The Silent Takeover: Global Capitalism and the Death of Democracyby Noreena Hertz
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Named one of the best books of the year by The Sunday Times of London, and already a bestseller in England, Noreena Hertz's The Silent Takeover explains how corporations in the age of globalization are changing our lives, our society, and our future -- and are threatening the very basis of our democracy.
Of the world's 100 largest economies, fifty-one are now corporations, only forty-nine are nation-states. The sales of General Motors and Ford are greater than the GDP (gross domestic product) of the whole of sub-Saharan Africa, and Wal-Mart now has a turnover higher than the revenues of most of the states of Eastern Europe. Yet few of us are fully aware of the growing dominance of big business: newspapers continue to place news of the actions of governments on the front page, with business news relegated to the inside pages. But do governments really have more influence over our lives than businesses? Do the parties for which we vote have any real freedom of choice in their actions?
Already sparking intense debate in England and on the Continent, The Silent Takeover provides a new and startling take on the way we live now and who really governs us. The widely acclaimed young socio-economist Noreena Hertz brilliantly and passionately reveals how corporations across the world manipulate and pressure governments by means both legal and illegal; how protest, be it in the form of the protesters of Seattle and Genoa or the boycotting of genetically altered foods, is often becoming a more effective political weapon than the ballot-box; and how corporations in many parts of the world are taking over from the state responsibility for everything from providing technology for schools to healthcare for the community.
While the activities of business, frequently under pressure from the media and the consuming public, can range from the beneficial to the pernicious, neither public protest nor corporate power is in any way democratic. What is the fate of democracy in the world of the silent takeover?
The Silent Takeover asks us to recognize the growing contradictions of a world divided between haves and have-nots, of gated communities next to ghettos, of extreme poverty and unbelievable riches. In the face of these unacceptable extremes, Noreena Hertz outlines a new agenda to revitalize politics and renew democracy.
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Chapter One: The Revolution Will Not Be Televised
Dancing with the Pink Fairies
J-20. For those in the know the acronym is easily decipherable: July 20, 2001, the call for action transmitted to hundreds of thousands at the click of a mouse. J-20 -- Genoa.
I first learned about the Genoa protests through the Net, as did most of those who gathered there. A chain letter sent to thousands and forwarded to thousands more eventually reached me. Cyberwar with a clear message: Be there, if you think that globalization is failing. Be there if you want to protest against global capitalism. If you think multinational corporations are too powerful. If you no longer believe your elected representatives will listen. Be there if you want to be heard.
On July 20, Genoa was host city to the G8 annual summit, and the place to be for the "veterans" of Seattle, Melbourne, and London's City and Parliament Square riots, for the veterans of Washington, Prague, Nice, Quebec, and Gothenburg (if 11 veterans" is the appropriate term for a movement only a couple of years old). They flocked there in droves: pink fairies in drag, red devils handing out "Boycott Bacardi" leaflets, Italian anarchists in game-show padded body armor, environmentalists with mobile phones, suburbanites with cameras snapping as if they were on a day trip to the big city -- a babel of different languages and different objectives gathered under the one "anti" banner.
I was prepared for the tear gas: I had read the California-based Ruckus Society's handbook, required reading for protesters, and had brought the requisite lemon and vinegar and a handkerchief to wrap around my face, as well as fake blood in a traveling shampoo container (good when you want to get let through a crowd). I was prepared for the police standoffs: I had studied the tactics of civil disobedience and direct action at the nonviolence workshop I had attended earlier that year in a hangarlike meeting place on the northwest outskirts of Prague. Although nothing could have fully primed me for the brutality of the Italian police.
What I was not prepared for was the extent of the sense of community among the divergent and often conflicting interests, the sense of camaraderie and unity around a shared opposition to the status quo. Neither was I prepared for the sheer rage, inflamed by the insistent drumming and by the mournful walling of the rainbow-stringed whistles sold at a dollar a piece: the black bloc anarchists intent on smashing shop front windows; the focus of many around me on tearing down the fence that the Italian authorities had erected to keep the world leaders in and the world protestors out.
