considerations of little consequence.
One might wonder whether Aventis was losing money and had its back to the wall, and so was forced to shed workers in order to remain profitable? Nothing was further from the truth. The turnover in 2001 for Aventis Parma, the worlds largest drug maker, was Ôé¼17.7 billion, and after-tax profits reached Ôé¼1.6 billion, an increase of 40 percent over the previous year. But such a favourable balance sheet was not enough to save the jobs of people who had given twen ty years loyal service to this company. They have simply been cut adrift to fend for themselves. (20)
With the power of national governments being rolled back in recent years, there are few avenues open today for checking the power of large transnational corporations. In fact TNCs want the national and global systems- economic, fiscal, social, cultural, environmental and political - to function for the purpose of providing a favourable climate for transnational investment and competition in the new global economy. John Vidal writes: so immense are they growing and such is their skill in levering markets, so grand their resources and great their political influence that they are now effectively units of governance. Yet they have avoided, so far, the business of having to be socially and environmentally accountable, and are to all intents undemocratic and unaccountable. (21)
The collapse of Enron towards the end of 2001 illustrates how the corporate world has structured itself to avoid any responsibility. The company soared from virtual obscurity to become a world player in the energy supply in a few years. It did this by adopting fraudulent accounting procedures which involved setting up around 900 shell companies around the world. In this way Enron was able to able to disguise heavy debts and losses. It also avoided paying federal taxes for four out of the previous five years.
International Herald Tribune columnist Richard Cohen captures the modern corporate ethos: Enron supported many charities and cultural institutions., but only the ones it chose. It put its name on a stadium, but, again only the one it chose. It basked in the gratitude it received for such largesse. (22) It did not, however, pay taxes. Many of Enrons executives and board members made a fortune before the collapse of the company, while thousands of workers lost all their savings.
But what was done, while immoral, may not be illegal, since the laws are stacked in favour of the corporations. This point was made by two professors of accountancy - Michael H. Gandof and Stephen A. Zeff. During the 1970s and 1980s members of the US Congress, mainly from oil-producing states, brought pressure to bear on the Financial Accounting Standards Boards and the Securities and Exchange Commission not to demand tougher standards for financial reporting in the petroleum industry. The professors conclude that congressional involvement in financial standard-setting has been pure politics, fuelled by a system of campaign financing that distorts the pursuit of the nations legislative agenda. (23)
Congress facilitated corporate greed by designing the nations laws in favour of corporations. What the chief executive of Enron, Kenneth Lay, affectionately named Kenny Boy by President W. Bush, did may not have been illegal. It was, however, profoundly immoral. Enron was the single largest contributor to George Bushs political campaigns since he first ran for Governor in Texas. It also made a massive donation to Bushs presidential campaign. The Republican political analyst Kevin Philips traced the Bush family favour swapping with Enron back to 1988 and likened Enrons potential damage to the Harding Administrations Teapot Dome scandal. The question now is whether what went up together will come down together. (24)
Very often the catch phrase get government out of business is used as a smokescreen by the corporation to be allowed to do whatever is needed to make more profits. For example: at home in the US, Enron had campaigned vigorously to free energy companies from government regulations with the usual get the government off our backs cry. But government help was eagerly sought for projects outside the US. In its drive to build power plants overseas and control the energy market, Enron benefited from a US$1.2 billion government-backed loan from two US agencies. In February 2002 the Overseas Private Investment Corporation (OPIC) was still owed US$435 million while the Export-Import Bank was due US$512 million. When it filed for bankruptcy in December 2001 Enron had approached OPIC for a further loan to bid for two major projects in Brazil. Enron did not tout the superiority of private enterprise when it was looking for what, in fact, is corporate welfare. (25) It is estimated that subsidies to corporations or corporate welfare, on a global scale, each year eaches $100 billion. (26)
1. Quoted in Thomas Berry, The Great Work: Our Way Into The Future, Bell Tower, New York, p. 143.
2. Ha-:Joon Chang, Kicking Away the Ladder,2002, Anthem Press, PO Box 9779, London, SWI9 7QA, p. 86.
3. Financial Market Lobllying; A New Political Space for Activists, 2002, The Corner House, PO Box 31137, Station Road, Sturminster Newton, Dorset DTlO1Y, UK, p. 2.
4. AnAgendaforFaimess, CORIJustice Commission, Tabor House, Miltown Park, Dublin 6, p. 60.
5. Frank Rich, All the Presidents Enrons, The New York Times, June 6, 2002.
6. Editorial, New York Times, June 10,2002.
7. Mathew L. Wald, E.P.A. Says It Will Change Rules Governing Industrial Pollution. The New York Times,