Friday, September 19, 2008

Fortune For 500, Misery For 5 Billion

The global economic power of giant Trans Continental Corporations has grown to the point that they have become bigger than most of the countries where they do business.
Altogether, of the 100 biggest economies in the World, 40 are countries and 60 are corporations. The world's Fortune 500 companies last year earned one-third of the World GDP of 70 Trillion dollars.
Anyone would assume that with such a large revenues, these 500 companies would have employed a substantial portion of the world’s workforce. We will be shocked to know that all these companies together employ less than 20 million out of an available 3 billion workforce, according to the Washington based Institute for Policy Studies (IPS). According to IPS, about 5 billion people, close to 80% of global population together earns less than half of the earnings of these companies.

If we look at the topmost 50 companies of these 500, it is evident why most of them are at the top. Their earnings are from natural resources. Oil, ore,minerals and metals and their by products like steel, aluminum, and power. These natural resources belong to the countries which means people, but these are given away for long term lease or sold at throwaway prices by the governments. For example, in 2004, oil was $ 25 and in 2008 over $100 a barrel. Was there any additional investment or additional employment generation between 2004 and 2008. Nil. Same is the case with iron ore, aluminum, coal, lime stone where prices have trebled. The iron ore mining companies in India used to sell the ore in 2004 at $35 a ton and pay 50 cents to the government as cess. In 2008 the ore is selling at $ 140 a ton but the companies continue to pay 50 cents only because of the long term lease contracts. If we look at the soaring profits of similar companies across the World, it is evident that the situation is same everywhere. And who bears the brunt. Billions of people suffer with rising costs and billions of windfall profits are pocketed by these companies.

Corporate globalization continues to increase at a hectic pace. The elixir of corporate is growth ... unquenchable growth. And profit. It’s imbedded in their genes. So these Trans Continental Corporations do everything in their power to grow and get profits. And power is one thing they have in abundance. Unlimited power with heads of governments wringing their hands at World Economic Forum and pleading for investments, offering huge tax breaks, huge tracts of land and a host of concessions. The Heads of State know clearly that while they govern a State, it is these Corporations that rule. In this process, these Trans Continental Corporations transcend responsibility to nations, people and employees. A Union Carbide can brush away with impunity the biggest and the most horrible industrial disaster with just $500 compensation to each of the surviving victims. And then one fine day it disappeared from the face of the earth. Just like that with a merger. A Dow Chemicals can refuse to clean up its shut down factory full of deadly chemicals , yet governments clamber over one another inviting it to set up business in their states. A Chiquita Brands International, the US company engaged in Banana business in Columbia , can get away with just a $ 25 million compensation to the hundreds of families of victims who have been killed by rebel forces in Columbia who were funded for a decade by the company to protect their business from disruptions. A Tata Motors can get away from moving a project to another place at a loss of 1500 crore rupees but consistently refuses to pay a few crores as additional compensation to 400 farmers whose land was acquired forcibly by the government for the project. That too after 40 people agitating for additional compensation were killed. The Sanlu group in China, biggest maker of milk powder can get away with mixing melamine in the milk powder resulting in 10,000 children becoming sick and 500 babies dying of acute kidney failure. After a mega merger, a giant corporation can get away with firing thousands of its employees by declaring “ these positions have become redundant”. Positions not people. These are not isolated incidents but regular happenings across the World. It is evident that these corporations transcend responsibility to nations, people and employees. So to whom are they responsible. The oft repeated remarks of the spin doctors of these corporations is that they are responsible to their investors is another sham. The investors are mega financial corporations who hold large chunk of stake in these companies. The retail investors are miniscule and a necessary evil who have little say or knowledge of their companies operations. In a recent AGM of Reliance, when one shareholder questioned Mukhesh Ambani how and why he is building a 27 floor billion dollar home for himself and how he could gift his wife a Jet with company money, he was asked to sell his shares and move on if he doesn’t like what the company is doing. Anyway, not even one per cent of the world population invest in companies. In effect, these corporations are responsible to no one. Trillions of dollars at their disposal and unbridled power derived through that money without responsibility to anyone. What a deadly cocktail !
And what do they do with this power. They use it to corner more profits. Take for example the carbon credit system. It was originally conceived to encourage the big corporations to be eco friendly by reducing pollution. How is the system in the current form. Carbon credits can be traded internationally, which means these big corporations continue to pollute but will buy the carbon credits from smaller companies. They have made a mockery of the system.
The most influential business group advising government on US-EU commercial relations', the Transatlantic Business Dialogue (TABD) consists of 100 CEOs of these most powerful corporations. When presidents, prime ministers and other heads of state meet at the World Trade Organization, this more permanent group provides its agenda. It is apparent that WTO is toying TABD agenda of watering down environment, consumer and worker protection laws in selected nations under the guise of binding free trade agreements that give them complete freedom to move their goods and capital across borders.
If WTO has its way, here's an example of how it works. Years ago a US Pharma giant has manufactured defective heart stents which cracked, killing close to 200 patients in whom they had been implanted. However, they had been cleared by the US Food and Drug Administration. So even though India has far superior heart stents, we cannot stop these defective stents from being dumped into our market . If we do WTO imposes trade sanctions on us. Neither can any nation stop Genetically Modified food products.
The most sinister thing is these Corporations control the media. Most of the television media ,movie industry and great part of print media are owned by these corporations either directly or through subsidiaries. About 80% of commercial television time , which actually sponsors TV programs is bought by them. The result -serious issues that affect these corporations are trivialized in TV media and buried deep inside newspapers. In affect, these corporations control our awareness of issues and influence the thought process. One of the best examples can be the Al Gore- Bush election. Major TV stations announced first of Al Gore win but within hours changed their stand and bombarded the viewers for weeks on Bush win. The reasons are fairly clear. Al Gore is eco friendly, is conscious of energy crisis which is unpalatable for big corporations. The fact that the perception of millions of people has been reversed or at worst confused at the bidding of these corporations to place oil friendly person to the highest of the office in itself tells the power and reach of these corporations.
The stark reality that Trans Continental Corporate rule has replaced democratic government rule is the single most important issue we now face. It will take great courage and common global action to challenge and overcome this monstrous threat to the well-being of the vast majority of humankind--and even to the planet itself.
It is predicted that by 2025 World will be full of robots. There is every possibility of this being a reality though not with the mechanical / electronic robots. But we the human beings will be robotized in our thought process and shepherded along the highway to an Orwellian night mare by these faceless Corporations for whom profits alone is reverent. Everything else is irrelevant.


