What To Do When Corporations Rule the World
An interview with David Korten by Sarah Ruth van Gelder
A few jaws dropped among the young activists at a training camp outside Seattle where preparations for the WTO blockade were in high gear. The man who had just joined the circle looked like he might be on his way to a Chamber of Commerce luncheon.
But the young activists soon learned that David Korten is a leading critic of corporate globalization. Many credit him with opening their eyes to the threat to democracy, the environment, community, and our common future posed by transnational corporations, global finance institutions, and the World Trade Organization, World Bank, and IMF.
David Korten didn’t always hold these views. He was raised in a small town in Washington state where it was assumed that he would take over the family business. In college he was a Young Republican, and it was his concern about the threat of communism that led to his decision to help bring the US business model to impoverished countries. He helped start a business school in Ethiopia and was a Harvard Business School advisor to the Central American Management Institute in Nicaragua. He later worked for the US Agency for International Development and the Ford Foundation in Asia.
Gradually, he found that the US development model was benefitting US corporations, not those it purported to serve. In 1992, he returned to the US to explore the roles of corporations, financial markets, the IMF, World Bank, and other global institutions. This exploration took form in his book When Corporations Rule the World, published by Berrett-Koehler and Kumarian Press in 1995.
I have been privileged to be a colleague of David’s for some years. He is founding board chair of the Positive Futures Network, publisher of YES! He’s a regular contributor to YES! and an important source of insights and ideas. I spoke to David about the upcoming release of the second edition of When Corporations Rule the World.
— Sarah Ruth van Gelder
Sarah: When the first edition of When Corporations Rule the World came out, you were one of very few voices questioning the global power of corporations and international finance institutions. That was in 1995. Now it’s 2001, the second edition is coming out, and things are radically different. What has happened in those six years?
David: Corporate power has become even more concentrated and rapacious. We see ever larger mergers, with particularly ominous consolidation in banking, media, and agribusiness. Even when the economy was at its most robust, downsizing continued as a favored corporate strategy for getting a quick boost in share price. Inequality is worse. Environmental failure is accelerating. Ever more of the commons is being privatized. Corporations are playing God with genes for profit. And the financial system has become even more rapacious and unstable.
The new edition of When Corporations Rule the World updates developments in all these areas. On the positive side, teach-ins, seminars, books, and articles in independent publications like YES! have increased public awareness and mobilized citizen action. World attention was briefly focused on the 50,000 people who took to the streets of Seattle on November 30, 1999, to protest the World Trade Organization. Less noted was the fact that on that same day, as many as a million people joined in demonstrations around the world. Indeed, citizen outrage has become so great that corporate elites and their captive public representatives are being forced to seek out ever more isolated and heavily fortified venues for their meetings.
Some 60,000 people turned out for the recent heads of state meeting in Quebec City, which was walled off with checkpoints, a chain-link fence set in concrete blocks, and 6,000 heavily armed police. The air was so heavy with tear gas that it hung in clouds over the city and was sucked into the meeting rooms through the air conditioning. The next meeting of the World Trade Organization will be held in Qatar, a remote monarchy with a reputation for ruthless political suppression.
The breadth of the growing citizen concern was documented in a Business Week poll, which found that 73 percent of adult Americans think corporations have too much power.
The new edition of When Corporations Rule the World documents the growing citizen concern and the opportunities it creates for deep change. Much as with the seemingly sudden disintegration of the Soviet Union and fall of Apartheid in South Africa, we are experiencing a largely invisible buildup of social tension similar to the pressure that builds in the Earth’s tectonic plates before an earthquake.
Sarah: The coalitions that are opposing globalization involve people ranging from Canadian farmers to Asian NGOs, to European environmental groups, to US steelworkers. Are these short-term, fragile coalitions, or is there something deeper that holds these groups together?
David: These alliances are built on a deep foundation. Though the various groups involved in the protests speak with many voices, they are joined by a deep commitment to life and democracy. In India, it’s known as the Living Democracy Movement, which is beautifully descriptive of the values the movement embraces.
Although sometimes characterized by the corporate press as isolationist, it is perhaps the most truly international and inclusive social movement in human history. There is a strong sense of international solidarity and a deep commitment to international cooperation. This is the positive face of globalization — the globalization of civil society. It is a collective human response to the threat posed to the rights and well-being of people everywhere by the globalization of undemocratic institutions.
More specifically, global financial markets and global corporations are programmed to destroy life — the lives of working people, the life of community, and the living wealth of the planet — to make money for the already wealthy. And they do it with extraordinary efficiency. The threat will not be resolved until the publicly traded, limited liability corporation is effectively eliminated as an organizational form. By that time, the new global consciousness will be so deeply embedded in the human consciousness as to be irreversible.