Least of all, perhaps, was I prepared for the extent to which those I spoke with were utterly disillusioned with politics and politicians, corporations and businesspeople alike, and the lengths to which they were prepared to go to break what they saw as a conspiracy of silence. The bare-chested young man with arms splayed in the sign of a pacifist, who remained upright despite the fire of a water cannon pounding against his back; Venus, the girl with pink hair and glitter stars stuck on her eyes, who told me in a soft Irish lilt that she was "willing to die for this cause."
Ten years after the tanks last drove onto Red Square, twelve years after the Berlin Wall came down, after the longest period of economic boom in modern times, dissent is nevertheless growing at a remarkable rate, voiced not only by the hundreds of thousands who gathered in Genoa or Gothenburg, Prague or Seattle, not only by the rainbow warriors, but by disparate and often surprising parties -- ordinary people with ordinary lives, homemakers, schoolteachers -- suburbanites and city dwellers, too. All over the world, concerns are being raised about governments' loyalties and corporations' objectives. Concerns that the pendulum of capitalism may have swung just a bit too far; that our love affair with the free market may have obscured harsh truths; that too many are losing out. That the state cannot be trusted to look after our interests; and that we are paying too high a price for our increased economic growth. They are worried that the sound of business is drowning out the voices of the people.
The fairy-tale ending of the story that began in Westminster on May 3, 1979, the day Margaret Thatcher came into power, and was later reproduced in the United States, Latin America, East Asia, India, most Of Africa, and the rest of Europe-the story of the streets being paved with gold, and the realization of the American dream-is no longer taken for granted. Myths that were perpetuated during the cold war era, out of fear of weakening "our" position, are beginning to be debunked. Wealth doesn't always trickle down. There are limits to growth. The state will not protect us. A society guided only by the invisible hand of the market is not only imperfect, but also unjust.
The world that is emerging from the cold war is the antithesis of the shrink-wrapped One World of the hyperglobalists. It is in fact confused, contradictory, and mercurial. It is a world in which a litany of doubts is starting to be recited, not at the ballot box, but in cathedrals, shopping malls, and on the streets. A world in which loyalties can no longer be determined, and allegiances seem to have switched. While BP was running a program for its top two hundred executives on the future of capitalism in which the merits and demerits of globalization were debated, a British Labour government was fighting to privatize air traffic control.
The Space Odyssey world of 2001 is getting dangerously close to the apocalyptic visions of Rollerball, Network, and Soylent Green. It is a world in which, as we will see, corporations are taking over from the state, the businessman becoming more powerful than the politician, and commercial interests are paramount. As I will show, protest is fast becoming the only way of affecting the policies and controlling the excesses of corporate activity.
The Benetton Bubble
We can date the beginning of this world, this world of the Silent Takeover, from Margaret Thatcher's ascendency. The hairspray-helmeted Iron Lady proselytized a particular brand of capitalism with her compadre Ronald Reagan that put inordinate power into the hands of corporations, and gained market share at the expense not only of politics but also of democracy. And it has been a durable product. Apart from a few discreet tweaks, theirs remains the dominant ideology across much of the world. Politics in the post-cold war age has become increasingly homogenized, standardized, a commodity.
Benetton provides an apt metaphor for politics today. Over the last eighteen years this Italian fashion company has run the most provocative advertising campaigns ever seen. Twenty-foot billboards with the picture of a starving black baby; the AIDS victim at his moment of death; the bloodied uniform of a dead Bosnian soldier; the "United Killers of Benetton" campaign, a ninety-sixpage magazine insert with photograph after photograph of condemned prisoners languishing on America's death rows. Benetton shocked us to attention, but shock is all it provided. It didn't rally us into action. Nor did it try and address these issues itself. Their advertising provided no exploration of the morality of war, there was no attempt to relieve poverty or cure AIDS. The only goal was to increase sales, not to start a discussion of the issues behind capital punishment. And if it profited from others' misery, so what?
