How corporations are replacing democracy

SILENT COUP: How Corporations Overthrew Democracy by Claire Provost and Matt Kennard (2023)

Everybody knows that corporations influence and manipulate governments behind the scenes. In Silent Coup, two British journalists show ways in which corporations are actually replacing governments.

There are international corporate courts, whose decisions are binding on governments. The world is dotted with enclaves administered by corporations independent of any national laws. Even responsibility for public welfare and national defense is being handed over to corporations.

Few of these things are secret.  They are just ignored.  That is why the coup is a silent coup.

Corporate Courts

I first learned about international corporate courts when the Obama administration proposed the Trans Pacific Partnership Agreement, a free trade agreement binding all the important nations bordering the Pacific except China.

The problem with TTP agreement was in the fine print.  Any time a TPP country’s government adopted a policy that impacted the profits of a foreign company, that company could go to a special arbitration board and demand compensation for lost profits.  

Public outcry prevented U.S. ratification of that agreement, but then I learned that NAFTA also contained an investor-state dispute settlement (ISDS) provision.  In fact, the whole world is covered by a web of ISDS agreements.

They were the brainchild of a German banker called Hermann Abs who had headed Deutsche Bank.  He helped finance the Nazi regime, although he did not belong to the Nazi party itself.  He helped settle allied claims against Germany after the war.  He was highly respected by bankers and industrialists, including in the USA.

In 1957, he made a speech in San Francisco to a group of bankers and industrialists from all over the world, calling for a “capitalist Magna Carta,” a system of international law that would protect global corporations from revolutionaries and nationalists. 

He joined with a British Lord called Lord Shawcross to write a document called the Abs-Shawcross Draft Convention.  It was taken up in the 1960s by the World Bank, which created the International Center for Dispute Settlement (ICDS) and pressured its clients to adopt ISDS rules.

Provost and Kennard came across the ICDS when they went to El Salvador, which was fighting a lawsuit brought by a Canadian-Australian company called OceanaGold, which demanded compensation for environmental regulations that prevent them from digging a gold mine.

 While El Salvador did win its case against the company by 2016, OceanaGold was ordered to pay $8 million. However, El Salvador’s defense had cost $12 million, which it could ill afford, leaving the government $4 million out of pocket.

Next they went to South Africa, where an Italian mining company sued for compensation for a South African law that required local people own 30 percent of the enterprise.  The lawsuit was settled by making an exception in the Italian company’s case.  Yet South Africa has negotiated ISDS agreements with other African nations.

The book gives many more examples. 

It is one thing to say that governments should respect property rights.  It is another to sat they should give foreign corporations rights that their own citizens do not enjoy. 

Corporate Welfare

Silent Coup then delves into the domination of international aid by large corporations.  They found example after example of public money and charitable donations being spent on projects of little or no value to the recipient countries. 

The International Finance Corporation was created in 1956 by the World Bank supposedly to aid the development of poor countries, but the authors say it is in effect just another profit-seeking investment bank, but using public money.

They went to a diamond mine in Tanzania that had been funded by the IFC.  It hadn’t paid any taxes in 10 years because it supposedly hadn’t made a profit; the Tanzanian government lacks the expertise to challenge that claim.

Other examples of recipients of IFC money they looked into included Grupo Poma, owner of gated communities and upscale shopping centers throughout Central America, a foreign-owned water privatization company in the Philippines, a foreign-owned diamond mining company in Tanzania, owners of a luxury hotel in Myanmar (Burma), a German grocery store chain operating in post-Communist Eastern Europe.  Those are just a few. 

A G8 initiative called New Alliance for Food Security and Nutrition, designed to reduce poverty and grow agriculture in Africa. In practice, this was implemented through changes to tax and agriculture laws designed to boost the profits of private agribusiness, with little benefit to the local people.

The authors say all of these decisions were made at high levels with no advice or accountability of local people.  That’s why they say corporations have overthrown democracy. 

Corporate Utopias

A third section takes aim at Special Economic Zones established within countries to give corporations preferential tax rates and more relaxed regulations. Some of these zones also are exempt from labor laws and protections.

The argument for special economic zones is that they allow governments an opportunity to experiment with new economic regulations or arrangements on a limited basis.  Deng Xiaoping used special economic zones to experiment with privatization schemes on a limited basis before spreading these to the whole of China.

There are 3,500 such zones across the globe, from Myanmar and Cambodia to Ireland and the UK, employing 66 million generally low-paid workers. Unfettered, union-free, government-backed worker exploitation, the authors argue, runs rampant amid this epidemic of “sweatshop globalisation.”  

Other special economic zones are the equivalent of gated communities for the rich, sometimes acquired by eminent domain.  The authors visited Lavasa, an entirely private city in India built and governed by a private corporation.  Built on the principles of the New Urbanism, it had excellent amenities for residents, who paid $17,000 to $36,000 for the least expensive apartments.  India’s national minimum wage is $2 a day.

Corporate Armies.

The final section reports on how corporations have their own quasi-military and quasi-police forces to protect their premises, transportation and logistics.

The fruit company Chiquita, has been found guilty of funding and arming known terrorists to protect its presence in the banana-growing regions of Colombia. Elsewhere, corporations are making profits from running immigration detention centers and prisons.

Israel integrates its military and police with its companies selling armaments and surveillance equipment, while privatizing many police functions.  The Palestinian Territories are where new products are tested.  An example is “skunk water,” a putrid liquid used on protestors to get them to disperse, whose effects last for days.

It is true that in today’s world, you don’t actually have corporations ruling territories directly with their own armies, as the Dutch and British East India Companies did,  and the Hudson’s Bay company did, in the 18th and early 19th centuries.

But what we are seeing is a militarization of corporations and a corporatization of military forces, across the globe.

∞∞∞

I have only scratched the surface of this book, and Provost and Kennard only scratched the surface of what’s going on.  

Silent Coup is not a reference book.  It provides little overall data on the trends it describes.  Its analysis does not go below the surface.  It is a narrative of where two reporters went, who they talked to and what they were told. 

I would have liked more about Rafael Correa of Ecuador, Evo Morales of Bolivia and others who are trying to resist international corporate power.

But it is good for what it is.  What the two reporters have written is enough to show that we the people need to put in power governments that will assert their sovereignty and protect their citizens from corporate power.

LINKS

Inside the Corporate Utopias Where Capitalism Rules and Labor Laws Don’t Apply by Claire Provost and Matt Kennard for In These Times (2016)

Unraveling Democracy and the Corporate Takeover, an interview of Claire Provost and Matt Kennard for The Intercept.

Silent Coup—How corporations rule the world, an interview of Matt Kennard by Chris Hedges for the Real News Network.

Tags: Claire Provost, Matt Kennard, Silent Coup