Globalization and Ethiopia Part 8: Corporate Versus State Power


Addis Tribune ( 05/05/00) By Dr. Andargachew Tiruneh




Sovereign-states, also referred to as states or nation-states, emerged only in 17th century Europe. In the subsequent centuries,

they became the global system. After Europe, it was the Latin American states which first became sovereign-states as they

became independent in the course of the 19th century; followed by Japan, Ethiopia and China at the turn of the 20th century;

the Middle East in the immediate post-war II years; and finally by Africa starting from the 1950s.


Examples of political organisations different from sovereign-states are empires, feudal principalities, clans and chiefdoms. The

sovereign-state is similar to these other organisations in that it has a government and a people. It differs from them in that it has

a defined territory and in that it gives rise to relations based on the principles of quality and non-interference in domestic affairs.

While the normal interaction between the other political organisations was one of self-help and downright conquest,

sovereign-states enjoyed exclusive power over national economic, social and political policies.


To speak of a system, of a sovereign-state system, is to suggest that there is a pattern, an order or a harmony in the relations of

states. Some hold this view to be true. Others maintain, nonetheless, that the relations of states based as they are on equality,

are anarchical. According to them, this was at the root of the two world wars and of many more earlier conflicts. Unlike the

empire system, there was no supra-national power to police the relations of states.


In the immediate post-war years, therefore, there was a great deal of disillusionment with sovereign-states. As a result, many

thought that the sovereign-state was doomed and going to be replaced by other political actors on the world scene. Some

proposed that the state was being replaced by nuclear powers which, because of their military and economic preponderance,

towered over all other states. The emergence of two groups of satelite states led by USA and the Soviet Union lent support to

this suggesttion. Others thought that the capitalist world would be defeated and that the international proletarian movement

would constitute the new order. Yet others suggested that one or more of the world’s great religions would come to dominate

the international scene.


More relevant to our discussion is the suggesttion, also made in the post-war years, that it is corporations that will replace

sovereign-states and become the real actors on the world scene. There are now a lot of people who think that this has come to

pass and that the globalisation of capitalism is the main cause of it. They point out that the corporations which have amassed so

much of the world’s resources have taken over a good deal of the sovereign power of states to determine their political,

economic and social policies.


One weapon corporations use in order to get their way is the mass media which they have come to control. One of the ironies

of democratic societies is the fact that the mass media is not owned and controlled by the people or their representatives but by big business. Moreover, globalisation has meant that the mass media has come to be owned and controlled by fewer and fewer tycoons through mergers and acquisitions. Information is transformed into a money-making commodity instead of being a question of everybody’s right to freedom of expression. In addition to amassing profits from media corporations, the tycoons

are in a position to enjoy freedom of expression much more than the rest of society and to shape public opinion, to influence

political trends, to undermine the election of parties or individuals not friendly to business and to promote the election of

compliant ones.


Another powerful instrument at the disposal of big business is the power of money. The most known use of it for political ends

is the financing of elections in the USA. American presidents and congressmen and women require millions of dollars each to

cover their electoral expenses such as adverts, traveling, and hotel costs for themselves and their campaign aides. This money

they get from big business and in return they protect the interest of their paymasters when they come to power. Corporations

also use money to employ lobbysts with the help of whom they influence politicians and international bureaucrats working for

economic institutions like the World Trade Organisation.


Yet another means is disinvestment. If they do not like the policies of a country, they would threaten to disinvest and take their

money to another country with a more compliant government. The power of disinvestment is, for example, what destabilises the Asian economies in the last few years.


Corporate power has greatly impacted on the economic sovereignty of states. As noted earlier, states have abdicated a good

deal of their responsibility over the economy. Those that used to own the instruments of production and other assets have

denationalised and handed them over to big business. Those that used to manage the economy have handed it over to the

market which, during monopoly capitalism, means to corporations. Deregulation has meant that corporations can trade freely

on the global market and move their capital from one part of the world to the other, destabilising states in the process.

Corporations have concentrated wealth and power into fewer and fewer hands through an ever increasing number of mergers

and acquisitions.


States which used to be able to tax the small businesses are finding it difficult to tax the big multinationals and banks which are

now able to move capital and use transfer pricing to evade taxation. Also, states used to be able to impose health, safety or

environmental controls on the operation of corporations. They used to be able to impose standards concerning the treatment of

corporate employees and to regulate what can and cannot be imported into the country. Now, however, they can do these

things only at the expense of losing aid from the Breton Woods institutions and private foreign investment as well as exposure to retaliation, negative media campaigns and destabilisation.


What is more, states have ended up by subsidising corporations. It has been noted earlier that corporations in the US

externalise their costs and impose it on society, a cost much more in value than the value of the corporations’ products. In many countries too, the infrastructure like roads, railways, electricity and medical treatment, which corporations and their employees also use, is paid for from tax.


It is not only their economic sovereignty that states have lost to corporations but also their power to safeguard their culture,

their eco-system and the health of their population. It has been noted in an earlier section that electronic information is tearing

down cultural diversity and replacing it with sex, violence and fast food which are American corporation products on the main.

We have also seen in connection with risk how the eco-system, food and life are being poisoned mainly by the activities of

corporations. States appear to be powerless to do anything about these developments.


There is general consensus that states have lost a good deal of power to corporations. However, some, and these tend to be

people on the right, underplay the importance of these developments and emphasise those powers which states have retained.

They argue that governmens still have control over a level of trade, taxation and implementation of domestic policies. They also

argue that liberalisation or deregulation enable states, particularly the poor ones, to attract foreign investment, skill and

technology and in this way develop quickly. Whether the threshhold is reversed and corporations have become more powerful

than states or not will continue to be a matter of debate for sometime to come.


The power of multinationals over third world states like Ethiopia is even more daunting. Capital is no longer being transferred to the Third World by public so much as private investors. This renders the poor states dependent on corporations for foreign

investment and transfer of technology.


In some of the smaller countries, multinationals have taken control of the economy, or huge chunks of it, so that the people

either work for it or they are unemployed. In the so-called banana republics, for example, it is corporations that dictate the

system of agriculture.


By contrast, what is conspicuous about the "coffee republic" of Ethiopia, which is dependent on peasants to produce that

beverage, is its failure to attract an appreciably sizable amount of foreign investment. To that extent, the state is probably more

independent than the Banana Republics from being over-ruled by corporations. This is achieved, nonetheless, at the expense of

being starved of private foreign investment, skill and technology.