Doing business is power politics

The question of the responsibility of business is not a new question. Ever since the industrial revolution and the rise of corporations as a new form of institutions, this question has been posed. What is new about the debate are the changes in the relationship between business, State and civil society in relation to increasing globalisation and new technologies. While the state’s sovereignty ends with its boundaries, multinationals typically cross these boundaries. With internet as their main tool, civil society organisations equally constitute of large international networks that have proved their capacity to mobilise in the past.

This paper focuses on civil society action and its power in relation to the State and corporate actors. It discusses examples of local civil society organisations who, by linking up with international NGO’s, have been able to challenge corporate power in these regions. As a result of these actions, transnational corporations have reviewed their strategy to the benefit of local populations. Its analysis is political rather than economic and draws upon the field of conflict studies.

Cases discussed in the paper focus on the extractive industry or trade in raw materials for two reasons.

• Firstly, corporate responsibility in these cases is clearer to establish than on activities at the end of the production chain.

• Secondly, the availability of natural resources and raw materials at a competitive price often find themselves in countries of the ‘global south’ where the capacity and willingness of the state in protecting its citizens against damaging impact of business activity is lacking.

In the face of global social and environmental challenges such as poverty and environmental degradation, all of the above mentioned actors agree on the necessity for change, conflict arises however when social and environmental interests clash with economic ones. Which ones are prioritised depends on actors’ capacity to mobilise resources and public opinion. The tools actors use to effectuate change stem from their sources of power. Typically, civil society uses information dissemination, campaigning and consumer boycotts. Governments bring change through implementing laws and sanctions. Finally transnational corporations impose constraints on their own activity through voluntary action.

I. Effect on imbalances in power relationships between actors

Power relations determine how resources and affection are distributed. They determine who is in the position to make decisions that shape the future. Conflicts arise when existing power relations are being challenged. Waging conflict through non-violent means can be an effective strategy as the chaos emanating from them is a way to make visible the interdependence between actors and redress imbalances. Conflicts accompany the transition towards a system where power relations are or at least intend to be, more equal. A next step is the further rooting of this equilibrium, to allow a society to deal constructively with future conflicts and to make it resilient to shocks.

A. Prototypes of power

We can grossly distinct three types of actors in society:

• Private sector;

• The State;

• Citizens organised in civil society organisations.

Our hypothesis is that human security can only exist if there is an equilibrium between these three players. Below an illustration what society would look like if power would be off balance, in the hands of one single actor. We describe three hypothetical situations: corporate rule, state rule and civil society rule. These prototypes incite us to rethink the equilibrium required for societies to meet both economic, social and political needs of citizens.

B. Corporate rule

What if power is concentrated in the hands of business actors? An example would be Liberia under the regime of Firestone in the beginning of the 20th century, where the State equalled Firestone.

Liberia under a corporation’s command:

In the 1920’s Washington refused to lend the Liberian government 5 million to deal with a financial crisis. While national bankruptcy was looming, the American millionaire tire maker Harvey Firestone stepped in the picture. Firestone was seeking new sources of rubber to meet the booming demand for rubber at the time as a result of the upcoming automobile industry. In 1926 he signed a deal that he could use 1 million acres of land, an area approximately the size of the Rhone-Alpes, for a period of 99 years. This area became the world’s largest rubber plantation. It served as America’s strategic preserve of rubber supplies in WWII. With a company having saved a nation, the balance of power between state and private interests was evidently tipped to the latter. Firestone was in command of the country, offering housing and schooling to its employees yet at the same time demanding work days from 12-14 hours by installing unobtainable quota’s. With the collusion of government and Firestone, the League of Nations undertook in 1930 an investigation into the company’s forced recruitment of labourers, considering to revoke its sovereignty (1). While Liberia has undergone a number of political turn-overs, Firestone’s policy has little changed; a recent class-action in the USA against the labour conditions of Liberian workers on the rubber plantations proves this point (2). At the same time, the liberian State remains highly dependent on Firestone’s, with a fifth of its budget coming from the company’s taxes.

If transnational corporations would be able to operate without any state regulation, the other actors would depend on their benevolence. To imagine this situation we again have a look at Firestone, whose PR manager boasts in an interview on its schools and excellent medical facilities that the company provides to its employees in Liberia (3). Without government rule, corporations can hypothetically set their own prices, the only system of regulation being the fierce competition between companies. As political parties and government depend on corporation’s financial support for their survival, they are in no position to guarantee the protection of employees. The capacity for a civil society to emerge would be subject to the approval of firms in control of certain geographical areas. A futuristic image could be that nation-states as building block of the current international systems would be replaced by corporation’s control over certain regions, providing services that fall currently under the responsibility of the State.

C. The state in control

What if power would be concentrated in the hands of a government? A crucial difference would be if political leaders would be democratically elected or not. If this would be the case, it would share some power with its citizens. If this would not be the case, a totalitarian regime would be the result. George Orwell’s novel “1984” wrote most eloquently what such a society would like. China under Mao was not far from this reality, when the State was in control of the entire society, not allowing any competitive authority, like religious groups and intellectuals and even impacting that most intiate part of social behavior, procreation. While labour unions in communist China are flourishing, the term is misleading. Instead of presenting worker interests, they are tools for state indoctrination under the guise of leisure activities. When the state has sole control, private ownership does not exist. The only type of enterprise is state owned enterprise.

