When Corporations Rule the World……………..…..the impact felt

Globalization & Development

Submitted To: Prof. C.Shambhu Prasad

Submitted By: Ms.Suchismita Sinha (43)PGPRM-II

Abstract

David Korten in When Corporations Rule the World offers redemption from the corporate wars. He

prophesies: Drink filtered instead of bottled water, eat fresh produce from farmers' markets, encourage

corporations to act nice. His mantra, "Localize economies, globalize consciousness!"

Corporations, originally designed to improve work collaboration and business financing, have become

Frankenstein monsters that we inadvertently allow to corrupt democracy, diminish citizen rights,

impinge on human freedoms, and weaken democracy because with no checks and balances and no

implicit morality, the single-minded pursuit of profit, growth and competitive advantage compels them

adamantly to do so. Human survival depends on a community-based, people-centered alternative beyond

the failed extremist ideologies of communism and capitalism. When Corporations Rule the World

provides an agenda of national and global reforms by which we may reclaim our power to localize

economies while globalizing consciousness.

The key questions discussed in the text are

• What ails our economics and associated politics, and

• How to improve the health of our increasingly global systems?

Also the role of globalization in this aspect has been covered precisely. Questions like whether

someone is for imperialistic globalization or not or how the position of US can be looked upon or

what actually the information we need to know, all these debatable issues were also been focused.

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IntroductionWhen Corporations Rule the World by David C. Korten was published by Kumarian Press, USA. In

addition to all the contents of the first (1995) edition, the new 2001 edition contains a new introduction,

epilogue and three new updated chapters.

Contents ………

I. Cowboys in a Spaceship

II. Contest for Sovereignty

III. Corporate Colonialism

IV. A Rouge Financial System

V. Reclaiming our Power

VI. From Corporate Rule To Civil Society

Basically, this book was written as a project of the PCDForum to help take the analysis and vision of the

alternative development movement into the mainstream

“A searing indictment of an unjust international economic order."  -   Archbishop Desmond Tutu 

David C. Korten is board chair of the Positive Futures Network, publishers of YES! A Journal of

Positive Futures, and founder and president of The People-Centered Development Forum. He is a former

faculty member of the Harvard Business School and the author of nine previous books including the

bestselling When Corporations Rule the World and The Post-Corporate World.

Korten's background includes an MBA and Ph.D. from Stanford Business School, teaching at Harvard

Business School and working with the U.S. Agency for International Development in Asia. He has over thirty-five years of experience in preeminent business, academic and international development institutions as well as in contemporary citizen action organizations. Disillusioned by the evident inability of USAID and other large official aid donors to apply the approaches that had been proven effective by the nongovernmental Ford Foundation, Korten broke with the official aid system. His

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last five years in Asia were devoted to working with leaders of Asian nongovernmental organizations on identifying the root causes of development failure in the region and building the capacity of civil society organizations to function as strategic catalysts of national- and global-level change. He is a major contributor to the report of the International Forum on Globalization on Alternatives to Economic Globalization.

Criteria for judging the book……….

From the very first day of joining Rural Management the theory of injustice was incorporated among

ourselves. The main objective of this course is to help the rural managers towards the just world in every

sense. how can we as a rural manager can create a more sustainable, and at the same time a more

economically and socially just world? In his revised edition of When Corporations Rule the World,

David Korten presents us with a brilliant and incisive analysis of the problem, the challenge, and the

opportunity.

The first (1995) edition of When Corporations Rule the World awakened many Americans to the

destructive systemic impacts of the global economic system and the depths of the structural problems.

Coming from a self-described conservative with an extensive background in international development

and economics, it offered a thorough and extensively documented analysis capable of swaying even

hard-core laissez-faire advocates.

The new 2001 edition has analyzed the growing gap between the rich and poor, the global citizen

movement against corporatization and provides a context within which to discuss the role of spirit and

culture in distinguishing between a society oriented towards capital versus one oriented towards people.

For anyone who wants to know the hard facts about globalization, this is a real “must read” book which

has a good exposure with fabulous statistics. The book is full of statistics like the following:

“A Nike shoe costing from $75-$ 135 actually costs Nike just $5.60 to produce. Of this entire price the

3rd world worker gets $0.15 h!!!!.”

