The Roots of Change – in Ourselves, or Government and Industry?

“The American Frankenstein”

I could very much relate to an article I read today, albeit with some reservations:

WOULD ANY SANE PERSON think dumpster diving would have stopped Hitler, or that composting would have ended slavery or brought about the eight-hour workday, or that chopping wood and carrying water would have gotten people out of Tsarist prisons, or that dancing naked around a fire would have helped put in place the Voting Rights Act of 1957 or the Civil Rights Act of 1964? Then why now, with all the world at stake, do so many people retreat into these entirely personal “solutions”?

Part of the problem is that we’ve been victims of a campaign of systematic misdirection. Consumer culture and the capitalist mindset have taught us to substitute acts of personal consumption (or enlightenment) for organized political resistance. An Inconvenient Truth helped raise consciousness about global warming. But did you notice that all of the solutions presented had to do with personal consumption—changing light bulbs, inflating tires, driving half as much—and had nothing to do with shifting power away from corporations, or stopping the growth economy that is destroying the planet? Even if every person in the United States did everything the movie suggested, U.S. carbon emissions would fall by only 22 percent. Scientific consensus is that emissions must be reduced by at least 75 percent worldwide. – Orion Magazine

I have heard so many people tell me that the way to change the world is for us each to change our own lifestyles. It’s all "in the simple things we do every day" they say. Take shorter showers, change your lightbulbs, keep a garden. While many pass responsibility for our present condition on politicians and faceless corporations, these lay the blame squarely at our own feet as individuals.

What is the average concerned consumer meant to do (after determining, once and for all, to stop calling himself a consumer!) – should he concentrate on only his own actions, or should he concentrate on changing the system, or both?

The article I quote above, in my personal opinion, is on the money in many respects, although perhaps a little imbalanced as well – and I also think it falls short by not providing some kind of direction or road map to address the issue raised. This post is a small attempt to do this, and stimulate discussion on the same. Please forgive the length, but I think it’s an important issue.

First we need a little background on why focussing only on our own individual behaviour, on its own, will never be enough.

Note: The next section covers the realities of the corporate takeover of the world. This is information everyone should know. If you’re already painfully aware of these things, then feel free to skip the first half to jump to the solution.

Industry and government teamed up = democracy for sale

A little while ago I wrote about global dimming, and how it is veiling our true predicament in regards to climate change. Today I want to consider another facet of this story – how politics and industry are effectively doing the same, not just in regards to climate change, but in regards to every aspect of our lives.

Power is shifting away from governments and politicians and being invested instead in transnational corporations and institutions. We now live in a world where corporations are taking over from the state, where business appears more powerful than politics, and where commercial interests are paramount.

There is plenty of evidence to back up these assertions. Multinationals are now as big as many nation states – 300 TNCs now account for 25 per cent of the world’s assets. Individual companies now have more wealth than whole countries. Mitsubishi is the 22nd largest economy in the world, General Motors the 26th, Ford the 31st. Each is larger than the economies of Denmark, Thailand, Turkey, South Africa, Saudi Arabia, Norway, Finland, Malaysia, Chile and New Zealand, to name but a few. Corporate sales account for two-thirds of world trade and one-third of world output, while as much as 40 per cent of world trade now occurs within multinational corporations.

Their economic dominance gives TNCs huge amounts of power. Their unprecedented strength and mobility means that they are increasingly able to play one state off against another in the search for ever lower standards and cheaper locations to base business. Governments are becoming trapped in a regulatory ‘race to the bottom’ to achieve international competitiveness. Under economic globalisation, democratic efforts to ensure corporations pay their fair share of taxes, provide their employees with a decent standard of living, or meet environmental targets are met with the response that such measure could undermine their international competitiveness – followed closely by a threat to relocate to countries with less stringent controls.

The implication is, as Hans Tietmeyer, former president of the German Bundesbank, has said, that, ‘Politicians have to understand that they are now under the control of the financial markets and not, any longer, of national debates.’ The sorry tale of Oskar Lafontaine, the former finance minister of Germany, is a case in point. Revenue from corporate taxes in Germany has fallen by 50 per cent over the past twenty years despite a rise in corporate profits of 90 per cent. In 1999, Oskar Lafontaine dared to attempt to raise the tax burden on German firms. He was simply blocked by a group of companies all of which threatened to relocate investment or factories to other countries if government policy did not suit them. Their threat was successful – and it was Lafontaine who was relocated, out of the government. – Green Alternatives to Globalisation, p. 18, 19.

