The Great Turning

by David C Korten

  Several of the earliest colonial settlements in what later became the United States were established by corporations chartered by the British Crown; they were largely populated with bonded laborers—many of them involuntarily transported from England—to work corporate properties. The importation of slaves from Africa followed.

  The British East India Company (chartered in 1600) was the primary instrument of Britain’s colonization of India, a country the company ruled until 1784 much as if it were a private estate. The company continued to administer India under British supervision until 1858, when the British government assumed direct control.11

  In the early 1800s, the British East India Company established a thriving business exporting tea from China and paying for its purchases with illegal opium. China responded to the resulting social and economic disruption by confiscating the opium warehoused in Canton by the British merchants. This precipitated the Opium War of 1839 to 1842 —which Britain won.

  As tribute, the victorious British pressed a settlement on China that required the payment of a large indemnity to Britain, granted Britain free access to five Chinese ports for trade, and secured the right of British citizens accused of crimes in China to be tried by British courts.12 This settlement was a precursor to the modern “free trade” 131agreements imposed by strong nations on weak nations to secure the rights of global corporations to act in disregard of local interests.

  The Dutch East India Company (chartered 1602) established its sovereignty over what is now Indonesia and reduced the local people to poverty by displacing them from their lands to grow spices for sale in Europe, a forerunner of the practices of contemporary global corporations that displace local farmers in order to consolidate their lands into foreign-controlled estates producing goods for export. The French Company of the East Indies (1664) controlled commerce with French territories in India, eastern Africa, the East Indies, and other islands and territories of the Indian Ocean.

  The Hudson Bay Company, which was founded in 1670 to establish British control over the fur trade in the Hudson Bay watershed of North America, was an important player in the British colonization of what is now Canada. Armed skirmishes with the rival North West Company were common until the British government forced their merger in 1821 into a single company with a monopoly over the fur trade in much of North America, including the Northwest Territories. The British South Sea Company, which was chartered primarily to sell African slaves to Spanish colonies in America, became the centerpiece of the “South Sea Bubble,” one of history’s most famous financial scams.13

  The new corporate form, the joint stock company created to fulfill the above functions, combined two ideas from the Middle Ages: the sale of shares in public markets and the protection of owners from personal liability for the corporation’s obligations. These two features made it possible to amass virtually unlimited financial capital within a single firm, assured the continuity of the firm beyond the death of its founders, and absolved owners of personal liability for the firm’s losses or misdeeds beyond the amount of their holdings in the company.

  Furthermore, separating owners from day-to-day management allowed for a unified central direction that was difficult or impossible with management control divided among a number of owner partners. The new enterprise form made it possible to amass financial power, in perpetuity and virtually without limit, under a central authority on behalf of the financial interests of owners who bore no liability for the consequences of its actions and with rare exception took no part in management.

  It is no exaggeration to characterize these forebears of contemporary publicly traded limited-liability corporations as, in effect, legally 132sanctioned and protected crime syndicates with private armies and navies backed by a mandate from their home governments to extort tribute, expropriate land and other wealth, monopolize markets, trade slaves, deal drugs, and profit from financial scams. One of the defining institutions of the modern era, publicly traded limited-liability corporations of gigantic scale now operate with substantial immunity from legal liability and accountability even in the countries that issue their charters.

  Institutional Sociopaths

  The publicly traded limited-liability corporation is an artificial entity legally accountable to the owners whose financial interests the corporation’s managers and workers are hired to serve to the disregard of public interests or their own values. Since the owners of publicly traded corporations rarely have personal knowledge of the corporations they own or involvement in their operations, there is no effective mechanism for them to express their values through their ownership participation even if they wish to do so. Shareholders committed to socially responsible investment who attempt to express their views on values issues at formal shareholder meetings are routinely ignored, even when they represent major blocks of stock.

  Professors of law and businesses commonly teach their students that bringing ethical considerations into corporate decision making is unethical, as it may compromise the bottom line and unjustly deprive shareholders of their rightful return. It is a rather perverse moral logic given that, as Marjorie Kelly points out in The Divine Right of Capital, shareholders contribute less than any other corporate stakeholder to the success of the enterprise.14

  Although the principle that the legal and ethical obligation of management is to place financial returns to shareholders above all other interests is not spelled out in any legislation, it has become deeply embedded in the U.S. legal culture and case law and has spread to other national jurisdictions. It is a pure case of judge-made law based on the arguments of corporate-interest lawyers.

