When Corporations Rule the World Unit V By David Korten MBA and Ph.D. of Stanford Business School Teaching at Harvard Business School

Agenda Summary Ethical Issues Critique Personal Perspective Possible Improvement References

Summary Part 1: Cowboy in a Spaceship -Outlines of the argument -He claims that economic “growth has done nothing to reduce the proportion of the population who live in absolute poverty;” Korten suggests focusing on two priorities: 1.Environmental sustainability and 2.Equal allocation of resources to create equal opportunity for all people

Summary Part 2: Contest for Sovereignty -Corporations are becoming dangerously powerful with no accountability -Privatization, deregulation and free trade are contributors to globalization Talk about how corporations have become one of, if not the most, dominant form of control in the world today. This is partly due to the influence of economic theories that have been twisted to support the development and reliance of corporations, as well as the trend towards capitalism.

Summary Part 3: Corporate Colonialism - Multinational companies are the main drivers of globalization and are not focused on human interests - “The greater the political power of corporations and those aligned with them, the less the political power of the people and the less meaningful democracy becomes.” Korten argues that global corporation have forced governments to compete against each other to the point where some private costs of the corporation are transferred to public costs. An example is in the US with the GM bailout, where GM was viewed as too big apart of the economy for the US to lose so they used tax payer money to save them from bankruptcy.

Summary Part 4: A Rogue Financial System Money has become delinked from value and has become almost a pure abstraction. “The world’s corporate giants are creating a system of managed competition by which they actively limit competition among themselves while encouraging intensive competition among the smaller firms that make up their periphery.” - Discuss how the concepts of money and value have been disconnected over time, partially due to investment playing a large role in the economy, and with this a greater reliance on groups or companies investing money instead of using it yourself. Main point: Because of the development of things such as investment, people now have an even greater reliance on the corporation. People develop a personal reliance on a company or corporation’s success because they have invested money into them, so now there is a vested personal interest in the success of a corporation beyond the economic control and resources it already possesses in that person’s life.

Summary Part 5: No Place for People -In the global free market, social responsibility is not valued. In order to attract investment, nations and communities compete to lower wages and living standards. - “It directly creates a world in which social bonds are destroyed and people and human values have no place.” Korten argues that global corporations are only focused on profit and use developing countries against each other to bid down the price of wages and working conditions so they can produce their goods cheaper.

Summary Part 6: Reclaiming Our Power Korten’s solution for globalization “The appropriate organizational form for the ecological era is likely to be a multi-level system of nested economies with the household as the basic economic unit…… Embodying the principle of intrinsic responsibility, each level would seek to function, to the extent that it is reasonably able, as an integrated, self-reliant, self-managing political, economic, and ecological community.” Encourage the decentralization of power that currently exists within corporations and companies. Instead, power should be distributed more evenly within small groups or local businesses. Korten believes that in doing so, the monopolization and self-interest that is generated by corporations in the current economic model would be replaced with a culture of knowledge-sharing and cooperation in order to accomplish tough goals or large projects. This would also encourage cultural diversity, and Korten recommends a shift towards sustainability and away from overconsumption, as well as some alternative to current economic issues such as taxation systems and financial institutions.

Summary Main Points: Anti-globalization: Globalization has harmful effects on politics, society, and the environment and giant international companies have become dangerously powerful. The gap between the rich and the poor continues to grow -The new global citizens movement of activism: the efforts of civil society groups to restructure global economic governance and focuses on the role of spirit and culture in a "civil-ized" society 1. Korten’s main points are anti-globaliation has many harmful effects so the benefits are not worth the costs 2. He also argues that there is an unfair dispersion of wealth and the gap between the rich and the poor is getter wider

Ethical Issues-1 Economic Systems and Justice Korten uses an End-State approach to evaluate the current capitalist system and deems it immoral Distributive Justice: The capitalist system in the states has an uneven dispersion of wealth Distributive justice: justice in allocation of benefits & burdens, is often thought to be the most important moral component of any economic system. Ie. Unfair that some are rich and some are poor Korten focuses heavily on the fact that in this system, a select few prosper heavily from the burden of many. Additionally, due to the nature of corporations and globalization, these roles aren’t just created, but also reinforced. The wealthy get wealthier, the middle class stays relatively the same, and the exploited grow to rely upon corporations due to them taking over and influencing areas, leaving no room for other opportunities. Argues that the power disparity between corporations and other groups of people is too much of gap and can lead to unethical practices in the pursuit of monetary gain or control.