We are living in a Benetton bubble. We are presented with shocking images by politicians who try to win our favor by demonizing their opponents and highlighting the dangers of the "wrong" representation. They speak of making a difference and changing our lives. Mainstream parties offer us supposedly different solutions and choices: Democrats tout liberal virtues, Republicans tout conservatism, all in an attempt to secure our votes.
But the rhetoric is not matched by reality. The solutions our politicians offer are as bogus as those of Benetton: a Chinese girl standing next to an American boy, a black woman holding hands with a white woman. Models with unusual faces, strong faces, sometimes beautiful, sometimes not. Multicolored people in multicolored clothes.
Political answers have become as illusory as the rows and rows of homogenized clothes, standard T-shirts, and cardigans folded in your local Benetton store. Commercialized conservatism and conformity par excellence. Politicians offer only one solution: a system based on laissez-faire economics, the culture of consumerism, the power of finance and free trade. They try and sell it in varying shades of blue, red, or yellow, but it is still a system in which the corporation is king, the state its subject, its citizens consumers. A silent nullification of the social contract.
But, I will argue, the system is undeniably failing. Behind the ideological consensus and supposed triumph of capitalism, cracks are appearing. If everything is so wonderful, why, as we will see, are people ignoring the ballot box and taking to the streets and shopping malls instead? How meaningful is democracy if only half the people turn out to vote, as in the Bush-Gore presidential election, even though everyone knew it was going to be a close race? What is the worth of representation if, as I will show, our politicians now jump to the commands of corporations rather than those of their own citizens?
Capitalism on Tap
It took time for people to rise up in protest, to see that the weightless state was unlikely to deliver the clean, safe world that they wanted their children to grow up in. For a long time people didn't question the one-ideology, homogeneous world. Why should they? For many, life was good and getting better. For most of the past twenty years the stock market has risen and interest rates fallen. More people than ever before own their own homes. Two thirds of us, in the developed world, have television sets of our own. Most of us, in the West that is, have cars. Our children wear Nike and Baby Gap. The middle class has grown and grown.
We are drip-fed images that reinforce this capitalist dream. Studios and networks beatify the very essence of capitalism. Prevailing norms and mainstream thoughts are recorded, replayed, and reinforced in Technicolor, while any criticism of the orthodoxy is consciously quashed. The peaceful element in the protests of Seattle, Gothenburg, and Genoa hardly made it to our screens. Proctor & Gamble explicitly prohibits programming around its commercials "which could in any way further the concept of business as cold or ruthless." Programs are sought that reinforce the advertisers' message. "Each time a television set is turned on, the political, economic, and moral basis for a profitdriven social order is implicitly legitimised."
In 1997 Adbusters, a Canadian "culture-jamming" organization, tried to air a counterconsumerism ad in which an animated pig superimposed on a map of North America smacked its lips while saying, "The average North American consumes five times more than a Mexican, ten times more than a Chinese person and thirty times more than a person from India....Give it a rest. November 28 is Buy Nothing Day." But U.S. stations such as NBC, CBS, and ABC flatly refused to run it, even though the funding for it was there. "We don't want to take any advertising that's inimical to our legitimate business interests," said Richard Gitter, vice president of advertising standards at General Electric Company-owned NBC.
Westinghouse Electric Corporation's CBS went even further in a letter rejecting the commercial, justifying its decision on the grounds that Buy Nothing Day was "in opposition to the current economic policy in the United States."
Such is our legacy. A world in which consumerism is equated with economic policy, where corporate interests reign, where corporations spew their jargon on to the airwaves and stifle nations with their imperial rule. Corporations have become behemoths, huge global giants that wield immense political power.
