Multinational Corporations are the main actors driving economic globalization which thrives when market forces are de-regulated, allowing essential goods and services to be allocated by commercial activity, not human need. The result is a world economy that favors affluent countries and their corporate interests whilst neglecting those living in extreme poverty who the market fails to reach.
I. Key Facts
Size and Income
Many corporations have a greater turnover than the GDP of most countries. Of the 100 largest economies in the world, 52 are corporations and 48 are countries, and these corporations have sales figures between $51 billion and $247 billion.
Seventy percent of world trade is controlled by just 500 of the largest industrial corporations, and in 2002, the top 200 had combined sales equivalent to 28% of world GDP. However, these 200 corporations only employed 0.82% of the global work force.
In the US, ninety-eight percent of all companies account for only 25 percent of business activity; the remaining two percent account for nearly 75 percent of the remaining activity. The top 500 industrial corporations, which represent only one-tenth of one percent of all US companies, control over two-thirds of the business resources in the US and collect over 70 percent of all US profits.
According to the International Finance Corporation (IFC), inflows of foreign direct investment to the emerging markets have grown by an average of 23 percent per year between 1990 and 2000. The combined value of stock markets in emerging economies is set to exceed $5 trillion in 2006, and has more than doubled in the past decade.
Chevron’s CEO received $37 million in total compensation in 2005, whilst Exxon’s CEO received a $400 million pay and retirement package. In the meanwhile the minimum wage in America (£5.15 per hour) is at a 50 year low.
Corporate growth is around four times as high as global economic growth.
In 2005 the number of millionaires globally swelled to 8.7 million, 5.7 million of whom are based in North America and Europe. Forbes reported a 15% rise in the number of billionaires since 2005, who now have a combined worth of $2.6 trillion.
Between 1980 and 1993, over four million jobs were shed by the largest 500 industrial corporations in the US. Since President Bush took office, two million have lost their jobs and in 2004 nearly one in ten could not find a full time job.
The International Labor Organization (ILO) calculates that global unemployment rates are at an all-time high. Of the 2.8 billion workers in the world in 2005, nearly 1.4 billion still did not earn enough to lift themselves and their families above the two dollars a day poverty line – the same proportion as ten years ago.
Nestlé’s fierce marketing of powdered milk in the 80’s caused the deaths of an estimated 1.5 million children through the contaminated water used to make the infant formula.
Nestle is still one of the most boycotted corporations in the world, and its infant formula is still controversial. In Italy in 2005, police seized more than two million liters of Nestle infant formula that was contaminated with the chemical isopropylthioxanthone (ITX).
In recent years tobacco giants have had to shift their focus to increasing demand in developing countries. The WHO has reported that 84% of the estimated 1.3 billion smokers live in developing and transitional economy countries. A 1994 WHO report estimated that the use of tobacco resulted in an annual global net loss of US$ 200 billion, a third of this loss being in developing countries, stumping development efforts.
Chevron and Coca Cola have been indirectly involved in the violent killings of workers and union officials in developing countries in attempts to suppress workers’ rights. Instances of kidnappings, torture, discrimination, health violations, fuelling conflicts, privatizing and contaminating local water sources, using child labor and even sex trafficking have all been documented as occurring under the responsibility of the largest corporations.
Sweatshops are often used in developing countries by the apparel industry which usually pay negligible wages to under age workers who often work long hours in terrible conditions.
Government support to farmers in OECD countries came to $283 billion in 2005, representing 29% of total farm income. The majority of farmers who own small to medium sized farms do not benefit from these subsidies. 30% of farmers in the US do not receive any of the $26 billion of US subsidies, and over 85% go to only 20% of the largest farms, a pattern repeated in the EU.
The number of small farms in the US has decreased from 6.8 million in 1935 to 1.5 million in 1998. In global commodity markets these subsidies mean that producers in developing countries, many of whom produce their goods with more efficiency and less cost than the US and EU, cannot compete with agri-business suppliers.