D. Civil Society rule

What happens if power would be concentrated in the hands of citizens, organised in civil society organisations? What would the societal landscape look like without a state and without big corporations structuring exchanges between people? This is a hypothetical situation in the current international system based on states; as a result of liberalisation, all states are infiltrated by corporations (with the exception of Bhutan). The examples where foreign corporations have long been kept out, are those under strong state rule. Nevertheless, in countries with a weak government, without important natural resources and relying on international aid, NGO’s (ranging from religious groups, armed factions to humanitarian organisations) play a dominant role. In this regard Kirghistan and numerous African countries can be mentioned as examples where civil society organisations have taken over the role of the state in the form of the provision of health care, education, funding of elections and state institutions and even provision of security in the case of United Nations peacekeeping missions.

Some perverse effects of civil society rule are the phenomenon of “donor darlings” and donor domains. Funding by international donors is based on the national interests of member states and the changing policies concerning aid conditionality. On top of the countries donors perefr to fund, they hava a prefence for certain domains, as illustrated by a World bank employee who commented that reconstruction funds are distributed very unequally since donors are interested in areas that make nice publicity and therefore fund massively schooling for girls while it is hard to find funding for the construction of sewerage infrastructure (4).

Furthermore, civil society is not elected, its leaders voice certain interests but can not claim to represent the public good. What is their mandate? To whom are they accountable? Their weak spot is that they always need funding since they don’t rely on a national system of taxes and they are not at the basis of an economic activity. Their agenda therefore risks being influenced by corporate of state donors. There are exceptions, an organisation like Amnesty International obtains its main funding through membership (a form of tax) and an organisation like the « Centro Bartolomé de las Casas » in Perou combines its research and lobbying activities with economic activities like running a printing company and a hotel, leading to a certain level of economic and therefore political independence.

E. Regulation, favouritism and the military industrial complex

In a similar exercise as above, we can pose the question what society would look like if power were concentrated in the hands of two actors rather than a balance of power between three.

• Regulation rules when power is concentrated in the hands of civil society and government, leading to regulation « in extremis » with the possibility of smothering markets.

• Late president Eisenhouwer referred to the term « military industrial complex » when power is concentrated in the hands of business actors and government, which is a reality for many African and Central Asian states with strategic natural resources. The government employs the military to ensure corporations’ safety and access to exploitation sites. In return the country’s elite is personally rewarded and accumulates extreme wealth (case of cotton in Uzbekistan and Petrol in Nigeria under rule of president Abacha)

• Finally, favouritism rules when power is concentrated in the hands of civil society and business organisations. Both have complementary interests. Since the age of “branding” (5) our the mental representations associated with a product are more important in our decision to buy than the product itself, since consumer motivation is more driven by want than by need. As a result, business organisations are in constant search for ways to create a positive image for themselves and their products. A common strategy is to associate themselves with civil society organisations supporting a « noble cause » and thereby giving their products « a soul ». The financial benefits that this association entails are very welcome for civil society organisations for the obvious reason pointed out above, that they rely on others for the funding of their activities.

During the last century the relationship between these three types of actors has undergone considerable changes.

II. Sources of power

For a better understanding of actor’s interdependence, we should have a look at their sources of power and their needs for cooperation with other actors.

Table: Needs and power of actors

Needs and power of actors

Actors	Source of Power	Type of Interest
Business	Wealth creation, others in need of their money	Favourable image; Access to resources (material and personnel); Good relationship with shareholders; Security
State institutions (instititutional versus individual level)	Power to make laws; Power of law enforcement and as last recourse military and police; Power to levy taxes	Legitimacy; Being re-elected; Financial resources
Civil Society	Consumer power; Soul (human values) to offer; Mobilisation of population, power of number; Influence on public opinion	Financial resources; Membership; Fulfilling mission (self-determination, livelihood or other contribution to human well-being)

III. Effectuating change, challenging power structures

Bringing change in power relations is a real challenge since power is often institutionalised in structures and will be strongly defended. But history shows it can be done.

How to challenge power structures? A model that is used in the conflict transformation literature to describe change is the “pillar tool of analysis”.

The model is based on the premise that the power of individuals or organisations (be it governments, foreign domination or companies) lies in the other actors’ recognition of them as legitimate power holders. An argument to demonstrate the powerlessness of civilians is “what would we have done against the nazi’s [without use of force]”; a counterargument would be : “what would the Nazis haven been without the support of IBM technology and many other ‘providers’?”. The model instigates us to think differently about power. From a focus on the (negative) consequences of the use of power it shifts attention to the sources of power. The model is based on a second premise, that if we know the sources of power (pillars in the model), we can withdraw them one by one and eventually topple a system considered unjust. This approach can have an empowering effect on those affected by negative consequences of the use of power. It starts with defining the structures of injustice and subsequently reflects on how to withdraw support of those. By recognizing one’s “buying power” for example, people can decide to withdraw their support and apply consumer boycotts as consumption is one of pillars of economic activity.

