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Back | Programme Area: Special Events (2000 - 2009) | Event: Regulating Global Institutions: Financial, Corporate and Non-Governmental Organizations

Regulating Global Institutions: Financial, Corporate and Non-Governmental Organizations

  • Date: 3 - 4 Feb 2002
  • Location: Porto Alegre, Brazil
  • Speakers: Deborah Eade, Peter Evans, Reinaldo Gonçalves, David Korten, Thandika Mkandawire, Peter Utting
  • Counterpart(s): Brazilian Institute of Social and Economic Analyses (iBASE)
  • Project Title: Geneva 2000: The Next Step in Social Development

Completing the Historic Transition to Democracy: Beyond the Regulation of Transnational Corporations, David Korten

Most discussions of corporate responsibility focus on the deeds—good and bad—of individual corporations. Important as such discussions are, they divert attention away from more basic questions of global governance and the democratic accountability of transnational corporations that now wield more economic and political power than most of the world’s states.

Any discussion of global governance properly begins with consideration of prevailing trends in the global condition of humanity toward a rapid increase in inequality, exclusion and deprivation, social breakdown, and environmental destruction. These unfavorable trends have accelerated over the past twenty to thirty years, revealing a growing failure of existing instruments of global governance of sufficient magnitude to place the human future at serious risk. Reversing these trends must become a priority of global governance, yet it will not be accomplished until the institutional system of global governance is itself transformed.

During the past two to three decades the power to set the agendas of national and global public policy has shifted from national governments and the United Nations system to global financial markets, global corporations, and public bodies that function in the exclusive service of global financial markets and corporations—in particular the World Bank, IMF, and World Trade Organization. As this power shift proceeds, the roles and authority of the United Nations and even most national governments are diminished accordingly—with the primary exception of the government of the United States which has given over control of its massive military and economic power to the service of corporate interests.

The Clinton administration placed that power at the disposal of Wall Street investment houses. George W. Bush rules primarily in the interest of the oil companies and military contractors in which his family has substantial interests.

Unfavorable trends in the human condition can be traced directly to this restructuring of the institutions of governance that has shifted power from people, communities, and democratically accountable governments to global financial markets and corporations. By law and structure the institutions that presently rule the world are single purpose organizations in the business of using money, to make money, for people who have money.

Corporations are legal constructions. They have no conscience. Voluntary codes of conduct are therefore meaningless. People work for corporations, but corporate accountability is ultimately to financial markets that have taken on a life of their own beyond human control or sensibility. In the U.S. system of corporate governance, which is rapidly spreading throughout the world, corporate employees are expected to leave all but financial values at the door when they enter the corporation’s employ.

The publicly traded, limited-liability corporation is a legal institutional form that traces back to the crown corporations European monarchs chartered to exploit the people, markets, and resources of colonial territories. It is designed to create concentrations of power shielded from accountability to all save a privileged ruling elite. It is a private interest legal instrument in the narrowest sense and has no rightful or appropriate role in setting or shaping public policy and priorities in democratic societies.

Public regulation of corporations is a limited solution given their propensity to acquire great concentrations of financial and media power that allow them to buy politicians, control the public dissemination of information, and dictate the terms of public discourse. They all too quickly turn the public institutions responsible for constraining their power in the public interest into instruments for the consolidation and projection of that power.

The current system of financial and corporate governance is the contemporary equivalent of monarchy and the challenge at hand is no less sweeping than that which faced our forbearers who decided that monarchy posed an unacceptable restraint to the advance of human freedom, dignity, and self-expression. The task was not accomplished by asking monarchs to be nice or benevolent. Nor was it accomplished through voluntary codes of monarchical conduct, or even through public regulatory oversight. It involved a fundamental restructuring of the institutions of governance to strip monarchs of their power and redistribute that power among ordinary people.

The transition to democracy was, however, incomplete as it failed to recognize that political democracy and economic democracy necessarily go hand in hand. To complete the democratization of political power it is now necessary to democratize economic power. This requires eliminating the institutional forms that concentrate economic power and shield it from public accountability, breaking up existing concentrations of economic power to free markets from monopolistic forces, redistributing and rooting ownership rights equitably in real people and communities, strengthening and democratizing the United Nations, and dismantling the World Bank, the IMF, and the World Trade Organization.

It was not easy to accomplish the first step toward the democratization of political power through the elimination of monarchy. It will not be easy to complete the process through the elimination of the institution of the publicly-traded, limited-liability corporation and the dismantling of the Bretton Woods triumvirate. It is, however, a challenge whose time has come.

David C. Korten is president of the People-Centered Development Forum and board chair of the Positive Futures Network.