The US Government Accountability Office (GAO) reports that 95 percent of corporations paid less than 5 percent of their income in taxes, and 6 in 10 paid nothing at all in federal taxes from 1996 through to 2000. The corporate share of taxes paid fell from 33 percent in the 1940’s to 15 percent in the 1990’s. The individual’s share of taxes has risen from 44 to 73 percent.
Every year corporations are fined hundreds of millions of dollars as their externalities create serious environmental catastrophes, neglect employee rights and even cause deaths. Examples include Chevron, guilty of some of the worst environmental and human rights abuses in the world such as the dumping of 18 billion gallons of toxic waste into rivers used for bathing water in the Amazon, devastating the health of the local community.
Taking the cost of these externalities into account, Ralph Estes estimated that the public cost of private corporations was over $3 trillion in 1995. His externalities included “workplace injuries, pollution, employment discrimination, consumer rip-offs, corporate white collar crime, tax abatements and all the other instances of corporate welfare, government contracting fraud and creative accounting”
The World Bank
Foreign direct investment now exceeds $1 trillion per year for World Bank projects such as privatization of public utilities and creating banking systems. 1% of all multinationals own 50% of the total stock of all foreign direct investment.
When these corporations made bad loans to developing countries, the IMF provided multi-billion dollar bailouts. For example, it bailed out foreign investors in Russia with an $11 billion package and orchestrated a massive bailout of the big banks that made bad loans to Asian countries. In 1995, the IMF gave almost $18 billion to Wall Street investors who stood to lose billions with the peso devaluation.
WTO rulings have often resulted in national governments being sued by corporations simply for placing national interests above corporate profit. The overall effect is the harmonizing of international regulations and standards to their lowest denominator.
The success of corporate influence on the global economy is measurable, as 70% of global trade is now controlled by just 500 corporations
The developing world, where 75% of people’s livelihoods depend upon agriculture, is the source of 90 per cent of all biological resources. Yet transnational companies based in developed counties hold 97 percent of global patents. Since 1985 there have been 10,778 patents on plants registered in the US. Overall, patent applications at the World Intellectual Property Organization have soared from 3,000 in 1979 to 67,000 in 1997.
Eighty percent of all corporations reside in the US and EU. Over 30,000 corporate lobbyists are based in Washington and Brussels, vastly outnumbering the US Congress and European Commission staff that they lobby.
The vast majority of lobby groups represent business interests who spend billions of dollars annually advocating their main cause, which is currently market access in emerging economies. In the US, corporations and their agencies spent $9.7 billion lobbying Congress between 1997 and 2000, about $4.5 million per year per member of Congress.
In his book Captive State (2000), George Monbiot lists 43 individuals who, since the 1997 elections in the UK, have been appointed as ministers, heads, chairmen, and advisors to as many government departments and independent committees. In each case their previous corporate positions (mostly as directors, chairmen or chief executives) and existing links to industry present a direct conflict of interest with their governmental roles.
The President, Vice-President, Commerce Secretary and National Security Adviser all have strong ties to the oil industry. The Bush family had strong ties to Enron-which was President G. W. Bush’s largest corporate source of funding.
Vice-President Dick Cheney amassed some £50m-$60m while he was chief executive of Halliburton Oil Company. Condoleezza Rice was a director of Chevron. Secretary of Commerce Donald Evans held stock valued between $5m and $25m in Tom Brown Inc, the oil and gas exploration company he headed.
In the US, watching TV is the 3rd most time consuming pastime, after sleeping and working. In the US, 75% of commercial television time and 50% of public television time is paid for by the 100 largest corporations. Projected global advertising expenditure for corporations in 2006 is over $427 billion dollars.
All major corporations, particularly those which have the greatest negative impact upon the environment, have repackaged themselves recently as having ‘green’ credentials to great effect. The oil giant BP’s new green, flower-like logo and recent PR campaign is an excellent example. As a result, BP has successfully managed to shift public focus away from the fact that is one of the world’s foremost polluters of the environment and considered by many as one of the top 10 corporate lawbreakers.