Just in my own ‘neighbourhood’, where I was recently stationed in Eastern Europe, I witnessed several large Trans National Corporations being granted incredible privileges by the current government in a bid to attract them to locate there. Amongst other benefits, these businesses secured a ten-year grace period, excusing them from all taxation. Once this period has elapsed they are free to pack up and move elsewhere if subsequent conditions do not suit. In the meantime, taxpayer dollars are being diverted into roading and other improvements so as to make life easier for their large scale transport needs, whilst workers’ rates are set at a bare minimum, with employees being sold the idea that the privilege of working for them should be reward enough – that having their globally recognised name on their resume is of more value than present financial security.

To attract companies like yours … we have felled mountains, razed jungles, filled swamps, moved rivers, relocated towns … all to make it easier for you and your business to do business here. – Advert placed by the Government of the Philippines in Fortune magazine

The trend is the same the world over. If cheap labour, and lax or non-existent environmental regulations make it cheaper to relocate, then that’s exactly what happens. Incentives to build and invest in the ‘people and place’ of local communities thus give way to the primary concern of shareholder profits. In a world where, as mentioned above, the vast majority of world trade is under the auspices of these companies, and the primary motivation is to look out for the interests of the corporation and its shareholders (this motivation, unfortunately, being built right into the corporation’s central charter), then our present environmental woes should have been not only easy to predict, but also recognised as the only logical conclusion to our present ‘Democracy-for-Sale’ combination of corporate feudalism and political commercialisation.

… We are witnessing a ‘slow motion coup d’etat’, a process of political osmosis by which power is seeping out of increasingly flaccid national governments to swell the already turgid TNCs and international trade and finance institutions. Any resistance to the coup from conventional politicians ceased long ago. They have become its willing accomplices and the distinction between government and big business is becoming increasingly blurred. – Green Alternatives to Globalisation, p. 20.

This is true in several ways – from industry sponsored ‘progressive governance’ events designed to ‘educate’ politicians in ‘correct economic systems’ (‘correct’ according to the WTO, IMF, and World Bank’s view of the world – i.e. policies that favour TNCs), to direct ‘donations’, to the revolving door hiring process that sees industry heads being absorbed into politics – where they end up being responsible for forging (relaxing) regulations for the very industries they’ve just left.

One would wish that our governments were, without vested interest, objectively considering the fate of present and future generations – making wise and precautionary decisions that will improve the long term sustainability of our society whilst working for the betterment of our lot in the present. But, this is clearly not the case when regulations and subsidies all favour the very industries whose underlying strategy is out-competing and swallowing up the community-minded, locally based, Ma & Pa type stores of yesteryear.

And, if the environment somehow manages to become a pressing concern in the eyes of the public, instead of bringing actual solutions to the table – government and industry instead attempt to veil the realities of our predicament, granting us either a reluctant admission of the same, or a watered down rhetoric expressing the need to implement ‘positive strategies’ for resolution – especially focusing on those ‘positive strategies’ that result in increased benefits for those same corporations – at yet greater costs to people and place.

A current and alarming example of this, amongst many, is the topic of biofuels. I’m not talking about your recycle-the-chip-fat scenario here – but the land/food-for-fuel scheme that is blindly marching across the world’s already-strained topsoils. This topic is of great concern amongst many in the public and scientific sectors, regarded by many as a “science fiction solution” to climate change, but it’s interesting to note there’s little to no debate about it in political circles:

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Hear how Hillary Clinton Changed Her Mind
on Biofuels Once She Decided to Run for Office

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McCain Changes His Stand on Biofuels

The whole ethanol craze is centred on economics only, but discretely covered in a light-green mantle of ecological concern. It is aggressively pushed forward despite being scientifically and ecologically unsound. Rather than reasoned public debate, the most likely hurdles to its progress could be the complete collapse of the agricultural systems it relies on. It shouldn’t have to be this way.

An excellent, practical example of how change at the top is essential to get agriculture back on track, is the U.S. Farm Bill. Every five years in the U.S. legislation is reworded and renewed that impacts to some degree or another almost every person, field and creature in the U.S., and also a large percentage of the rest of the world’s population. Yet, most people in the U.S. are blind to this fact, leaving politicians and industry lobbyists alone to beat out a ‘deal’ most satisfactory to themselves – to destructive large scale monocrop, fossil fuel intensive, chemical laden conglomeratic industrial farming – and even when the average Joe does take note, industry lobbyists inevitably get their way. (Read more on the Farm Bill here.)

