State and Corp.
ZNet Germany, May 18, 2005
Q: We want to talk about the two dominant power structures of the modern era: the national state and the transnational corporations. The first question is, could you please talk about the rise of this concept of the national state: Why was it created, and what were its consequences?
Well, the nation state is pretty much a European invention, I mean there were similar things, but the nation state in the modern form was largely created in Europe over many centuries. It's so unnatural and artificial that it had to be imposed by extreme violence. In fact that's the primary reason why Europe was the most savage part of the world for centuries. It was due to trying to impose a nation state system on cultures and societies that are varied and if you look at them had no relation to this artificial structure.
In fact the derivative effects were also the main reason the concept spread elsewhere. In the course of creating modern nation states, Europe developed a culture of savagery and a technology of violence which enabled it to conquer the world, and as it conquered the world it attempted to impose nation state systems wherever it went, also artificial and violent. If you look at today's major conflicts around the world, most of them are the residue of European efforts to impose nation state systems where it doesn't make any sense, which is almost everywhere. The few exceptions to this are places of European colonization where they simply exterminated the indigenous population, like the United States and Australia. So there you get more homogeneous societies. On the other hand, the primary reason why the savage conflicts in Europe ended in 1945 was that it was recognized that if they continued this game any longer, they'd just wipe themselves out. So you have, since 1945, a peace internal to Europe. Germans and French don't regard it as their highest goal in life to slaughter each other anymore.
In the course of the development of the nation state system, there also developed on the side various economic arrangements which about a century ago turned into what became contemporary corporate capitalism, mostly imposed by judicial arrangements, not by legislation, and very tightly integrated and linked to the the powerful states. So today you can't dissociate the powerful states, the G8, the ones that are meeting in Edinburgh, which is really G1 or G3 or something like that with little participation of others, from this hisory. It's impossible to distinguish the modern dominant states from the multinational corporate system, the conglomerates that rely on them, that have a relation of both dependency and domination to them.
In fact, two centuries ago, James Madison in a very early period of modern capitalism described the relation of business to government as that of "tools and tyrants." He said that businesses are the "tools and tyrants" of government. By now that's become virtually the definition of the world. Multinational corporations are the tools and the tyrants of the powerful states, so making a distinction between them is extremely hard.
Q: In the beginning of the nation state, what do you think were the social forces behind it and why did they do it?
Well, it began in the feudal period with lords and battles for power between feudal lords, kings, the Pope and other centers of power which gradually evolved into systems of nation states in which a combination of political power and economic interests converged enough to try to impose uniform systems on very varied societies. I mean, after all in Europe it's very recently, I mean in living memory, that the state system actually consolidated.
There are plenty of people in Europe who can't talk to their grandmother because she talks a different language. This is just a recent coalescence of political, cultural, economic power and now quite properly beginning to break up. So one of the healthiest developments in Europe in my opinion is the process of a kind of devolution which is proceeding at various rates in different parts of Europe. So in Spain, for example, Catalonia, the Basque country, and to a more limited extent others, are developing a substantial degree of autonomy.
I was just in England before coming here, it's not England really, I was in Scotland, and by now Scotland has a degree of autonomy, Wales has a degree of autonomy and I think these are natural developments back toward forms of social organization more related to real human interests and needs. Actually I've been under investigation, maybe I still am, by the Turkish state security courts for what they call preaching separatism. Namely in a talk I gave in Dyarbakir in south Eastern Turkey I actually said some favorable things about the Ottoman empire. Not that anybody wants the Ottoman empire back, but they had the right idea about many things. One was that they left people alone, partly because of corruption and weakness, but partly for doctrinal reasons. The whole area under the Ottoman empire had nothing like a state system. So in a particular city, the Greeks would take care of their affairs, and the Armenians would take care of their affairs, and others would run their part of the city. And it was kind of integrated. You could go from Cairo to Baghdad or Istanbul without crossing any border or posts or anything like that. That's probably the right form of organization for that part of the world and probably every part of the world. And those are tendencies that are pretty clear in Europe, mostly at the cultural level but to some extent also at the political level. I suppose it is a reaction to the centralizing tendencies of the European Union which are often quite autocratic, particularly the enormous power of the Central Bank. But it's all in connection with the high concentration of economic and political and social power that lies in the hands of the unaccountable private tyrannies that are closely linked to state power and rely on it.
Q: Could you tell us in detail how the corporation became so powerful?
