TCS Daily

The Business of Governing

By Tomasz Teluk - March 9, 2004 12:00 AM

They provide social security from the cradle to the grave. They supply jobs, cars, flats, vacations, nursery schools. They are engaged in market regulations. They make decisions about families, sometimes about war and peace. But without them it is hard to imagine capitalism. I am not talking about governments but about something even more powerful: multinational corporations.

There are more than 60,000 multinationals operating around the world, according to United Nations data. Some 500 of the world's biggest companies play a role similar to governments. Two-hundred of them make up a quarter of global gross domestic product. Corporation growth has been more than 100 percent since the 1990s. The annual income of the world's leading retailer -- Wal-Mart -- is twice as big as the GDP of Portugal, Iran or Israel. The potency of the nation-state is being eclipsed by corporate power. Economically, corporations -- Ford, DaimlerChrysler, Shell, General Electric, Toyota, Citigroup, Allianz or IBM -- are richer than governments.

The answer to the question "why have corporations become more powerful than governments?" is not simple. Governments are in a long-term recession. Governments pay for irrational and unworkable social programs, healthcare and bureaucracy. Multinational corporations work in market conditions, they compete, and their main goal is profit. A state is not a company. Governments cannot go bankrupt. The nature of the state is based on compulsion, so it works ineffectively and badly. On the market bankruptcy is common, so managers try hard to work as efficiently as possible.

Politicians work only for personal profit and for the lobby they represent. Corporations must work across borders and develop international structures. They have become multinational republics. Shareholders demand a return on investment. Over-regulated national economies, meanwhile, are in stagnation. Some European Union countries' economies have shrunk. Companies also make losses but government administration is a permanent loss. Companies can try reengineering, or strategy correction, and in effect, start to make a profit. Government administration based on central planning is ineffective. Politicians are not managers.

Corporations have started to play a role that traditionally belonged to the state. Private capital employs more citizens than governments do. Corporations provide social security, daycare, houses and money for funerals. Pension programs based on investment funds are more profitable than state-provided social security. Leading companies provide employees with cars, computers, phones, flats and leisure activities. Corporations have educational functions: training courses or e-learning programs are common. Workers also benefit from private health care. Multinational corporations are not private governments in the national states but are types of international superstates operating in the global market, with loyal citizens on a few continents at the same time.

If a corporation operated as a government it would take three-quarters of our salaries as advance payment for services it will never provide. Successful corporations take over state functions, providing better service for lower price. Agreements are voluntary. But government, duplicating the corporation's role, is not disappearing. Governments and corporations sometimes cooperate on market regulations. This alliance is the main current danger to individual liberty. Without "help" from the state, creating a monopoly is almost impossible. But if corporation and government agree, the consumer is helpless. A client is unable to choose and is forced to buy products at higher prices. Human beings should be the most important goal in all human activity. From an individual perspective cooperation between state and corporation is negative. A free market with ethics, not one without moral responsibility, is the solution for a better world.


TCS Daily Archives