Masked Avengers©Linda Dawn Hammond 2001

The Silent Takeover: Global Capitalism And The Death Of Democracy

by Noreena Hertz

In the hullabaloo after the United States presidential election it was easy to forget something that was even more alarming than confusion over who won. More than 90m Americans had not bothered to vote - more than the combined population of England, Ireland and Scandinavia. Low turnout is not just a US phenomenon. In Britain the landslide victory for Labour in the 1997 election was achieved on a turnout of 69% - the lowest since the second world war. In the 1999 European elections less than half of the electorate voted, and less than a quarter went to the polls in the UK.

People have lost faith in politics, because they no longer know what governments are good for. Thanks to the steady withdrawal of the state over the past 20 years from the public sphere, it is corporations that increasingly define the public realm.

Unregulated or under-regulated by governments, corporations set the terms of engagement themselves. In the developing world we see a race to the bottom: multinationals pitting developing countries against each other to provide the most advantageous conditions for investment, with no regulation, no red tape, no unions, a blind eye turned to environmental degradation. It's good for profit, but bad for workers and local communities. As corporations go bottom-fishing, host governments are left with little alternative but to accept the pickings. Globalisation may deliver liberty, but not fraternity or equality.

At the headquarters of the World Trade Organisation in Geneva we see rulings being made in the names of the free market that limit states' abilities to safeguard their people's interests. When the European Union tried to ban synthetic hormones from beef on the basis of strong evidence that they could cause cancer, reduce male fertility and in some cases result in the premature onset of puberty in young children, it found itself unable to do so thanks to a WTO ruling that put the interests of Monsanto, the US National Cattlemen's Association, the US Dairy Export Council and the National Milk Producers Federation first. Time and time again the WTO has intervened to prevent governments from using boycotts or tariffs against companies that they find to be acting in ethically or environmentally unacceptable ways.

In Germany, where revenue from corporate taxes has fallen by 50% over the past 20 years despite a 90% rise in corporate profits, a group of companies, including Deutsche Bank, BMW, Daimler-Benz and RWE, the energy and industrial group, thwarted an attempt in 1999 by the finance minister, Oskar Lafontaine, to raise the tax burden on German firms. The companies threatened to move investment or factories to other countries if government policy did not suit them. "It's a question of at least 14,000 jobs," said a spokesman for RWE. "If the investment position is no longer attractive, we will examine every possibility of switching our investments abroad."

In view of the power these corporations wield, their threats were taken seriously. Within a few months Germany was planning corporate tax cuts that would reduce tax on German companies to less than US rates. As one of Chancellor Gerhard Schröder's senior advisers in Washington commented at the time, "Deutsche Bank and industrial giants like Mercedes are too strong for the elected government in Berlin." In the US the quid pro quo being exacted by George Bush's corporate backers is becoming all too clear. Since being elected, the president has opened up the Arctic national wildlife refuge to oil drillers, retreated from his promises of protecting forests, made moves to weaken the requirement on mining companies to clean after themselves, reversed a campaign pledge to regulate CO<->2 emissions from power plants, and thrown the Kyoto treaty on global warming into disarray. The interests of the US people have been subordinated to those of the energy giants that bank-rolled him: $47m was all it cost.

This is the world of the Silent Takeover, a world in which governments can no longer be relied on to protect the people's interests. Blinded by the allure of the market, they now put corporate interests first. So it is left to us, through individ ual action, to take the lead. In a world in which power increasingly lies in the hands of corporations rather than governments, the most effective way to be political is not to cast one's vote at the ballot box, but to do so at the supermarket or at a shareholders' meeting.

Because, when provoked, corporations respond. While governments dithered about the health value of genetically modified foods, supermarkets faced with consumer unrest pulled the products off their shelves overnight. While nations spoke about ethical foreign policy, corporations pulled out of Burma rather than risk censure by customers. Bush may have backed down on his pledges to limit CO<->2 emissions, but BP continues to spearhead the campaign for their reduction. And when stories broke over the world of children sewing footballs for Reebok for a pittance, what did governments do? Nothing. But Nike, fearing a consumer boycott, stepped in with innovative plans for dealing with the child labour problem.

Delivering a quality product at a reasonable cost is not all that is now demanded of corporations. The key to consumer satisfaction is not only how well a company treats its customers, but increasingly whether it is seen as taking its responsibilities to society seriously. People are demanding that corporations deliver in a way that governments can't or won't. Can shopping adequately replace voting? No, it cannot. The world cannot be simplified to the extent that consumer politics tends to demand. Is GM food necessarily always bad for consumers or the environment? Or could this technology be harnessed for good? Child labour may be distasteful to Western expectations, but does boycotting goods made with child labour improve or exacerbate the lot of children in the developing world? Trusting the market to regulate may not ultimately be in our interest. Moreover populist politics can easily result in tyranny, not necessarily of the majority, but by those who can protest most effectively. Rather than empowering all, consumer and shareholder activism give greatest voice to those with the most money in their pockets, those with the greatest purchasing power, those who can switch from seller to seller with relative ease. Consumer and shareholder activism is a form of protest that favours the middle classes and the dissatisfaction of the bourgeoisie. Nor should the takeover by corporations of governments' responsibilities be viewed as a reason for governments to withdraw. Despite the roles corporations are beginning to play in the social sphere, social investment and social justice will never be their core activity. Their contribution to society's needs will always remain at the margins.

In Japan's Mitsubishi Villages, Nissan Towns and Toyota Cities the keiratsus - trading companies - used to provide school vouchers, housing and health care. In the wake of the Asian financial crisis, the firms are withdrawing support from the community. The head of Toshiba says they are no longer "a charity". Entire communities are suffering. The suicide rate in Japan rose by a third between 1997 and 1999, a testament to the social strain. As more and more of the public realm is handed over to the private sector to manage, we need to see the Japanese case as a cautionary tale. If this move by Western corporations towards greater responsibility and care is predicated solely on the continuing strength of the global economy, on the fact that philanthropic acts are essentially tax write-offs against balance sheets firmly in the black, is it not likely to be reversed when times again become difficult? Companies will not be able to justify staying involved to their shareholders, unless they calculate that withdrawal from their social commitments will be so damaging to their reputation as to be more costly than maintaining them. The corporate provision of welfare risks dependence on the continued generation of profits.

Corporations are not society's custodians: they are commercial entities that act in the pursuit of profit. They are morally ambivalent. Often their business interests happen to coincide with society's, but this is by no means always the case. Governments, on the other hand, are supposed to respond to citizens. Downgrading the role of the state in favour of corporate activism threatens to make improvements in society dependent on the creation of profit. And governments that stand back while corporations take over, without being willing to set the terms of engagement or retain the upper hand, are in danger of losing the support of the people, whose feeling of lack of recourse or representation is showing itself in a wave of protest that goes beyond acts of consumer and shareholder dissent. All over the world people are beginning to lash out against corporations, governments and international organisations alike. In a world in which politicians now all sing from the same hymn sheet, people who want to change the hymn have to go outside the church.

But like consumer and shareholder activism, other forms of protest should not be idealised. Their limitations are clear. The commonality of interests often centres on a shared general disillusionment rather than specific concerns or proffered solutions. In some cases protesters are motivated by a sense of common good, but in others they are concerned only with safeguarding their own interests. Pressure groups need to play to the media, which encourages posturing, the demonisation of "enemies", an enormous oversimplification of issues and the choosing of fashionable rather than difficult causes to champion. Issues such as forest biodiversity, nitrate leaching or soil erosion in Africa hardly get a look in. And, as one of London's May Day protesters told me: "There has to be trouble, otherwise the papers won't report it."

But despite the limitations of protest, despite its failure to balance effective means with democratic ends; despite the fact that it can never by itself be a long-term solution, the crucial question is whether protest can change politics in the same way as it is beginning to change the corporate agenda. Can protest put people back into the forefront of politics? There are signs that it can, and that perhaps the political corpse is beginning to twitch.

In June 1999 in Cochabamba, Bolivia's third-largest city, the water authority was privatised after recommendations by the World Bank. At once the price of water tripled, which meant that a typical worker was spending almost a quarter of his or her monthly wage on water charges. People gathered on the streets and protested, there was a four-day general strike, payments were boycotted, and 30,000 people marched through the city centre. Finally, in April last year the water supply privatisation was revoked. In 1985 government leaders had asked the Bolivian people for patience and sacrifice as they implemented neoliberal reforms. Fifteen years later, it seemed that their patience had run out.

In New Zealand, a country that embraced free-market fundamentalism with enthusiasm in the early 1980s, the current Labour administration is implementing changes that for the past 20 years would have been considered heretical. Workplace accident insurance has been renationalised, a state-run People's Bank will open soon in which personal banking fees will be 20-30% lower than those charged by private banks, tax cuts for high earners have been reversed, and trade union rights boosted. As Prime Minister Helen Clark has said, New Zealand's experiment in market fundamentalism has failed. In the US we are also seeing the beginnings of a turnaround. Prompted by the failure of California's privately owned power distributors to deliver electricity at a fair price to citizens, or often to deliver it at all, and experiencing their first state-wide blackouts since the second world war, Californian politicians are contemplating a once unthinkable change of course: to regain control of the very power transmission system that they privatised five years ago. Small signs, it is true, and for now focused on renationalisation rather than issues of global concern, but they represent cracks in an ideology that had become hegemonic over the past 20 years, the beginnings of a recognition that there has to be new thinking. However, looking at the choices on offer at the forthcoming British election, we see the extent of the political consensus. A reduced state, with an ever greater dependence on corporations for solutions, has become the standard line touted by all parties.

As far back as 1968 Margaret Thatcher said in a famous speech: "There are dangers in consensus: it could be an attempt to satisfy people holding no particular views about anything. No great party can survive except on the basis of firm beliefs about what it wants to do." The irony is that by buying so wholeheartedly into the form of capitalism initiated by Thatcher and Ronald Reagan, British politics has fallen into this very trap, leaving the electorate increasingly alienated from and distrustful of politics, and providing people with little alternative but to protest rather than vote. Until the government regains the trust of the electorate, the people will continue to scorn democracy. Until the state reclaims the people, the people will not reclaim the state.

The Silent Takeover: Global Capitalism And The Death Of Democracy by Noreena Hertz is published by Heinemann at £12.99. To order this book for the reduced price of £10 contact CultureShop (see ad on page 16)

The Guardian Weekly 10-5-2001, page 23