How it became so powerful? Well, we know it very well. There were enormous market failures, market disasters in the late 19th century. There was a brief experiment, a very brief experiment, with something more or less like capitalism, not really but partially, really free markets, and it was such a total catastrophe that business called it off because it couldn't survive, and there were moves in the late 19th century to overcome these radical market failures and they led to various forms of concentration of capital: trusts, cartels, and others, and the one that emerged was the corporation in its modern form.
And the corporations were granted rights by the courts. I mean, I know the Anglo-American history fairly well - but I think it's pretty much the same elsewhere, so I'll keep to that one - in the Anglo-American system the courts, not the legislators, gave the corporate entities extraordinary rights. They gave them the rights of persons, meaning they have the right of freedom of speech, they can propagandize freely, advertise, they run elections and so on, and they have the protection from inspection by the state authorities which means that just as the police technically can't go into your apartment and read your papers, the public can't find out what's going on inside these totalitarian entities. They're mostly unaccountable to the public. Of course they are not real persons, they are immortal, they are collectivist legal entities. In fact they are very similar to other organizational forms we know and are one of the forms of totalitarianism that developed in the 20th century. The others were destroyed, these still exist, and later they were required by law to be what we would call pathological in the case of real human beings.
So they are required legally to maximize power and profit no matter what effect that has on anyone else. They are required to externalize costs, so if they can get the public or future generations to pay their costs, they are required to do that. It would be illegal for corporate executives to do anything else.
By now, in what are called trade agreements, which have nothing much to do with trade, corporations are granted rights that go way beyond the rights of persons. They are granted the right of what's called "national treatment." Persons don't have that right. Like if a Mexican comes to New York, he can't claim national treatment, but if General Motors goes to Mexico, it can claim national treatment. In fact corporations can even sue states, which you and I can't do.
So they're granted rights way beyond persons. They are immortal, they are extraordinarily powerful, they are pathological by legal requirement, and that's the contemporary form of totalitarianism. They are not truly competitive, they are linked to one another. So Siemens and IBM and Toshiba carry out joint projects. They rely heavily on state power; the dynamism of the modern economy comes mostly out of the state sector, not the private sector. Almost every aspect of what's called the "New Economy" is developed and designed at public cost and public risk: computers, electronics generally, telecommunications, the internet, lasers, whatever...
Take radio. Radio was designed by the US Navy. Mass production, modern mass production was developed in armories. If you go back to a century ago, the major problems of electrical and mechanical engineering had to do with how to place a huge gun on a moving platform, namely a ship, designing it to be able to hit a moving object, another ship, so naval gunnery. That was the most advanced problem in metallurgy, electrical and mechanical engineering, and so on. England and Germany put huge efforts into it, the United States less so. Out of associated innovations comes the automotive industry, and so on and so forth. In fact, it's very hard to find anything in the economy that doesn't rely critically on the state sector.
After the Second World War this took a qualitative leap upward, particularly in the United States, and while Alan Greenspan and others make speeches about "entrepreneurial initiative" and "consumer choice," and things you learn about in graduate school, and so on, this has almost no resemblance to the actual working economy. In fact a striking example of all this which we see very clearly at MIT, a main technological scientific university, is a recent shift in funding. When I got to MIT 50 years ago, it was Pentagon funded, almost one hundred percent. That stayed true until about 1970. Since then, however, Pentagon funding has been declining and funding from the National Institute of Health and the other so called health-related national institutes has gone up.
The reason is obvious to everybody except maybe some highly theoretical economists. The reason is that the cutting edge of the economy in the fifties and the sixties was electronics-based, so therefore it made sense for the public to pay for it under the pretext of defense. By now the cutting edge of the economy is becoming biology-based. Biotechnology, genetic engineering and so on, and pharmaceuticals, so it makes sense for the public to pay for that and to take the risks for it under the pretext of, you know, finding a cure for cancer or something. Actually what's happening is just developing the infrastructure and insights for the biological-based private industries of the future. They are happy to let the public pay the costs and take the risks, and then transfer the results to private corporations to make the profits. From the point of view of corporate elites it is a perfect system, this interaction between state and private power. There's plenty of other interactions as well. For example, the Pentagon isn't just for developing the economy, it's also for making sure that the world follows corporate friendly rules. So the linkages are quite complex.
