The role of Ethics, Economic Power and Political Power in Big Corporations

Today in class we had a short discussion on which is the economic and political power of Corporations and Transnational Companies in the Global Political Economy as compared with the power that have states and governments. Undoubtedly, the scope and array of political activities of companies is huge and their economic activities are even more diverse.

More so, the power of these corporations to shape culture, politics and media is widely studied and written about in books, journals and documentaries. What is usually not mentioned is that these huge and powerful companies have acquired political power by the use of their profits for the sake of protecting their interests. These interest and the means used are subject of ethical judgement.s

Generally, the political power to which we usually identify this corporations is that of lobbying. However, many other ways of achieving global economic and political power are open for corporations by allying with ruling governments, offering loans and investment for countries and/or new cities; but also by the enforcement of specific news agendas and in the Media to inform citizens.

It is of particular interest for me the ethics of the political and economic power that a company has. The pursuit of profit is the goal of a company by the provision of services to its consumers. It is profit which fuels a company to continue growing and providing services. However, this activity of pursuing profit is subject for ethical judgements that historically have been judged by/from immoral philosophical backgrounds. (For further information on what I consider to be Morality or Ethics please visit: http://aynrandlexicon.com/lexicon/morality.html)

The pursuit of profit is a moral action when undertaken in consistency with the respect of individual rights. As such, a company should and can influence politicians by lobbying when it considers it necessary for them to increase their profits. The lobbying that is ethical is that which doesn’t creates privileges but that which eliminates regulations on competition that was previously benefiting special interest groups.

Historically, the role that Corporations and Transnational Companies have had should be analysed in context when judged about its morality or immorality. Thousands of pages of research that demonstrate how corporations have used its political power to achieve special privileges can be found everywhere. The immorality of the actions of many corporate managers has been demonstrated and data on how they have violated human rights can easily be found in newspapers. But this is not an absolute; just because some (or most) of the companies have violated and abused of their economic and political power it doesn’t make of them to be intrinsically evil or corrupt.

Corporations are not humans. However, corporations are managed by humans whom depending on their philosophies of life can respect or violate individual rights and disobey the rule of law. It are only those companies which act ethically which at the end of the day will profit the most and benefit the rest of society in a positive sum game. Those companies and their managers who are willing to violate rights and act unethically have brought the Global Political Economy into zero sum game results in which only one side of the exchange has benefited.

And here, once again, the enlightment of Ayn Rand comes to play particular interest when identifying which is the difference between economic power and political power. As well, as what is ethically correct for a company to do or not to do.

Rand wrote that,

What is economic power? It is the power to produce and to trade what one has produced. In a free economy, where no man or group of men can use physical coercion against anyone, economic power can be achieved only by voluntary means: by the voluntary choice and agreement of all those who participate in the process of production and trade. In a free market, all prices, wages, and profits are determined—not by the arbitrary whim of the rich or of the poor, not by anyone’s “greed” or by anyone’s need—but by the law of supply and demand. The mechanism of a free market reflects and sums up all the economic choices and decisions made by all the participants. Men trade their goods or services by mutual consent to mutual advantage, according to their own independent, uncoerced judgment. A man can grow rich only if he is able to offer better values—better products or services, at a lower price—than others are able to offer.

Wealth, in a free market, is achieved by a free, general, “democratic” vote—by the sales and the purchases of every individual who takes part in the economic life of the country. Whenever you buy one product rather than another, you are voting for the success of some manufacturer. And, in this type of voting, every man votes only on those matters which he is qualified to judge: on his own preferences, interests, and needs. No one has the power to decide for others or to substitute hisjudgment for theirs; no one has the power to appoint himself “the voice of the public” and to leave the public voiceless and disfranchised.

Now let me define the difference between economic power and political power: economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.

And by this she meant that economic power is always ethical because it pursuits a reward for men everywhere and anytime (in the entire process of designing, production, transportation and distribution of products and services). And as such that the political power of a company appears when the businessman becomes a bureaucrat or lobbyist that uses the power of government to achieve privileges for himself and his company.

This discussion comes from observing the following table which presents the GDP-PPP of the Top 100 Economies in the World (2009) which was prepared by the World Bank. Particularly relevant from this table is the fact that among the top 100 economies the authors included also the largest companies in the world in base of their Revenues-PPP (2009). In position #32 appears Royal Dutch Shell as the largest company of the list with revenues of 458 billion dollars and it is followed by ExxonMobil in position 35 with 426 billion dollars. These two companies had Revenues-PPP in 2009 which surpassed the size of the GDP-PPP of countries like Venezuela (#48), Greece (#52) and Switzerland (#53).