  Consequently, under current U.S. law, the publicly traded limited-liability corporation is prohibited from exercising the ethical sensibility and moral responsibility normally expected of a natural-born, emotionally mature human adult. If it were a real person rather than an artificial legal construction, we would diagnose it as sociopathic. Unless 133constrained by rules set and enforced by a public body functioning as a kind of parent surrogate, the publicly traded corporation operates in an ethical vacuum.15

  Corporations spend billions of dollars on lawyers, lobbyists, and PR flacks whose job is to gain corporate freedom from such rules by manipulating the political process. Corporate CEOs have suggested, only partly in jest, that in their ideal world their corporate headquarters would be located on a private island outside the jurisdiction of any government and their plants would be on barges that could be moved on a moment’s notice to wherever labor is cheapest, public subsidies and tax breaks most generous, and regulations most lax.

  DEMOCRATIC CHALLENGE

  Absolutism, the belief in the absolute right of kings, had been put to rest in England by 1689. The monarchy remained, however, and the nobles and other men of property who had secured the power of the vote for themselves showed no enthusiasm for broadening the democratic franchise at home or ending colonial rule abroad. Absolutist monarchy remained strong in much of the rest of Europe, particularly France, for another hundred years. However, the erosion of monarchy had begun.

  End of Monarchy

  As the American Revolution of 1776 challenged the concept of foreign rule, so the French Revolution of 1789 was a direct challenge to the institution of monarchy. It began as a revolt of the French middle class against the power of the nobles and the clergy. A growing peasant rebellion in the provinces panicked the nobles and clergy sufficiently to persuade them to join with relatively conservative members of the merchant middle class—the bourgeoisie, in the terminology of the day—to draft a Declaration of Rights and a new constitution that stripped the nobles and clergy of their special power and privilege. The loss by Spain and Portugal of control over their Latin American colonies followed in the early 1800s during the Napoleonic Wars, when those colonies followed the example of the United States and established themselves as independent states ruled by descendants of their European occupiers.

  The fears of other European monarchs that the F
rench Revolution might inspire others to rebel proved well founded. Europe experienced a 134wave of democratic revolutions. The Spaniards revolted against Joseph Bonaparte in 1808. Insurrections followed in Greece, Italy, Spain, France, Belgium, and Poland between 1820 and 1831, and in 1848 in France, Austria and Hungary, Germany, and Italy. A flourishing of democracy in the twentieth century was accompanied by extraordinary technological and economic advances that brought to roughly 20 percent of the world’s population a level of material comforts that would have been the envy of nobles in generations past.

  End of Colonialism

  The aftermath of World War II brought another wave of dramatic advances in the democratization of human cultures and institutions as the spirit of freedom swept the world. In India, a modest and diminutive man named Gandhi rallied a nation behind an independence movement that countered British military power with the moral power of principled nonviolence in the cause of a universal right to self-governance.

  The inspiration of Gandhi’s victory energized oppressed people the world over to join a struggle for human liberation from European imperial domination. Independence movements throughout Europe’s colonial territories built an unstoppable momentum with the support of human-rights movements organized in solidarity by citizens of the colonial powers themselves.

  The institution of the corporation remained alive and well throughout this period of democratic reforms, but emerged from World War II constrained by government oversight, the countervailing power of strong labor unions, and a social contract that supported an equitable sharing of wealth and power and cooperative working relations among government, labor, and business. Various social movements successfully lobbied for strong consumer, worker, and environmental protections. It appeared for a time that the corporate beast had been tamed to the service of the public interest.

  By the end of the second millennium, the institutions of political democracy had replaced the institutions of monarchy in most of the world, and classic colonialism had come to a much deserved end. The Soviet Empire had disintegrated, and China, although far from democratic, had opened its economy to market forces. Pundits declared the universal triumph of democracy and the free market.

  135 The democracy, however, was more a democracy of money than of people, and the markets were only truly free for corporations and big investors. In its actual expression, market freedom means that corporations are free to do whatever they like. People are free to buy or do without whatever products or jobs corporations choose to offer them on terms of the corporation’s choosing.

  IMPERIAL COUNTERATTACK

  The extreme and growing inequality that has turned out to be a hallmark of the corporate global economy did not happen by accident. It results from the work of skilled planners who designed the institutional framework for a post–World War II global economy with the intention to secure U.S. global economic and political dominance based on well-proven principles of imperial rule.

  Grand Plan

  Britain entered World War II as the world’s dominant colonial power and intended to maintain that position at the war’s conclusion. Secret British planning documents from 1945 and beyond outline plans to strengthen British access to raw materials in Africa and to develop the Middle East, in the words of Ernest Bevin, Britain’s postwar foreign secretary, as “a prosperous producing area to assist the British economy and replace India as an important market for British goods.” To this end Britain would use development assistance to influence other countries’ internal decisions to protect and advance British economic and political interests.16

  The United States, for whom World War II was an opportunity to pull itself out of an economic depression and strengthen its industrial base while the European economies were being devastated by the conflict, had a similar, but larger and bolder, vision by which it, not Britain, would dominate the postwar global economy. The U.S. intention was to use to its own advantage a principle the British had demonstrated prior to the war: an open global economic system works to the benefit of the strongest player.