Q: I would like to come back to the nature of the corporations. My question is could there be a difference between a German-based multinational corporation and Anglo-American based corporation. Why I'm asking this is because the Deutsche Bank announced their intention to fire 6.000 people next year, very shortly after they announced an annual profit of over 2.5 billion dollars, and they were bitterly condemned over the whole political spectrum in Germany. It was said that they couldn't call themselves "German" any more. They were also accused of a lack of social responsibility. My question is if there is such a concept possible as socially responsible corporations?
It's kind of like the notion of benevolent dictatorship. I mean, it's possible and it's better to have a benevolent dictatorship than a ruthless dictatorship. If you have to have a dictator, it's better to have a sort of nice person who gives candies to poor children, but nevertheless it's a dictatorship. So yes, you can have a socially responsible corporation in the sense that the public will compel them to carry out some humane activities.
Actually this is built in into Anglo-American law, as well, so we see that corporations are required by judicial decision, law, to maximize power and profit, but they are also at least permitted to carry out humanitarian actions, particularly if the television cameras are around, that is, and if it's purely hypocritical. So if a drug company wants to give out drugs in poor neighborhoods, that's fine as long as it's for public-relations purposes that can be claimed to add to profits. That is to maximize their profits, they can do a little good, too.
Furthermore the courts have gone so far as to urge corporations to carry out humanitarian activities, or else, and now I'm quoting, "an aroused public" may discover what their real nature is and move to undermine their rights and privileges. So in order to prevent "an aroused public" from developing, it's a good idea to project a benign and benevolent image. I think the same is true of political dictatorships and kings and so on and so forth. So you can have socially responsible corporations, and they are better than brutal and murderous ones, exactly as in the case of other kinds of totalitarianism, and the public can affect that, but the real problem is not that, it's the unaccountable concentration of private power. Yes, it could be more or less benevolent under public pressure.
Q: Transnational corporations are sometimes called "de facto government" or the "virtual senate." They control nowadays to a significant extent the state, which was supposed to defend the interests of the people and not the interests of the "elites." Do you see the state as really dead?
Well, that's up to the public. I mean, traditionally states have been defenders of private power. Either they are the power or they defend private power. There are struggles over this going on constantly, that's why we have more freedom than people used to have, through constant popular struggle. By the end of the Second World War there was a mood of a sort of radical democracy, practically revolutionary, over almost all the world. The war had a tremendous effect, and actually the first post-war policies of Britain and the United States - the victors - were to try to destroy the anti-fascist resistance; that was the first chapter of post-war history in Europe, and in Japan. Destroy the anti-fascist resistance and restore the traditional societies, now subordinate to the victors. It happened with considerable brutality in many places, like in Greece, where Britain and mostly the United States probably killed about 150.000 people and left a residue which was basically fascist, and actually included a fascist coup and went up into the mid seventies.
In Italy, the United States intervened at once to try to prevent popular democracy, subvert Italian elections and so on; in fact Italy was the main focus of CIA subversive activities at least into the 1970s, including support for military coups, terror, and so on. And pretty much the same was true in Germany, France, Japan, and elsewhere.
So the first goal was restore the basic structure of the traditional society, undermine the anti-fascist resistance, crush the popular labor movements and so on, but it couldn't be done completely. And the power of the radical democratic thrust had to in part be accommodated, in the United States as well. So you get a period of "welfare state" systems, social democratic systems in which it's true that the state was compelled to act in ways that accommodated public demands, and it leads to the social market in Europe, the welfare state in the United States and England, and so on...
Q: ...but it was the people...
Yes, they forced it, and in fact the financial arrangements reflected that. So the Bretton Wood system designed by Britain and the United States after the Second World War was based on control of capital and relatively fixed currencies, and that was done very consciously with the understanding that unless states have the right to control capital movements, you can't have democracy, because the "virtual senate" of investors and lenders could control state policy simply by...
Q: That's actually what we are getting at with that this question. There was this huge debate about if in certain moments the state has to be strengthened in a certain sense because what we are hearing all the time from the politicians all across the board: OK, we would like to do something for you, but we can't because the corporations wouldn't let us.
But that's by design. The post-war system was designed so as to permit the state to use capital controls to prevent investors and lenders, banks, and corporations from running the domestic economies, and currencies were fixed relative to each other to prevent speculation, which is another way of attacking government decisions. And it was understood, very consciously, it was not a secret, that this was to enable governments to carry out policies relatively free from corporate control, and that in turn led to the greatest economic growth in history.