Even though is not commonly done; I have always studied Global Political Economy by remembering clearly what is ethical human behavior and what is not. Starting from this point then I try to understand what is or can be the effects of a government’s or corporation’s decisions in real world cases. Unfortunately, the ruling ethical code among Academics today considers it to be evil to pursue profit, self-interest, individualism and collaboration in order to create positive sum games in global exchange.

Indeed, historical examples are not the best reference for illustrating how we can benefit from an Objectivist ethics perspective when understanding the role of Companies in Global Economy. However, it is this lack of many examples which should make it easier for us to identify how a Businessman success depends on “his intelligence, his knowledge, his productive ability, his economic judgment—and on the voluntary agreement of all those he deals with: his customers, his suppliers, his employees, his creditors or investors. A bureaucrat’s success depends on his political pull.” (Rand, The Ayn Rand Letter, III, 26, 5. 1971-76).

Now, it is time for me to continue reading history and seeking for those few exemplary examples of ethical businessmen who have given us the best products and services in positive sum games for the entire world.

On the fallacies of an Emerging Global Left

“Socialism is unrealizable as an economic system because a socialist society would not have any possibility of resorting to economic calculation. This is why it cannot be considered as a system of society’s economic organization. It is a means to disintegrate social cooperation and to bring about poverty and chaos.” Ludwig von Mises. Money, Method, and the Market Process.

Recently, an article from the blog Poverty Matters (supported by the Bill and Melinda Gates Foundation) authored by Jayati Ghosh in the Guardian elaborates on how a new global left is emerging as a result of a transcendance of the traditional socialist paradigm. Ghosh explains that this new global left has is currently transcending the traditional socialist emphasis on “centralised government control over an undifferentiated mass of workers, to incorporate more explicit emphasis on the rights and concerns of women, ethnic minorities, tribal communities and other marginalised groups, as well as recognition of ecological constraints and the social necessity of respecting nature.” This transcendance is occurring via what Ghosh considers to be seven common threads that are not new but a result of a “collective failure of memory”.

These threads are:

An attitude to what constitutes democracy,
the rejection of overcentralisation,
a more complex approach to property rights,
a discourse in the language of “rights”,
a realization that addressing issues only in class terms is not sufficient,
a emphasis on gender as a a cause for addressing issues,
an emphasis on environmental conservation, the protection of ecosystems, biodiversity and the integrity of a country’s genetic assets.

I wonder what Ghosh considered to be the traditional socialist paradigma. Socialism and the ideas behind this socioeconomic system of collective ownership of the means of production is very diverse and it is incorrect and inaccurate to speak of a single socialist paradigm. More so, what seems a New emergence of the left is in fact not occurring anywhere in the world.

Collectivism (inaccurately generalized as “the left”) in its many names and shapes continues developing itself within the same framework of ideas that have been used for centuries. While the historical context has changed the principles continue being the same. As such, the thread number 1 which seems for Ghosh as a new attitude toward democracy is the result of the failure of the previous collectivist governments that have ruled the world. There is no real change in the attitude toward democracy since collectivist ideas consider democracy as a means to the value they aim to achieve: collective power over the collective. The only way of having a new attitude toward democracy would be in fact to reject it as a mean to achieve any end successfully. This of course is not happening anywhere in the collectivist groups of the world.

As well, the point number two of overcentralisation is false since collectivism is a centralized system of organization in which at the end of the day the sole power over everything resides in the collective government. The only change is not of how centralization happens but on how many people are to be managing that collective government (the Party, elites, corporations, oligarchies, et al).

Point number three and four have nothing new and are the same exact approaches that collectivism has had since it origin in regard to property and rights. Collectivist philosophies consider all in essence the private ownership of the means of production to be evil, static in nature and inefficient to satisfy the needs of humanity. Its approach to rights is rooted on the principle that the only important rights are those of the collective and thus reject the individual rights of its members.

Points five, six and seven have also not changed in the collectivist mindset since they are rooted in the principles of class struggle that have only continued the trend of understanding society as a competing/destructive system based on gender, race, culture, religion, etc. The principle continues the same: The so called tension or antagonism continues to exists in their interpretation of society due to competing socioeconomic interests between people.

By definition, the only way in which any real change, evolution or overcoming of a collectivist philosophy in the globe will arise when the discourse starts by rejecting the philosophical principles in which they are rooted. As such, unless they understand how and why the collectivist philosophy is full of fallacious principles that have caused death and poverty for centuries, there is nothing that will change. There is no emergence of a new left, there is no resurgence of collectivism and the dialectics of historical materialism continue existing in the core of all collectivist philosophies. It will be only until intellectuals have the common-sense and moral courage to question their philosophies of life that we may seem an end to centuries of collectivist failed projects of organizing society. Until that day what we will continue seeing is the same social system that has destroyed the best within man for ages.