Propelled by government policies of privatization, deregulation, and trade liberalization, and the technological developments of the past twenty years, a power shift has taken place. The hundred largest multinational corporations now control about 20 percent of global foreign assets, and fifty-one of the one hundred biggest economies in the world are now corporations. The sales of General Motors and Ford are greater than the GDP of the whole of sub-Saharan Africa; the assets of IBM, BP, and General Electric outstrip the economic capabilities of most small nations; and Wal-Mart, the supermarket retailer, has higher revenues than most Central and Eastern Europe states.
The size of corporations is increasing. In the first year of the new millennium, Vodafone merged with Mannesmann (a purchase worth $183 billion), Chrysler with Daimler (the merged company now employs over 400,000 people), Smith Mine Beecham with Glaxo Wellcome (now reporting pretax profits of $7.6 billion as GlaxoSmithKline), and AOL with Time Warner in a merger worth $350 billion-five thousand mergers in total in 2000, and double the level of a decade earlier. These megamergers mock the M&A activity of the 1980s. Each new merger is bigger than the one before, and governments rarely stand in the way. Each new merger gives corporations even more power. All the goods we buy or use-our gasoline, the drugs our doctors prescribe, essentials like water, transport, health, and education, even the new school computers and the crops growing in the fields around our communities-are in the grip of corporations which may, at their whim, nurture, support, or strangle us.
This is the world of the Silent Takeover, the world at the dawn of the new millennium. Governments' hands appear tied and we are increasingly dependent on corporations. Business is in the driver's seat, corporations determine the rules of the game, and governments have become referees, enforcing rules laid down by others. Portable corporations are now movable feasts and governments go to great lengths to attract or retain them on their shores. Blind eyes are turned to tax loopholes. Business moguls use sophisticated tax dodges to keep their bounty offshore. Rupert Murdochs News Corporation pays only 6 percent tax worldwide; and in the U.K., up to the end of 1998, it paid no net British corporation tax at all, despite having made £1.4 billion profit there since June 1987. This is a world in which, although we already see the signs of the eroding tax base in our crumbling public services and infrastructure, our elected representatives kowtow to business, afraid not to dance to the piper's tune.
Governments once battled for physical territory; today they fight ill the main for market share. One of their primary jobs has become that of ensuring an environment in which business can prosper, and which is attractive to business. The role of nation states has become to a large extent simply that of providing the public goods and infrastructure that business needs at the lowest costs while protecting the world's free trade system.
Divided We Fall
In the process, justice, equity, rights, the environment, and even issues of national security fall by the wayside. Take the case of the Taliban -- supported by the United States until 1997 because of U.S. oil company interests, despite the regime's dismal human rights record. Social justice has come to mean access to markets. Social safety nets have been weakened. Union power has been smashed.
Never before in modern times has the gap between the haves and the have-nots been so wide, never have so many been excluded or so championless. Forty-five million Americans have no health insurance. In Manhattan, people fish empty drink cans and bottles from trash cans to claim their five cents' redemption value, while in London, car windshield washers armed with squeegees and pails of dirty water ambush drivers at traffic lights. Americans spend $8 billion a year on cosmetics while the world cannot find the $9 billion the UN reckons is needed to give all people access to clean drinking water and sanitation. The British Labour party has gone on record as saying that wealth creation is now more important than wealth redistribution.
In America, during the ten years after 1988, income for the poorest families rose less than 1 percent, while it jumped 15 percent for the richest fifth. In New York City the poorest 20 percent earn an annual average of $10,700 while the wealthiest 20 percent earn $152,350. Wages for those at the bottom are so low that, despite the country's low unemployment figures, millions of employed Americans and one in five American children are now living in poverty. Never since the 1920s has the gap between rich and poor been so great. Bill Gates's net worth alone at the end of the last century, for example, equaled the total net worth of the bottom 50 percent of American families.