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Summary

When Corporations Rule the World explains how economic globalization has concentrated the power

to govern in global corporations and financial markets and detached them from accountability to the

human interest. It documents the devastating human and environmental consequences of the successful

efforts of these corporations to reconstruct values and institutions everywhere on the planet to serve their

own narrow ends. It also reveals why and how millions of people are acting to reclaim their political and

economic power from these elitist forces and presents a policy agenda for restoring democracy and

rooting economic power in people and communities.

David Korten argues effectively that corporations, originally designed to improve work collaboration

and business financing, have become Frankenstein monsters that we unwittingly allow to corrupt

democracy, diminish citizen rights, impinge on human freedoms, and weaken democracy because with

no checks and balances and no implicit morality, the single-minded pursuit of profit, growth and

competitive advantage compels them inexorably to do so.

The solution, once we educate people that corporate power is a problem, is to revoke some corporate

charters and change corporation laws so that corporations once again become our obedient servants

instead of our masters, and once again serve their intended and important purpose: to facilitate

investment in business and to allow people to work effectively ' in company'.

Are you against Imperialist Globalization? Korten sounds that alarm that globalization like the WTO takes away the sovereign rights of individual

nations. Along with many others he sees Corporations as “sitting above” the nation state.

This is where I would disagree. While globalization is the process through which these mega

corporations go around ripping off the third world—we have yet to see corporations mounting their own

military armies when they come into conflict with other corporations(that we are going to see in

subsequent reading).

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We see imperialism as a world process, not just capitalism on a world scale. Imperialism is the next

higher stage of capitalism. While corporations can be spreaded in different countries—they remain

rooted in their own nation state. In fact the state is an important arena of struggle between contending

national corporations—with the state often stepping in to bail out industries, bankrupt companies etc.—

all dependent on what is in the national interests. The state is an extremely important arena in the

struggle between corporations. Here battles go on over Gov. policy towards ailing industries, or

bankrupt countries, over how monetary, financial and trade agreements are determined. That said, as

anti-imperialists we were surprised to find only one reference to “imperialism” in the entire book—and

this was a quote by someone else.

Locating the U.S. in the Larger World

The fact that can never be refused to be confessed the predominance of America in shaping the global

economy & its institutions since World War II. All the strengths & dysfunctions of the global system

have got the tendency to be revealed in the USA, then in the rest world.

The United States has a special role in globalization, a role to which we have paid scant attention so far.

The role is this: The United States is the dominant player.

When politicians talk about securing a grand destiny for the U.S. in this century, they are not speaking

as representatives of a country of under-dogs seeking finally to make good in the world. They are talking

about a national economy that consumes a terribly disproportionate share of the world's resources, and

one that enjoys a standard of living so high that the poor of the U.S. "enjoy" resources that make them

seem rich by the standards that prevail throughout the developing world.

Ironically, another answer is a failure of Americans to think globally.

Korten exhibits an American distaste of big government, without noticing that the U.S. has one of the

most decentralized state systems on earth. This decentralization has accomplished not local

"empowerment" (a word that deserves a long vacation) but fragmentation, duplication, and bidding wars

for corporate investment

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A ROUGE FINANCIAL SYSTEM

In his book, Korten has analyzed the delinking money from the real value, in the context of global

financial system. The historic Bretton Woods conference that gave birth to World Bank &IMF & the

melding of computerization & globalization in a broader manner.

Do you want to create money without creating value? You have two options either by creating debt or

by bidding up asset values.

The Money GameThe world's most powerful instrument of governance is not a government. Nor is it a global

corporation. Rather it is a global financial system that is running dangerously out of control.

Each day half a million to a million people--primarily Western Europeans, North Americans, and

Japanese--arise as dawn reaches their part of the world, turn on their computers, and leave the real world

of people, things, and nature to immerse themselves in playing the world's most lucrative computer

game: the money game. As their computers come on line, they enter a world of cyberspace constructed

of numbers that represent money and complex rules by which those numbers can be converted into a

seemingly infinite variety of financial instruments, each with its own distinctive risks and reproductive

qualities. Through their interactions, the players engage in competitive transactions aimed at acquiring

for their own accounts the money that other players hold.

Not only is the money game challenging and fun, the play money it generates can be exchanged for real

money to buy things from people who work in the real world--lots of things. Unfortunately for the rest

of us, though it is played like a game and the transactions involve nothing more than moving numbers

from one electronic account to another through a global web of computers, the money game has

enormous real consequences. Take the recent Mexican peso crisis as an example.

Corporate Cannibalism………

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The global economy has become like a malignant cancer, advancing the colonization of the

planet's living spaces for the benefit of powerful corporations and financial institutions. It has

turned those once useful institutions into instruments of a market tyranny that is destroying

livelihoods, displacing people, and feeding on life in an insatiable quest for money. It forces us all

to act in ways destructive of ourselves, our families, our communities, and nature. This destructive

process is driven by a combination of institutional forces and an extremist ideology of corporate

libertarianism that invokes the theories of Adam Smith and market economics to advance policies

that systematically undermine both the market and democracy.

In this era of corporate, the quickest way to make the kind of profit that this so called system

wants is, to capture & also cannibalize the existing values from a weaker market player. Weaker it

is in the sense because it provides own employees a secured well playing jobs with a commitment

to invest in the future, running with a fully funded retirement trust fund. Such companies are

sustainable over the long run. They are being replaced by a special breed of extractive instructor,

namely the corporate rider, specialized in preying on established corporations. These raiders

identify a company traded on a public stock exchange & very importantly they are well managed

& fiscally sound. After this, the raider may form a new corporation as a receptacle for the

acquired company which is financed almost completely with debt & has little or no equity. The

borrowed funds are used to buy shares of the target company in a quiet manner at the prevailing

market price up to the maximum permitted by law. The last weapon they use is they offer the

board of directors to buy the outstanding shares. Thus the acquired company is getting purchased

by using its own assets to secure the loans used to buy it.

In spite of all these above mentioned facts if a company goes to meet social responsibility the

result may be the same as The Stride Rite Corporation, loosing 65 percent income in the very

thirteen tears as a consequence of the initiatives taken by Arnold Hiatt, the then CEO, to serve

the minor community of America. Basically it established plants in remote & rural areas offering

well-paying jobs for minorities but soon the whole strategy was changed, it moved its plants

abroad to take the advantage of low cost labour.

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And the result is doubled sales. Ervan Shames expressed, “Putting jobs into places where it does not make economic sense is a dilution of corporate & community wealth”(pg 203)

I think Globalization strengthens tendencies toward global scale monopoly rather increasing the competition, do you? (This is my point of view, not others)

Economists consider a domestic market to be monopolistic when the top four firms account more

than 40 percent sales. Aren’t the following data supporting my statement?

92 percent of the US appliance market is controlled by four companies (Whirlpool, GE,

Electrolux/WCI & Maytag)

More than 66 percent of US revenue passenger miles is accounted to four airlines only

namely United, American, Delta& North west.

In the automotive, airline, aerospace, electronic components, electronics & steel industry,

the top five firms control more than 40 percent of sales.

Concentration without centralization………

May be there are variations in approach but the world’s most successful transnational

corporations be it Japanese or European or American------the formula is same in structuring the

global capitalism more or less by those common but fruit giving means, i.e. downsizing staffs &

contacting out, using computers in order to bring out the automation (off course to reduce staff &

inventory), mergers & acquisitions etc.

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Thus it is possible that the aggregate sales of world’s ten largest corporations in 1991 exceeded the

total GNP of the worlds 100 smallest countries! General Motors achieved 133 billions revenue in

1992 that roughly equaled the combined GNP of Tanzania, Ethiopia, Nepal, Bangladesh, Zaire,

Uganda, Nigeria, Kenya & Pakistan.

Retail power, the latest drama………

The mass retailers like Wall Mart, Home Depot are playing notoriously against each other &

abruptly shifting their sourcing from domestic firms too low- labor cost countries like Bangladesh

or China.

The corporations attitude may best be described in concise by referring to Adam Smith,

“People of the same trade meet together, even for merriment & diversion, but the conversion ends in a conspiracy against the public, or in some contrivance to raise prices.”

Why is Corporate Globalization Bad? Other aspects…..Do you know where garments paid for with your tax dollars were made?

Are cities and states buying products that are made in a socially responsible and environmentally

sustainable manner? Or are our public institutions stuck in business-as-usual, carelessly purchasing

goods that have been made under poor environmental and social conditions? These are important

questions, because if we can convince institutional buyers to commit to purchasing only the most

responsible and sustainable products, then we can use the power of the government purse to help build

the market for green/fair goods.

Global Exchange has joined a national "Sweatfree" campaign, an effort to ensure that the clothes,

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uniforms, and other products bought by our cities and states are not made in sweatshops.

We Have a Right to Know When major corporations operate in the United States, they are required by law to disclose basic

information about the impacts of their business. Companies must provide details about their pollution

discharges, the kinds of chemicals they use, and the number and cause of workplace injuries. Although

not foolproof for preventing abuses, these disclosure requirements create a measure of transparency that

empowers communities to hold corporations accountable for their actions.

But when US-based companies operate abroad, they do not have to make similar disclosures. Local

communities living near multinational corporations' factories or mines don't know what kinds of toxins

are being released into their air and water. Workers are not given information about the kinds of

chemicals they are exposed to. Activists cannot find out if corporations have paid local military forces to

crack down on community or worker dissent. When it comes to knowing exactly how corporations

impact their lives, communities around the world are being left in the dark.

Corporate power is becoming even more concentrated and rapacious. We see ever larger mergers, with

particularly threatening consolidation in banking, media, and agribusiness. Even when the economy was

at its most robust, downsizing continued as a favored corporate strategy for getting a quick boost in

share price. Inequality is worse. Environmental failure is accelerating. Ever more of the commons is

being privatized. Corporations are playing God with genes for profit. And the financial system has

become even more rapacious and unstable.

Suppose, we were able to deal with the issues of corporate rule, then also some problems would not be solved because simply sweeping away global corporations to reclaim the spaces

they have colonized would only remove a barrier to the creation of just, sustainable, and compassionate

societies. There would remain a daunting task of restoring damaged ecosystems and communities and

redistributing the recovered assets in ways that assure their sustainable use.

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It would also be necessary to rebuild the capacity of households and communities to steward and

manage the space reclaimed.

We’d have to learn to make choices between appropriate and inappropriate technologies, and to relate to

one another and to the Earth in more equitable, sustainable, and democratic ways.

Many of us have become so conditioned to being dependent on hierarchical organizations that we

would have to relearn how to take responsibility and be active participants in our communities and

businesses.

Specific measures to these ends Korten has elaborated in his book namely, The Post-Corporate World.

“We have a collective cancer, and our survival depends on depriving it of its power by restructuring our economic rules and institutions to end absentee ownership, rights without accountability, corporate welfare, and financial speculation.

References………..Websites…

• www.pcdf.org/corprule/corporat.htm

• www.amazon.com/exec/obidos/tg/detail

• www.third world traveler.com/Korten/WhenCorps RuleWorld _Korten.html

• www.mapcruzin.com/rev_corp_rule.htm

• http://www.globalexchange.org

Books ……..• The Post Corporate World by David C.Korten

• Capitalism & Justice by John Isbister

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Rapporteur’s Report

By

Ms.Suchismita SinhaPGPRM-II, Roll No.-43

On

Recent Financial Crisis in East Asian Countries Experiences and Lessons

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Presented by: Awanish Kumar (11)

Santosh Kumar Sharma (39)

Based on book: A Citizen's Guide to the Globalization of Finance by

Kavaljit Singh

Globalization & Development

A Citizen's Guide to the Globalization of Finance

This term paper analyses the financial crisis in Mexico in 1994-95 and the Southeast Asian currency

crisis in 1997. Before this crisis, East Asia had experienced phenomenal growth; indeed, this economic

success is often referred to as the East Asia Miracle. It has been described how the poverty had

decreased, and Governments were vital parts of the economy and privatization was not reasonable.

The Mexican Financial Crisis

Both internal & external factors led to this ….

