Book review: Shadow Sovereigns

The threat posed to democracies by transnational corporations and their relentless demands for ever more “competitiveness” and low taxes is, says Susan George, a challenge to social stability. Neil Robinson agrees.

How Global Corporations Are Seizing Power

Susan George

Polity, €68.00; ebook, €19.50

WINSTON CHURCHILL once remarked that ‘democracy is the worst form of government, except for all those other forms that have been tried from time to time’.

Churchill’s dictum captures the way that most of us think about democracy. We often think that the governments we elect are incompetent. At the same time we couldn’t imagine living under some other system.

At first glance, this contradiction looks like one of democracy’s great strengths.

We can live with democracy even when we loathe its results. Government incompetence is tolerable for a while because we believe that we will be able to ‘kick the rascals out’ at some point.

Being able to get rid of bad governments is a good thing and makes democracy bearable but is it a weakness of democracy as well as a strength?

Our ability to vote out bad governments gives us the idea that democracy has a built-in self-correcting mechanism. 

We rarely move from bad to great government, but we continually hope that things will get better and believe that this means that democracy is working and is sustainable over the long term.

This is a large amount of hope and a big leap of faith. Democracy is a fragile thing.

Globally and historically, more experiments in democracy have failed than have worked, and many democratic experiments scarcely merit the democratic label at all. Only around 30 countries have managed to create and sustain democracy for any amount of time. Democracy can collapse quite easily. 

Just look at how it failed in most of Europe between the first and second World Wars, with horrific results, Worse, the idea that democracy has a self-correcting mechanism makes us politically lazy. If democracy fixes itself through the ballot box why pay any attention to politics? It’ll sort itself out in time.

This is a dangerous attitude. If we think like this we are a bit like the proverbial frog placed in a pan of water on a stove. As the water gets hotter the frog doesn’t notice the small changes in temperature that are leading to it being boiled alive until it’s too late.

The same applies to democracy. Small changes that we don’t take notice of can become big threats to our democratic rights. Without action to counter these changes the self-correcting mechanism that we think protects democracy won’t work after a time.

There have been a lot of books of late warning that the water temperature in democracies is rising to dangerous levels. Much of this literature has focused on the dangers caused by economic inequality and the damage it does to the social fabric that surrounds democracy.

Susan George’s new book fills a gap by looking at the politics that makes inequality such a threat.

Big firms, George argues, have effectively captured power within and over government. These big firms are transnational corporations, firms that have production facilities, offices and markets across the world. 

These companies are adept at maximising their influence over public policy and at moving their earnings around to minimise their tax obligations.

The source of transnational corporations influence is first and foremost the idea that the promotion of competitiveness is more important than anything else in social and economic life. The call for increased competiveness has become the mantra for both big business and for politicians and civil servants.

For transnational corporations competiveness is constrained by regulations, which push up the costs of doing business, and taxes, which cut into profit and thus hamper their expansion.

For governments and their civil servants, promoting national competiveness is essential to attract investment from transnational corporations. 

Getting this investment means creating a climate in which corporations can thrive. Regulation should be ‘light touch’ rather than heavy handed. Taxes on corporate earnings should be low to bring in investment.

Shared faith in the importance of compe

tiveness is reinforced by the revolving door between government and transnational corporations, and lobbying.

Retiring politicians and civil servants regularly now move from public service to the corporate world. This blurs the line between public and private interest. How stringent are bureaucrats in regulating firms that they may seek to join after leaving public service?

How can we be sure that politicians’ insider knowledge and contacts, developed at public expense, are not later used to seek special favours for private bosses?

The exchange of personnel is not a one-way street from government to business.

One reason that business lobbies have been so successful is that they are often talking to a very receptive audience of people from corporate backgrounds or lobby organisations recruited into bureaucracies.

This is the equivalent of putting the fox in charge of the henhouse and is a particular problem in international bureaucratic agencies like those produced by the European Union.

George cites the case of the European Food Safety Agency which regulates the growth of genetically modified foods in Europe. Most Europeans oppose this food. The agency, however, has staff members, even a past head, who have worked for the International Life Sciences Institute. 

That is a body that represents and is funded by some of the largest transnational food and agro-industrial firms, firms at the forefront of genetic crop modification. 

Not only halest agency shared staff with the institute, it has also commissioned the institute to research the safety of genetically modified food. How, George asks, can we trust in their impartiality?

Conflicts of interest such as this privilege private over public interest and can make a mockery of the idea that democracy produces policy that is broadly in line with popular opinion.

Secrecy makes this worse. Much of the influence peddling and pandering to private interests takes place far from the public view.

The worst case of this is the ongoing negotiations over the Transatlantic Trade and Investment Partnership.Its negotiation between the USA and Europe is hidden from public scrutiny.

The treaty — partnership is a misnomer — threatens to sweep away local powers to regulate economic activities and products, and block future regulation. 

A future national government seeking to regulate a product might be sued for damaging the competitiveness and profits of a trans-national corporation.

Trans-national corporations may influence much of the agenda of democratic governments but we still demand that ‘our’ democratic government delivers services to us in the form of things like police, schools, hospitals, roads, and food safety.

Paying for services becomes harder when trans-national corporation minimise their tax payments. The tax burden to pay for services has to fall on ordinary citizens, or governments have to borrow to fund services. 

Either way, we end up paying. Taxes such as Vat typically go up to make up shortfalls from corporate tax income. When borrowing gets too high we face cuts and austerity to control government spending.

We can blame politicians for this, but we shouldn’t blame them alone. Some of the responsibility lies with us for believing that everything might be better after the next election. It won’t be. 

If we want democracy to work, we have to make sure that the power of the people is greater than the power of private interests.

Neil Robinson is professor of politics at the University of Limerick


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