Capitalism has triumphed, but its spoils are not shared by all. Its failings are ignored by governments which, thanks to the very policy measures they introduced, are increasingly unable to deal with the consequences of their system.
And that system is rotten. Political scandals are unveiled all too frequently: Kohl, Schmidt, and Mitterrand are among those we already know or suspect. Even those politicians not on the take are increasingly indebted to or enmeshed with business.
Nowhere is this more apparent than in the United States. Clinton's presidency was immersed in scandal at once: from the Whitewater allegations, via overnight stays in the Lincoln bedroom for party funders, to the final act of pardoning tax evader and arms dealer Marc Rich. For candidates for the 2000 American presidential elections, their very ability to run depended upon their securing corporate funding. George W. Bushs campaign war chest was $191 million, Gore's $133 million. And objections to the McCain-Feingold bill on campaign finance reform, which once in effect would ban businesses, trade unions, and individuals from making unlimited "soft money" contributions to American political parties, came from both Democrats and Republicans.
No wonder the politicians' star is fading. People recognize politicians' conflicting interests and unwillingness to champion them, and are beginning to abandon politics en masse. Whereas the 1980s saw democracy emerging all over the world as the dominant mode of government, imbued with a unique legitimacy and commanding mass support, by the 1990s voter turnout almost everywhere was falling, party membership declining, and politicians rated below meter maids as worthy of respect. All over the world, from the old democracies of the United States and Western Europe to the young nations of Latin America and the Far East, people have less confidence in the institutions of government today than they had a decade ago. Only 59 percent of British voters voted at the 2001 general election, down from 69 percent in 1997, the lowest turnout since World War 1. In the USA, not in nearly two centuries have so many American citizens freely abstained from voting as in the past six years. The product sold by politicians is seen as broken, no longer deemed worth buying.
Breaking the Silence
This is the world of the Silent Takeover I will explore in this book. My aim is to make sense of this world and understand where it is likely to take us: a world in which corporate resources dwarf those of nations, and businessmen outrank politicians; in which three quarters of Americans now think that business has gained too much power over many aspects of their lives; and in which, despite the ever harder sell of party politics, fewer and fewer trouble to vote. Economics is now accorded greater respect than politics, the citizen has been abandoned, and the consumer is all that matters. "Participation in the market has [been] substituted for participation in politics."
My argument is not intended to be anticapitalist. Capitalism is clearly the best system for generating wealth, and free trade and open capital markets have brought unprecedented economic growth to most if not all of the world. Nor is the book intended to be antibusiness. Corporations are not amoral but, I will argue, they are morally ambivalent. In fact, under certain market conditions, business is more able and willing than government to take on many of the world's problems. "Social responsibility," "sustainable development," and "environmental impact" are terms more likely to be heard today from CEOs than from government ministers.
Neither do I intend to glorify government. Although, as I will argue, the state has a clear role to play in society, I remain highly skeptical of government's ability to play this role, especially now that the boundaries between business and government have blurred so much and there is such a lack of true political leadership or will.
What my book is intended to be, however, is unashamedly propeople, prodemocracy, and projustice. I mean to question the moral justification for a brand of capitalism that encourages governments to sell their citizens for a song; to challenge the legitimacy of a world in which many lose and few win; to reveal how the takeover endangers democracy; and to argue that there is a fundamental paradox at the heart of laissez-faire capitalism, that by reducing the state to its bare minimum and putting corporations at center stage the state risks jeopardizing its own legitimacy. I will explore the implications of a world in which we cannot trust governments to look after our interests and in which unelected powers -- big corporations -- are taking over governments' roles, and examine the consequences of a political mind-set which values the pursuit of market share above all else. I will chart the unfettered pursuit of profit, and confront those who justify pork-barrel politics as an expression of free speech, and those who justify nonintervention in other countries' affairs for reasons of their own trade interests.