Baba's Blogs said...

Guess it is the profit motive and the pelf for wealth. It’s the Power of “VITAMIN – M”. As I write this, CNBC - TV 18 announces the following news “In 18 months time RIL will produce 40% of Nation's oil production". Business line carried the following headline this morning “Reliance ADAG Hollywood forays with Spielberg-led production house investing $1.2 billion”. However the icing on the cake was the wonderful article in The Hindu Magazine section “Soon medical call centers based on the EMRI model may be available to other nations”. We are all losing sleep on something or the other - Mega mergers, Oil, Minerals, Land, Dollar, Stocks, Alliances, Mortgages, Metro, Medicare and Multi nationals….Some profiting from their investments and looking for higher returns while others working for these corporations and awaiting their salaries.

radhe said...

Quite thought provoking. However, after raising the ire, the article stops short of suggesting ways to address this.

Anonymous said...

Staggering statistics! Very interesting and thought provoking read. Indeed worth questioning how much has really changed since the era of 'Company Bahadur' when corporations ran countries. Could you also please present your views on the reverse? Sovereign funds utilizing investments in joint stock companies as a vehicle of foreign policy... Looking forward to your next post.

Anonymous said...

Wanted to add that I particularly enjoyed reading this article. The subjects and quality of your posts seem to just get better & better!
I really would like you to continue with a few more posts on this particular subject. As I mentioned in my comments - 2 related subjects come to my mind:
1. To explore the historical journey of multinational corporations...How much has really changed from the 18th century-era East India Company and the 21st century MNCs?
2. Also look at it the other way..China & countries of the Middle East are increasingly using their forex reserves and sovereign funds to make strategic investments that drive foreign policy. It will be interesting to read your thoughts on this...


Ramana said...

Some day I will. The posts are getting better because I am getting angrier. I write better when I am angry.

Anonymous said...

Angry (young) (Ra) man (a) !

I agree with Yati. The subjects on which you are writing are broader than before and the incisiveness too is up.

I rate this one of the best you wrote but what got me upto date is "trickle down effect' posting.

Keep up your spirit !


Ramana said...

Angry old RaMANa

Samir said...

Keep up your flame & passion Ramana...yaha to kam ke sew kuch aur time he nahi milta... Waht r your views on the USA elsections...a blog on that will be good