  The plan, which is discussed in more detail in chapter 11, “Empire’s Victory,” centered on opening national economies to unfettered access 136by U.S. corporations and financial institutions, which at that point were unquestionably the most powerful on the planet. A set of three international institutions formed at U.S. initiative and known collectively as the Bretton Woods institutions—the World Bank, the International Monetary Fund, and the General Agreement on Tariffs and Trade (later replaced by the World Trade Organization)—would be key players in implementing the U.S. strategy.

  Easy Credit

  The Bretton Woods institutions played their roles well. As country after country emerged from colonialism, the World Bank encouraged them to spur the growth of their economies by accepting foreign loans to finance the purchase of goods and services from the industrialized nations. Soon the new nations found themselves in a condition of debt bondage to the very countries from which they had presumably gained their independence.17

  Corrupt rulers for whom the loans were a win-win proposition eagerly joined in the scam. They gained political capital from projects paid for with borrowed money, and they profited directly from bribes related to the deal making. Generous grace periods granted on interest and the repayment of principal assured that the burden of repayment would fall on their unfortunate successors.

  Former colonies borrowed not only to finance development projects but also to get the foreign exchange to import luxury goods for their ruling elites and arms to repress dissent. Later they used new loans to finance the debt-service payments that eventually came due on previous loans. This pyramiding of the debt burden accelerated dramatically in the late 1970s due to significant increases in energy costs.

  Adjusting the Poor

  By 1982, it was evident that many low-income countries would never be able to repay their accumulated foreign debts. Fear that default could bring a collapse of the global financial system spread panic in the ranks of global financiers. The International Monetary Fund (IMF) and the World Bank stepped in as debt collectors to impose a package of standardized economic “reforms” known as structural adjustment.

  The IMF and World Bank are both headquartered in Washington, D.C., and operate under the influence and close oversight of the U.S. 137Treasury Department, which has traditionally served as the U.S. government representative of Wall Street banks and investment houses. It was therefore no surprise that the policy prescriptions demanded as conditions for new credit served the interests of global finance at the further expense of the people in whose name corrupt leaders had incurred the debt. The standard “structural adjustment” agreement called for

  rolling back regulations that benefited workers and protected public health, safety, and the environment but increased business costs;

  eliminating restrictions on foreign imports, foreign ownership, cross-border financial flows, the export of natural resources, and the activities of foreign banks and financial houses so that global corporations could move goods and money across their borders at will;

  privatizing public assets and services, including communications, power, and water, by offering them for sale to private investors at bargain prices;

  slashing public expenditures for health and education to free funds for the repayment of foreign loans; and

  providing special tax breaks and subsidies to foreign investors.

  These measures attracted foreign investment and increased exports to generate foreign exchange to repay outstanding debts to foreign creditors —starting with the IMF and World Bank. They also gave foreign corporations and financiers unrestricted access to national economies to extract the maximum amount of wealth with the minimum investment of time and money.

  Deeper in Debt

  Faithful implementation of the mandated policies made a government eligible for yet more loans. Foreign indebtedness thus continued to grow in tandem with growing foreign control of national econo
mies—playing out much the same scenario by which the moneylenders of ancient time consolidated their control over the lands of once independent farmers and reduced free farmers to serfdom. The new colonialism had a friendlier face than the old, but the consequences in terms of foreign control and expropriation were much the same. 138

  In the 1990s, the corporate plutocrats turned to international trade agreements as their favored instrument for rewriting national laws to implement their corporate-friendly agenda of deregulation, open borders, and privatization. A single international trade agreement could at a stroke effectively overturn hundreds of laws inconvenient to foreign corporate interests in each of the signatory countries with virtually no public debate. It was far more efficient than overturning the democratic process one country at a time, and it worked for rich and poor countries alike.

  Each new agreement further constrained the ability of governments to hold global corporations accountable for the consequences of their actions, thus advancing the transition from elite rule by unaccountable monarchs to elite rule by unaccountable corporations and financial markets.18 It was an undeclared class war of the owners and managers of big capital against democracy and those who actually produce wealth, and it continues today without respite. The weapon of choice is a money system that silently and invisibly transfers an ever growing portion of the world’s real wealth to the control of a small ruling class.

  MONEY RULES

  In modern societies in which access to most everything essential to survival depends on money, money has become the ticket to life itself. Through a kind of psychological transference, the instinctual human love of life becomes a love of money. Money becomes an object of worship. This gives almost total power to those who have the means to create and allocate money, silently and invisibly ruling from their temples in the sky those who must serve them in return for the money on which their very lives depend. The rule of money works all the better for corporate plutocrats because most people are wholly unaware of the ways in which the organizing principles of Empire have become embedded in the money system.