Let me elaborate. Recall that our contemporary global corporations are direct descendants of the British East India Company and the Hudson Bay Company. The institutional form of the publicly traded, limited liability corporation was created to make possible the nearly unlimited aggregation of economic power under a centralized command authority for the purpose of colonizing and extracting the wealth of others without regard to human or natural consequences. Today, corporations, which command more economic resources than most states, are using their power to claim ownership rights to yet more of the productive assets of society and planet, including water, soils, air, knowledge, genetic material, communications.
Here is where we see the link between corporate globalization and the commons. Corporations are pushing hard to establish property rights over ever more of the commons for their own exclusive ends, often claiming the right to pollute or destroy the regenerative systems of the Earth for quick gain, shrinking the resource base available for ordinary people to use in their pursuit of livelihoods, and limiting the prospects of future generations.
The system is brilliantly designed to strip away any human sensibility from decisions that have profound human consequences. Even if the top manager of a corporation has a deep social and environmental commitment, he (it’s usually a “he”) is legally bound to act on this commitment only to the extent that it is consistent with maximizing returns to shareholders.
Sarah:When the question of corporate rule comes up, some people get very uneasy that those who work in or lead corporations are being demonized. A lot of people are looking for approaches that are inclusive and don’t divide us. How do you respond to that concern?
David:Unfortunately, we live in a deeply divided society; living in denial of that fact will not make the divisions go away. On the other hand, it is no more helpful to demonize the rich than it is to demonize the poor. My own focus is on the structural causes of the division, which is why I focus on the nature of the corporation as an institution and on the ways its legal structure directs the behavior of those who work for it.
One thing that is important to understand about me is that, although I’m often referred to as an economist, my professional training is actually in psychology and in the behavior of organizations. In business school, I was trained to design organizational structures, including corporations, to shape human behavior through the design of reward and punishment systems.
The clearest example is CEO compensation. According to the latest Business Week survey, the head of a major corporation now receives an average compensation package of more than $13 million a year, most of it in stock options. The actual value of the options depends on the growth of the stock price, which provides a powerful incentive for the CEO to keep his attention focused exclusively on maximizing short-term return to shareholders.
Now consider that the CEO of a major corporation sits at the top of an authoritarian organizational structure that gives him command authority over economic resources greater than those of most countries. The law, the financial incentives of his compensation package, and his board of directors all tell him that this power is to be used exclusively to increase shareholder return. Add to this the fact that the legal structure of publicly traded corporations disconnects the rights and powers of ownership from the consequences of their use by institutionalizing an extreme form of absentee ownership; owners are kept unaware of the actions taken in their name for their exclusive benefit and shielded from any liability for the consequences of those actions.
Put this together and you begin to realize that the publicly traded, limited liability corporation is designed to encourage and facilitate the abuse of power for the exclusive benefit of a privileged elite. It is an institutional form programmed by its legal structure to behave like a sociopath irrespective of the ethical sensibilities of the employees who serve it — including those of the CEO.
One can, with justification, argue that those who sit atop the system as money managers and corporate CEOs use the system to their own advantage. Yet in many respects you might think of them as well-compensated employees of a system that serves its own ends without regard to human interests. I see little point in demonizing the servant for the sins of a master that has neither soul nor conscience. The goal must be to transform the demon master into faithful servant by changing the rules that define it. Limit its size, strip it of its special rights and privileges, and vest its ownership in the employees, community members, customers, and suppliers it properly serves. I see little hope that leadership for such change will come from the ranks of the system’s power holders.
I sometimes try to imagine what it would be like to be CEO of a $100-billion corporation with operations in more countries than I can name, producing and selling thousands of products and services about which I have little knowledge, facing incessant demands from shareholders to get the stock price up 10 percent by the end of the quarter. Like finding oneself astride a Brahma bull in a rodeo, it surely focuses the attention, but probably not on large questions of ethical purpose and the nature of society. This is one reason I believe change is more likely to come from outside the system, from people who have the freedom and distance to be more reflective.
Sarah: What problems would not be solved if we were able to deal with the issues of corporate rule?
David: This is a key question, because simply sweeping away global corporations to reclaim the spaces they have colonized would only remove a barrier to the creation of just, sustainable, and compassionate societies. There would remain a daunting task of restoring damaged ecosystems and communities and redistributing the recovered assets in ways that assure their sustainable use.