The first 25 years after the Second World War, often called "The Golden Age of Capitalism," there was very fast growth, there was nothing like it ever before or since, and to a degree egalitarian growth. So in the United States, which is the least egalitarian of the major countries, the bottom twenty percent actually gained more than the top twenty percent in that period. That went on up until the early seventies. At that time, there began a major reaction in order to destroy democracy, which is considered a great threat to elites, properly, and to undermine the system that allowed governments to respond to the public to create welfare state systems. The first move in fact was to eliminate controls on capital, which is understood are at the core of allowing the government any kind of space for independent decision making. Eliminate the controls, let currencies flow freely, so you get a huge explosion of speculation against currencies, and in many other ways.
In fact if you look at the neo-liberal programs, every single element of them is designed mainly to destroy democracy. That's true of elimination of fixing currencies amd freeing capital flight. Privatization by definition undermines democracy. It takes things out of the public arena. Turning services into private control takes away everything that the government might want to do. So when the Germans say that, yes it's true, because they designed it that way. They designed the system in such a way that the state would lose the capacity to respond to its citizens and would be compelled to respond to concentrations of private power.
Q: I mean the point is that you can still reverse it.
Of course you can reverse it! It was reversed in 1945. It's not a particularly radical position to say, let's restore the Bretton Woods system. I mean, nobody wants to do exactly that, that's perfectly well understood, but yes of course it can be reversed, in fact corporations, they don't have to exist, not any more than any other form of tyranny has to exist.
Q: Is this maybe also the reason why the movement of the "Workers Without Bosses" in Argentina is less known here? I mean nobody knows about it here. It is not discussed in the mainstream media.
Any form of democratic participation has to be suppressed. So when you read a reference to what's called the "anti-globalization" movement, it's described as people who throw rocks at windows or something like that, riffraff who, you know, have riots. When you read descriptions of the World Social Forum, it's quite interesting. The World Social Forum and the World Economic Forum take place at the same time. The World Economic Forum is mostly rich people going to fancy restaurants and things like that. The World Social Forum is detailed, extensive discussions of real issues in the world, African-Brazilian relations, international economic policy, and so on. If you take a look at the descriptions, I've actually done it, I've compared them, the World Economic Forum is described as some profound thing with the deep minds of the world dealing with major problems, and the World Social Forum is people having carnivals and games. Actually it is literally described as a center of anti-Semitism. I don't know if you were at the World Social Forum in 2003, but the way it's described in US foreign policy journals is that it was full of neo-Nazis waving swastikas, and so on and so forth.
Or just to take a recent example, take the elections in Iraq. In fact, they were a major triumph of non-violent resistance. The non-violent public resistance simply compelled Britain and the United States to accept elections. Try to find anybody who writes that. Actually the business press points it out, but almost nobody else.
Q: ...what the Christian Science Monitor called "the Sistani factor" in an article titled "The Sistani Factor."
The Sistani factor, yes, occasionally the reporters - any reporter with his head-screwed on knows it.
Q: I mention it because you mentioned it in your blog on ZNet.
Yes. There I mention anything I can find. I mean there are some who pointed it out and everybody knows it, but the main story communicated is that Britain and the United States in their magnificence carried out wonderful elections as they bring democracy to Iraq. That's sheer nonsense, as a look at the immediately preceding events demonstrates. However, for somewhat similar reasons, I don't think it's appropriate to call them "demonstration elections," as many of my friends do.
Q: ...you mean they were compelled to hold the elections.
They were compelled to accept more or less authentic elections…
Q: …but what about that other description, as "demonstration elections"?
It is described that way only by the left. The mainstream describes them as marvelous elections brought about by Bush's messianic vision to bring democracy to Iraq. It was neither that nor was it "demonstration elections." It was a popular resistance compelling the occupying forces to allow a certain level of elections which they are now trying to subvert. That's quite different from what happened in El Salvador or Vietnam, where there really were "demonstration elections," created by the occupying authorities to try to give an aura of legitimacy to the occupation. It's not what happened in Iraq. That's clear also from the direct reports of the most knowledgeable and experienced correspondents, like Robert Fisk. In Iraq, it was mass popular non-violent resistance, which compelled the occupying authorities to accept elections that they opposed and are now trying to subvert. This doesn't say they were wonderful elections. They weren't, but not for the reasons of El Salvador and Vietnam.
I mean it's part of this incredible failure of the occupation. I mean if you think of the Nazis in occupied Europe, they had much less trouble, than the Americans are having in Iraq, much less.