Our politicians are: 1) skillfully presenting themselves as concerned environmentalists, 2) excusing and promoting the industries that are the biggest contributors to global warming and environmental destruction, whilst 3) shifting the guilt for the same onto the average Joe Citizen (one factory can do more environmental damage in a single afternoon than an ordinary citizen can in his entire lifetime), and 4) veiling our true ecological predicament to mute public outcry and to protect the status quo.

Often, any attempt to scrutinise the actions of big business is met with the cry ‘protectionism’. We would do well to note that ‘free trade’ organisations like the WTO encourage their own kind of protectionism – working within a framework that is either above the law, or shaping its own; a system that protects corporate profits at the expense of the public good. This is not democracy at work. It is, in fact, quite the opposite.

For example, WTO ‘like product’ rules render it illegal to discriminate between imports of similar products on the basis of the way in which they were produced. They therefore prohibit discrimination between GMOs and non-GMOs, or between imports of clothes made with child labour and those made in decent conditions, or between meat and dairy products made through the appalling mistreatment of animals and those made with high animal welfare standards. Governments are now unable to exercise their responsibility to protect their citizens from products that damage the global environment, or from foods made with appalling animal welfare standards. By giving up the right to condition investment in a country on certain societal standards, or to make the entry of products into domestic markets dependent on compliance with national rules, governments have deliberately eroded the leverage they once held over corporate behaviour on behalf of the people. – Green Alternatives to Globalisation, p. 22.

Getting to the heart of the matter: Corporate greed is a CEO’s legal obligation

Most of us have watched The Corporation, prompting us to go "tsk, tsk" and giving us increased scepticism about the pro-social and pro-environmental claims of Big Industry. Hollywood even presents us with dramatisations of David and Goliath type stories of small community underdogs battling greed and corruption – winning after mega effort and against the odds – or they present us with the tale of an idealistic, yet sincere and determined employee changing the course of his company for the better. These kind of stories appeal to our inner desire to see good triumph, but they never examine the root obstacle to that change – that being the legal structure of corporations themselves.

The following passages begin to shed light on why we’re in the mess we are in, and can also get us thinking about how we can, finally, get out of it.

After 23 years as a corporate securities attorney–advising large corporations on securities offerings and mergers and acquisitions–I left my position as partner at Skadden, Arps, Slate, Meagher & Flom because I was disturbed by the game. I realized that the many social ills created by corporations stem directly from corporate law. It dawned on me that the law, in its current form, actually inhibits executives and corporations from being socially responsible. So in June 2000 I quit my job and decided to devote the next phase of my life to making people aware of this problem. My goal is to build consensus to change the law so it encourages good corporate citizenship, rather than inhibiting it.

The provision in the law I am talking about is the one that says the purpose of the corporation is simply to make money for shareholders. Every jurisdiction where corporations operate has its own law of corporate governance. But remarkably, the corporate design contained in hundreds of corporate laws throughout the world is nearly identical. That design creates a governing body to manage the corporation–usually a board of directors–and dictates the duties of those directors. In short, the law creates corporate purpose. That purpose is to operate in the interests of shareholders. In Maine, where I live, this duty of directors is in Section 716 of the business corporation act, which reads:

…the directors and officers of a corporation shall exercise their powers and discharge their duties with a view to the interests of the corporation and of the shareholders….

Although the wording of this provision differs from jurisdiction to jurisdiction, its legal effect does not. This provision is the motive behind all corporate actions everywhere in the world. Distilled to its essence, it says that the people who run corporations have a legal duty to shareholders, and that duty is to make money. Failing this duty can leave directors and officers open to being sued by shareholders.

Section 716 dedicates the corporation to the pursuit of its own self-interest (and equates corporate self-interest with shareholder self-interest). No mention is made of responsibility to the public interest. Section 716 and its counterparts explain two things. First, they explain why corporations find social issues like human rights irrelevant–because they fall outside the corporation’s legal mandate. Second, these provisions explain why executives behave differently than they might as individual citizens, because the law says their only obligation in business is to make money.

This design has the unfortunate side effect of largely eliminating personal responsibility. Because corporate law generally regulates corporations but not executives, it leads executives to become inattentive to justice. They demand their subordinates “make the numbers,” and pay little attention to how they do so. Directors and officers know their jobs, salaries, bonuses, and stock options depend on delivering profits for shareholders.