• External Factor-mainly the low interest rates in the U.S. combined with the recession there and

in other countries.

• The inflows in the country was short-term and aimed at making quick profits through financial

speculation on stocks and other securities in the financial markets of Mexico

• Gains from the foreign investments were more illusory than real.

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• Mexico was living beyond its means.

• Decrease in domestic savings

• Current account deficit.

• During 1990 and 1994, portfolio investment inflow was $71.2 and 72% of it was used by the

Mexican authorities to finance the current account deficit

Ultimately Collapse of the peso happened.

Increased interest rate in USA

Political agitations in Mexico eroded investor confidence

Mexico government announced a 13 percent peso devaluation which panicked foreign investors

and they started pulling their money out of Mexico.

Over the next two days $5 billion fled the country. The Mexican stock market lost one half of its

value over within months of the devaluation

It in turn affects

• Deterioration of the Mexican economy

• Deterioration of living

• Job loss

• Fall in real wages

• Increased interest rate

• Credit crunch

• Reduction in social sector spending

• The rich have hardly been affected as they invested their savings in dollars

The Southeast Asian Currency Turmoil, the case of Thailand & also contagion effect on South

Korea, Indonesia, Malaysia and Philippines have been described in the term paper precisely.

Malaysia failed to avoid the Currency Crisis, whereas the rupiah lost 58 percent of its value

against the dollar in 1997 Indonesia.

• Then came The Great Asian Bailout Programme by World Bank off course influenced by US,

in which the role of the lenders in the creation of this crisis was ignored & the foreign banks

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alone were given huge subsidies so that they do not have to suffer for their mistakes, while local

banks and companies were forded to go under.

Trans National Corporations (TNC) operating in the region suffered short-term losses. But in the

long run, TNCs have emerged as the net gainers. In all ways, the workers were the major sufferers.

The IMF and its Contributions to the Crisis & the Washington Consensus were also discussed

broadly in the presentation.

Should India pursue capital account convertibility? This particular topic was handled seriously In

this background, the wider implications of India’s recent moves to open up its financial markets to

global finance are discussed at the end.

The main attraction was the post presentation session in which Prof. Indranil Chakroborty shared his

knowledge in this mass debatable topic.

He shared his view about Enron incident.

He told that amazing case of Priceline, the E-Ticketing company of US which was not having single

owned furniture also, earning more revenue than all the airlines company together!!!

He expressed his passionate reading of Economist, the famous magazine.

He concluded that there is sure chance of one economy for crashing but the probability is once in ten

years. According to him, Turkey & South Africa are on the verge. But this is not applicable for the

OECD countries.

In between discussion when some of us were getting confused with the currency market & stock

market, he cleared the differences between these two.

But the most encouraging thing for all of us that he was pleased with the passion for the whole

matter & respect for data the presenters showed. Hope, we will keep it up.

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Glossary Capital account convertibility- Tara pore Committee (1997) defines CAC as "the freedom

to convert local financial assets into foreign financial assets and vice-versa at market determined

rates of exchange".

Hot money- In economics, hot money refers to funds which flow into a country to take

advantage of a favorable interest rate, and therefore obtain higher returns. They influence the

balance of payments and strengthen the exchange rate of the recipient country while weakening

the currency of the country losing the money

Difference between Currency Market & Stock Market:

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The currency (foreign exchange or forex or FX) market exists wherever one currency is traded for

another. It is by far the largest market in the world, in terms of cash value traded, and includes

trading between large banks, central banks, currency speculators, multinational corporations,

governments, and other financial markets and institutions. Retail traders (small speculators) are a

small part of this market. They may only participate indirectly through brokers or banks and may be

targets of forex scams.

Market size and liquidity

The foreign exchange market is unique because of:

its trading volume,

the extreme liquidity of the market,

the large number of, and variety of, traders in the market,

its geographical dispersion,

its long trading hours - 24 hours a day (except on weekends).

the variety of factors that affect exchange rates,

Average daily international foreign exchange trading volume was $1.9 trillion in April 2004 according

to the BIS study Triennial Central Bank Survey 2004

Stock market

A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately.

The term is used especially to apply within one country as, for example, in the phrase "the stock market was up today"

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order

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