China & Global Oil

I am currently enrolled in the course “Oil, Power and Climate – A Global Perspective” with Dr. habil. Peter Gärtner who is an specialist in Global Studies, North-South relations, democratization, development theory and policy, law and globalization with a regional focus in Latin America.

As part of our initial discussions we were required to present a review of the current status of the main importers and exporters of oil. My selection was China and its raising demand of energy resources in order to continue providing for the world the largest amount of goods ever made in history. Indeed, the numbers I found of China were astounding and the forecast of its increase for the next ten years is even more astonishing. As forecasts show, the United States is soon to lose its hegemonic position in the world as the largest economy due to the fact that since 2010 it was China the world’s largest energy consumer (and its growth continues to further grow).

For the last six months I have been paying much attention to literature in the Asia region and I have started to draw a new world map that has South East Asia and the Pacific at its core. I foresee a semester full of Asia related topics and I will most certainly enjoy focusing in that area.

I share with you the handout with the latest figures and updates on China that I prepared for a discussion. The file is accessible online and can be downloaded as a PDF: http://issuu.com/condottiero/docs/oil-china-lgpr

Global Balance Of Power: The Shifting Contours – Analysis (eurasiareview.com)
Oil falls to near $103 after China growth slows (sfgate.com)
China’s Domestic Consumption Ambitions (wallstreetpit.com)

Drugs: A Legal Market is not a Free Market

A couple days ago, Otto Perez Molina, recently elected as President of Guatemala; announced that he was willing to decriminalize the commercialization of drugs. According to U.S. authorities, Guatemala has became the transshipment point for more than 75 percent of the cocaine smuggled into the United States since 2005. Along with this, the Opium poppy cultivation is already done in large parts of the countryside making the production of Guatemalan heroin a greater and the newest worry for the United States. The country’s elites are already part of this business and the paranoia of crimes that used be a remembrance from Colombia‘s 1990s history seems to be repeating in these Central American countries.

What impresses me the most now is how this news has started spreading around my Facebook contacts (mostly libertarians and liberals). Both groups seem to be happy to hear this announcement by Guatemala’s President. However, both groups applaud the news for different reasons. The legalization/decriminalization of drugs will not be the panacea we all are hoping for. Specially not if started by any of the Central American governments. The reasons are many and I will begin by listing some of them to open the discussion,

Corruption, lax enforcement, and judicial impunity levels in Central America are among the highest of the world.
Drug lords and their new and powerful money have been mentioned by many analysts to be already part of the politic and economic elites of these countries.
The Central American countries in which this drugs are produced and transported are inhabited by a large majority of people living in the lowest leves of Human Development.
If legalized, the trade, production and commercialization of drugs (cocaine and heroine mainly) will be regulated by these governments.
Without any doubt, this regulations will enable and create legalized monopolies ruled with the partnership of previous drug lords and government officials.
It has not been advocated by any of the political leaders which road would take the legalization of drugs. This is important, because under current legalization procedures it is not the same to get the approval for a new medicine in the market as to get the approval for a new liquor, a new energizing drink or of a new edible product.

The history of the legalization (production, trade and commercialization) of items considered by many as drugs and for others as commodities has shown that for as long as a government elite hold the power to legalize it; it was in their power to take the first steps into the acquisition of a monopoly of its trade and production.

If legalized, the emergence of a coercive monopoly would be inevitable. As noted by Ayn Rand, the governments and their partners in these coercive monopolies “will be able of setting the initial prices and production policies independently of the market, with immunity from competition, from the law of supply and demand. An economy dominated by such monopolies would be rigid and stagnant.”

If we support the complete and absolute free trade of all commodities it is necessary that we do not grant to government an intrinsic right to regulate it. No compromise should ever be done with a government that requires regulation in order to give us legalization. Legalization should result in freedom and not in regulation. The drug trade should be opened to businessmen and entrepreneurs in the freest way possible. The freest way is that of requiring the traders to inform their buyers about all the necessary information about the products they are offering.

We may be taking part in a historical moment in which the most important thing are principles. Let us remember that one of the most valuable principles of trade is Freedom; and that one of the most valuable principles of government is to seek that i will Protect Individual Rights and not to regulate their lives.

Note: To understand more which are the principles that really matter in this discussion, I invite you to take a look to the video titled: The Drug War in Guatemala: A Conversation with Giancarlo Ibarguen.