Companies believe their duty to the public interest consists of complying with the law. Obeying the law is simply a cost. Since it interferes with making money, it must be minimized–using devices like lobbying, legal hairsplitting, and jurisdiction shopping. Directors and officers give little thought to the fact that these activities may damage the public interest.

Lower-level employees know their livelihoods depend upon satisfying superiors’ demands to make money. They have no incentive to offer ideas that would advance the public interest unless they increase profits. Projects that would serve the public interest–but at a financial cost to the corporation–are considered naive.

Corporate law thus casts ethical and social concerns as irrelevant, or as stumbling blocks to the corporation’s fundamental mandate. That’s the effect the law has inside the corporation. Outside the corporation the effect is more devastating. It is the law that leads corporations to actively disregard harm to all interests other than those of shareholders. When toxic chemicals are spilled, forests destroyed, employees left in poverty, or communities devastated through plant shutdowns, corporations view these as unimportant side effects outside their area of concern. But when the company’s stock price dips, that’s a disaster. The reason is that, in our legal framework, a low stock price leaves a company vulnerable to takeover or means the CEO’s job could be at risk.

In the end, the natural result is that corporate bottom line goes up, and the state of the public good goes down. This is called privatizing the gain and externalizing the cost. – How Corporate Law Inhibits Social Responsibility – A Corporate Attorney Proposes a ‘Code for Corporate Citizenship’ in State Law

No environmental movement will meet with success if it only operates on the typical patchwork process – that of trying to scold and chide industry and consumers into lessening their impact on the world. Indeed, regulatory controls alone will never be sufficient either, and work on the same after-the-fact premise. What is required is major surgery to the central chartered legal responsibilities for businesses (currently just to protect their own interests), and personal accountability for their directors. Without embedding broader social and environmental responsibilities, inter-business competition and shareholder demands will always ensure investment in the future gives way to a mere striving for market dominance, at any cost.

By the people, for the people

In no way am I discouraging noble efforts in all the little areas of our lives. It is through our purchases, activities and habits that we create ‘niche habitats’ for industry to thrive in, but at the same time we must recognise that society is shaped by more than just consumer demand. Indeed, consumer demand itself is shaped by industry, through stealth marketing tactics, planned obsolescence and more. Big industry is favoured and even subsidised by government, and government is increasingly subservient to industry demand. As shared further above, the line between industry and government is blurred.

At the moment we live in a world of ‘corporate watchdogs’ and ‘whistleblowers’. We have law suits where powerful well financed corporations ably defend themselves against the small budgeted claims of people’s whose concerns are well off the radar of stock-tracking shareholders. This scenario is farcical. Why do we bother? Since it is a legal obligation for industry heads to make the interests and profits of the corporation their primary concern, then trying to get them to consider the collateral damage of their activities is like trying to get water to flow uphill.

The good news is that, unlike the law of gravity, we can change the laws governing corporations.

The Corporation documentary showed clearly how corporations have been given the rights of ‘individuals’, yet actual individuals learn ethical values from an early age, and suffer shame or penalty for their indiscretions. Decision makers in industry, however, hide behind the ‘corporate individual’. The Corporation may come under scrutiny, but the real life people behind the logo are almost never subject to prosecution. This needs to change. Personal accountability needs to be ‘incorporated’ into the laws of incorporation.

In this sense, I have to agree with the author of the initial quote at top, that we do indeed need to confront and take down the systems that have been taking so much from so many for so long. The growth economy must go. The every-man-for-himself mentality must die.

If we are to hook our ailing planet up to a life support system – shouldn’t we double check who is holding the stethoscope? Those making the greatest profits from our resources have garnered the support of government to all but completely externalise the real costs of their plundering. Yet, we have fallen, or have been manipulated into, a level of social and political apathy that’s far beyond any previous generation that has ever existed. We watch and wait for those in power to solve our problems – ignorant of the fact that whatever ‘solutions’ they have will only be a profit-making hybrid of any potential real solutions, since no action can be taken unless profit is the result. This is not a time to allow ourselves to be serenaded by political and industry greenwash. While we’re greening our personal lives – let’s not ignore the fact that our composting and light bulb swap-outs will mean little in the grand scheme of things if we leave unchecked the great industrial machine that put us into this predicament in the first place.

We need to see democracy return to a community hall near you.

Further Reading: