We are told that corporations are becoming ever more powerful; a match even for national economies. Before getting too concerned it is worth considering the nature of this authority.
I have been sitting by the pool reading Noreena Hertz’ The Silent Takeover. As I put it down, I read on the back cover that of the world’s 100 largest economies, 51 are now corporations, only 49 are nation states. The book, and others in similar vein, reiterates how the turnover of corporations has come to dwarf the national incomes of many states.
As Martin Wolf has pointed out, when you compare the sales of a company with the value added of an economy you are comparing apples and pears, and a like for like comparison is less striking. But this is not the main point. It is probably true that the chief executive of General Electric is a more powerful figure in the world economy than the Finance Minister of Greece. Certainly I can remember Jack Welch’s name, and I expect you can too.
But so what? Politics is not the only source of authority in a democratic society. David Hume and Albert Einstein held authority by virtue of their intellect: Richard Dimbleby and Walter Lippman held authority by virtue of their skills as commentators and interpreters. David and Victoria Beckham hold authority by virtue of the adulation of their fans. Only a fool would suggest that people be elected to these positions. The managers of large corporations simply enjoy one of the many forms of authority in society
We can compare the turnover of businesses with the gross domestic product of countries because both are measured in dollars, but it is meaningless to do so.
We use the same units to count the number of people who are employed by General Electric, have read Hume’s philosophy, or bought a Spice Girls record. But that comparison is meaningless too. What really matters is the nature of the authority which is held, the checks and balances on it, and the manner in which it is exercised. No crude statistics record this.
In terms of sheer numbers, Posh Spice has more impact than Einstein or Hume, but her influence is shallow, transitory. That is not true of the influence of Jack Welch. The impact of his decisions on the shape and activities of General Electric is more extensive than the effect of the Greek Finance Minister on business in Greece. The process that gives Welch that authority is not democratic but it is nonetheless impressive. It arises in two stages. The chief executive of GE is powerful because GE is successful. And within GE itself there is an intensely meritocratic selection mechanism that identifies its chief executive. Individuals who survive it generally display ability and integrity only occasionally found in politicians.
Still, the authority of politicians is subject to a democratic audit which does not apply to business executives. That is why there need to be other checks. The most important is that submission to Jack Welch’s influence is voluntary in a sense that submission to the will of the Greek finance minister is not. People mostly chose to be General Electric employees or customers, but not to be Greek.
The result of the opportunities for choice between businesses is that the authority of the management of General Electric has to be exercised in a competent and benign way. And it mostly is. If we are to treat states and businesses as similar entities, who would not rather be a member of the Shell economy than the Nigerian one?
A striking feature of Ms Hertz’s book is the triviality of most of her examples of business influence on society. Her principal concern is to deplore the fact that such influence exists at all. So the Colgate sponsored Boogie Woogie has reached Bhutan? And no two countries with a McDonalds have ever fought each other? I am not sure this is right, but if it is right we can hardly be expected to believe that it results from the political influence of McDonald’s. If I really thought McDonald’s could spread world peace, I might even be willing to eat their product.
General Electric does come in for criticism, to be sure. Its NBC subsidiary declined to show an advertisement featuring a pig superimposed on a map of the United States accompanied by an appeal to viewers to celebrate November 28th as Buy Nothing Day. Richard Gitter, who as vice president of advertising standards at NBC, must stand some way below Welch in the GE hierarchy, reportedly commented that ‘we don’t want to take any advertising that’s inimical to our legitimate business interests’. Still, when the roll of enemies of free speech is called, I doubt if Mr Gitter will rank even with the masters of spin, far less with the Catholic Church’s index or the Nazi book burners.
The opportunity for choice limits the power of corporations. Because there is a competitive publishing market, the mighty Bertelsmann business put profit before ideology and published Ms Hertz’ book. And corporations will not grow too powerful if we make sure such choices are available. If we ensure that when News Consortium caves in to the Chinese government, the censored material still has many other outlets. If we ensure that research scientists who don’t want to work for Glaxo SmithKline can get good jobs. If we ensure that airlines which don’t want planes full of GE components are able to buy from other suppliers. The numbers that should concern us are not arbitrary measures of the turnover of corporations, but indicators of their market power.
Noreena Hertz: The Silent Takeover: Global Capitalism and the Death of Democracy, Heinemann, 2001