IV. Justification for power imbalances

There are different levels of analysis of structures that are upholding corporate power.

• One is based on tangible structures like laws and agreements defining boundaries for actors’ operations, like liberal laws and legal frameworks as a guarantee for private property and free trade agreements.

• Another level of analysis looks at the more intangible aspects of structures like value systems and the cultural justification of power distribution among actors.

A. Tangible

Although colonisation as an imperialist strategy to confiscate territory under the banner of bringing civilisation is no longer in fashion, we can argue that the confiscation of public goods in the hands of a few is a process that continues in other forms with comparable justifications. The patenting of medicinal plants, human genomes and crops as well as the privatisation of natural resources like water and mineral wealth all have the same consequence. They bring goods from the public domain to the realm of private ownership and therefore restrain the number of people having power over them, obviously increasing the power of the owners. In many societies collective ownership takes prevalence over private ownership. Instead of splitting up goods and placing it under someone’s legitimate ownership, often through monetary transaction, goods are collectively owned and managed. Clashes between these two systems can for example be found in the practice of genetic modification of plants, when plant sorts are taken out of a territory, are genetically modified by a company and patented. Companies therefore become the owners of the plants while before they did not belong to anyone specifically. Farmers can no longer become the owners of the patented seeds, they are merely leasing them, thereby creating a relation of dependency and power imbalance between the two groups.

As the prevalence of private property is increasingly being questioned by international civil society, would it be imaginable that one day we judge it the same way as (most of us) do now with colonialism, as a curiosity of the past?

B. Intangible

Growing up in a culture leads to the identification with a culture’s justification of power relations and leads to the interiorisation of one’s place within the hierarchy, leading us to believe that we have deserved this place for numerous reasons. Those active in conflict transformation have given considerable attention to the demystification of cultural messages in justifying dominance.

• An example of the institutionalisation of power structures is racism, making one race supreme over another. Justification for this inequality was historically found in religion and evolution theories, leading for example to apartheid and the conviction that peoples are genetically different and that there are parallel development paths for different races.

• A related idea, yet different in the sense that the same destination finally can be achieved is the development imperative. Domination takes place in the idea that economic development is the only direction in which our societies can move forward. Development assistance serves to raise ‘the underdeveloped’ to same level of development as our societies. An assumption is that in doing so, they will easily give up local cultures and practices. Two examples are the missionary idea of lifting the other, underdeveloped, group to our standards through education and the structural adjustment programs of the IMF and Worldbank in the 1970’ and ‘80’s.

• A third example is the conceptualisation of nature as material or as sacred, as a collection of objects or as having a soul or a spirit. These different interpretations become important when companies negotiate with government contracts, for example in the extractive industry, to start mining in a certain region. At multiple occasions, in countries as diverse as Canada, Zambia and Pérou, when companies started their activities, they encounter massive resistance of the local population, contesting the notion of property, ownership and land management. Concerning some cultures and traditions, land belongs to ancestors and cannot be sold, nor contracted. In no way should these views be interpreted as univocal as these societies are also complex and find themselves in the midst of multiple transformations. The following example is an illustration. In Zambia, some communities have themselves sold their land to mining companies, only to claim it back later on. While impossible to accept within the frame of law, their position can be understood if we realise that the concept of private ownership is conceived differently in many rural, agricultural communities where communal ownership of land is more common, sometimes in combination with private ownership. Another example demonstrates that also within communities these different meanings of land are prevalent. Among the First nation of the Chipewyan in Athabasca, Canada, a fierce debate is taling place within the community among those willing to sell for economic benefits and those refusing. making reference to their cultural and ancestral heritage. This is principally a debate among generations where the elders are wondering what the Earth can support while the younger are enthusiastic about the financial perspectives of their minderal rich land, according to John Rigney, a leader of the tribal council, interviewed by Josh Harkinson for Mother Jones (28 august in Courrier International « Des pétroliers et des Indiens - Au Canada, on pollue en grand »).

V. Conclusion

While power structures are deeply embedded in both cultural and institutional arrangements, it is possible for citizens to challenge them. An interesting example of challenging tangible structures like laws and legal agreements is the nation-wide civil society campaign in Zambia against mining contracts the Zambian government had signed with foreign corporations. The popular contestation has led the government to review its contracts. Zambia is also one of the first African countries where labour unions are openly contesting the concessions of its government to Chinese mining companies, who had achieved at negociating bottom tax prices, the illegality of labour unions and 7-day work week in Zambia’s copper producing region. Obviously it is an even larger challenge to address intangible structures.

Notes

• (1) : N. Jahr « Corruption and Reconstruction in Liberia », Dissent Magazine, Summer 2006, www.dissentmagazine.org/article/?article=653

• (2) : Firestone under Fire, Co-op America Quarterly, summer 2006.

• (3) : Nieuwllink, 18 July 2008.

• (4) : Interview by author, Washington D.C. June 2006

• (5) : No logo, Naomi Klein