Over the last two decades the balance of power between politics and commerce has shifted radically, leaving politicians increasingly subordinate to the colossal economic power of big business. Unleashed by the Reagan-Thatcher axis, and accelerated by the end of the cold war, this process has grown hydralike over the last two decades and now manifests itself in what are diverse positive and negative forms. Whichever way we look at it, corporations are taking on the responsibilities of government.
And as business has extended its role, it has, as we shall see, actually come to define the public realm. The political state has become the corporate state. Governments, by not even acknowledging the takeover, risk shattering the implicit contract between state and citizen that lies at the heart of a democratic society, making the rejection of the ballot box and the embracing of nontraditional forms of political expression increasingly attractive alternatives. Exploring these developments and their consequences will make up the body of this book.
My decision to write The Silent Takeover was not a disinterested one. I needed to make sense of my own growing discontent, my own feelings that things were going awry. How could it be that life had in many ways never been better, yet I and so many around me seemed so troubled? How was it that 1, the daughter of a woman who devoted much of her life to putting women into politics, now saw politics as a coopted, increasingly meaningless arena -- a sideshow whose best act was the farce of the last U.S. presidential elections? How could it be that ten years after landing in Leningrad to set up Russia's first stock exchange -- a traveling saleswoman with an M.B.A. from Wharton in my briefcase -- I now felt a burning need to question its very tenets? Why was it that at Cambridge University's business school, where I teach, when I made it clear that I was willing to supervise on the issues that this book examines, I was deluged with so many requests from students that I couldn't possibly satisfy them all?
We stand today at a critical juncture. If we do nothing, if we do not challenge the Silent Takeover, do not question our belief system, do not admit our own culpability in the creation of this "new world order," then all is lost. As we shall see, inequality of income is bad not only for the poor, but for the rich, too. The steady erosion of government and politics is dangerous for all, regardless of political persuasion. A world in which George W passes law after law favoring the interests of big business, Rupert Murdoch has more power than Tony Blair, and corporations set the political agenda is frightening and undemocratic. The idea of corporations taking over the roles of government might in some ways seem appealing, but risks leaving us increasingly without recourse.
The story will be told through a cast of characters that we shall meet on the way. Granny D, the ninety-one-year-old grandmother who walked across America to champion campaign finance reform; Sister Patricia Marshall, the shareholder activist nun who persuaded PepsiCo to sell off its Burmese bottling plant; Oskar Lafontaine, the former German finance minister whose parting comment on his resignation was, "The heart is not traded on the stock market yet." These are but a few of the voices we will hear.
But this book is not just the sum of their disparate stories; it is the sum of all our stories. We are all in the midst of a corporate takeover, and no gated communities or six-figure salaries will protect us from its impact.
My subject is how the Silent Takeover crept up on us, why it matters, and what we can do about it.
Copyright © 2001 by Noreena Hertz
What People are saying about this
Rosabeth Moss Kanter, Harvard Business School, bestselling author of World Class and Evolve!: Succeeding in the Digital Culture of Tomorrow
Meet the Author
Author, academic, and broadcaster Dr. Noreena Hertz is the Associate Director of the Centre for International Business at the University of Cambridge. She began her career as a Russia expert, and worked for the World Bank in 1992 advising the Russian government on its economic reforms. In the mid-nineties she worked on the Middle East Peace Process with the Palestinian Authority and governments of Israel, Jordan, and Egypt.
With the critically acclaimed publication of The Silent Takeover in England, Noreena Hertz has become recognized as one of the world's leading young experts on economic globalization. Her op-ed pieces have been published in The Washington Post, The New Statesman, The Observer, and The Guardian, and she is a regular commentator on both television and radio. The Silent Takeover has been translated into French, German, Spanish, Italian, Dutch, Korean, Portuguese, and Japanese. The author received her M.B.A. from Wharton and a B.A. in Philosophy and Economics from University College London. Her Ph.D. is from the University of Cambridge. She lives in London.
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