It would also be necessary to rebuild the capacity of households and communities to steward and manage the space reclaimed. We’d have to learn to make choices between appropriate and inappropriate technologies, and to relate to one another and to the Earth in more equitable, sustainable, and democratic ways. Many of us have become so conditioned to being dependent on hierarchical organizations that we would have to relearn how to take responsibility and be active participants in our communities and businesses. Learned dependence is, for example, a major barrier to effective employee ownership.
Sarah: Some have said that your approach is utopian — that because of travel, the widespread use of communications technologies, people’s love of cultural differences, the economic theory of comparative advantage, globalization is inevitable.
David: Those of us who oppose corporate rule made a serious tactical mistake in
allowing ourselves to be characterized as an “anti-globalization” movement. We failed to realize that to most people the term globalization refers to increasing international exchange, communication, and awareness of the planet as a whole; trends that probably are inevitable and that most of the protestors strongly favor.
Many of us are now using more precise language to make clear that our opposition is to corporate globalization, that is the corporate domination of the planet, the use of trade agreements to strengthen corporate rights and to remove constraints to their pillage of the Earth. This type of globalization is an artificial product of rules made through undemocratic and illegitimate processes by people seeking to free themselves from democratic accountability for their actions. We don’t have to accept it.
So the question becomes, “Is democracy a utopian ideal in a world of corporate rule?” I’m sure that in an earlier day, many considered those who called for the end of monarchy in favor of democracy to be utopians.
If democracy is a politically infeasible goal in our present context, then we might well conclude that human survival is also politically infeasible, since corporate rule is leading us toward our own self-destruction. So should we just throw up our hands and say we are doomed? Or should we get on with figuring out how to make the politically infeasible feasible?
I see it as a test of how we would answer the question, “Is there intelligent life on Earth?” If we are in fact an intelligent species, then we ought to be able to look ahead, see where we’re headed, realize it is not where any sane person should want to go, and make the choices necessary to move in a different direction.
There are also basic questions about human nature. Modernism has cultivated a widespread belief that humans are by nature greedy, individualistic, and aggressive, and that progress depends on a competitive process by which the strong displace and destroy the weak. Conversely, this belief system suggests that cooperation is not in our nature and if it were, it would be a barrier to progress.
Fortunately, we don’t have to look very hard to realize that compassion, cooperation, even love, are the foundation of most human relationships and indeed, are an essential underpinning of civilization. It seems self-evident, therefore, that these capacities are at least as inherent in our nature as is our well-demonstrated capacity for greed, violence, and destruction. It is a matter of which capacities we choose to nurture in ourselves, our children, and the larger society.
I’m especially excited by the new biology’s findings that mature living systems are based on mutuality and cooperation. We see in living systems an incredible capacity for cooperative self-organization toward relationships that maintain a delicate balance between individual and collective needs. If this capacity for mutuality is a universal characteristic of healthy living systems, which it seems to be, then surely we humans have a similar potential, even though modern societies seem intent on denying it. Such insights from the frontiers of the biological sciences may profoundly reshape our image of ourselves and allow us to move beyond our dependence on coercive hierarchical forms of organization to maintain social order.
Sarah:Where do you see the most promising work happening in moving us toward the kind of just, compassionate, sustainable society we’ve been talking about?
David:In terms of the business sector I think of groups working on socially responsible investment and the Social Ventures Network, which brings together business leaders like Ben Cohen, Anita Roddick, and Judy Wicks who are fire-in-the-belly activists working to create enterprises that explore the possibilities of what business can contribute to creating a better society.
To me, the greatest source of hope for the human future is the evidence presented by Paul Ray and Sherry Anderson in their interview in YES! magazine [Winter ‘01] that millions of people are awakening to a new cultural consciousness. For the United States, they trace this new consciousness back to the civil rights movement, when many awoke to the fact that relations between the races were defined by a cultural code that had nothing to do with reality. There soon followed a realization that relations between men and women, people and the environment, straights and gays, and now people and corporations have also been defined by cultural codes that are similarly at odds with reality. This trend is freeing us to rethink human values and relationships in ways that may lead to the realization of previously unrecognized potentials in ourselves and society.
The trend has important implications, as it suggests that political success must be built on the foundation of an awakened cultural consciousness. The most potent political actions will be those that facilitate the awakening, while coalescing and aligning the social energies released toward the task of building a world that works for all. A new politics will naturally flow.
It is within our means to make a collective choice for life, though time is fast running out. I sometimes feel torn. We must wake people up to the unacceptable consequences of accepting the status quo. Yet fear alone can cause us to draw inward and focus on purely defensive strategies that are ultimately self-defeating. The energy for the creative task at hand must flow from a deep love of life and compassion that leads us to reach out to all our neighbors in a joyful anticipation of the world that is ours to create together.