Ethical Issues-2 Corporate social responsibility Global corporations exploit workers in developing countries leads to countries losing their sovereignty Global corporations tend to lose their focus on environmental sustainability Corporate social responsibility: a corporation has some ethical obligations to the community and the environment along with the stakeholders 1. The company is responsible to the workers and this is not being done by all the global corporations around the world. Examples of this are sweat shops operated in poor working conditions where workers are exploited and paid minimal wage. This also effects workers in the country which the corporation is based because they are losing work to workers in other countries. 2. Countries also lose sovereignty as a result of globalization which could be seen as loss of freedom. An example of this is US run factories in China and how China deals with US inspection and running of these factories 3. The corporation is also responsible to the general public and the environment. They should be focusing on such things as pollution and waste and acting in a ‘green’ way

Critique Capitalism vs. Socialism: Korten has some good basic ideas for dispersion of wealth but his argument is unrealistic Example: Canadian Model, ICBC and BC Hydro Without globalization prices would be higher and society would be worse off Globalization helps promote political allegiances through trade agreements Globalization leads to increase in technological advancements and sharing of resources Matt: Points 1 and 2: - While Korten provides some perfectly valid points, he goes too far in his deconstruction of capitalism to a point where it borders more closely on socialism. The simple replacement of one flawed system(Capitalism) with another(Socialism) in of itself is not sufficient to establish a more morally correct system. - While Korten’s various misgivings of globalization are understandable, he also understates the positive effects that it carries as well. For example, while Korten recommends a decentralization of power to smaller groups, this would make it harder to mass produce items or restrict the amount of resources they would have access to. This means that many items that we take for granted, even things like groceries, would have to cost more to compensate for this. Michael: 3. Globalization also promotes political alliances through trade agreements like the World Trade Organization and this can lead to peace between countries, An example of this is the free trade agreement between Canada and the United States 4. Globalization also helps with increasing technological developments as corporations can use resources found world wide. Without Globalization there would not be things like Walmart all over the world or maybe such developments as laptop, or at least the laptops made would be of lesser quality and sold at a higher price

Book Evaluation Passion for the topic Polarizing; people either strongly agree or disagree “Bible of anti-globalization” Raises ethical questions about our current global capitalist system Matt: Points 1 and 2: - While Korten provides some perfectly valid points, he goes too far in his deconstruction of capitalism to a point where it borders more closely on socialism. The simple replacement of one flawed system(Capitalism) with another(Socialism) in of itself is not sufficient to establish a more morally correct system. - While Korten’s various misgivings of globalization are understandable, he also understates the positive effects that it carries as well. For example, while Korten recommends a decentralization of power to smaller groups, this would make it harder to mass produce items or restrict the amount of resources they would have access to. This means that many items that we take for granted, even things like groceries, would have to cost more to compensate for this. Michael: 3. Globalization also promotes political alliances through trade agreements like the World Trade Organization and this can lead to peace between countries, An example of this is the free trade agreement between Canada and the United States 4. Globalization also helps with increasing technological developments as corporations can use resources found world wide. Without Globalization there would not be things like Walmart all over the world or maybe such developments as laptop, or at least the laptops made would be of lesser quality and sold at a higher price

Personal Perspective Globalization has some negative ethical qualities but it is essential to growth in technology and stability in our economy Government regulations could be put in place to put an emphasis on ethical issues for multinational global corporations Importance of the Book/Summary of why we reviewed the book the way we did: We decided to review the book section by section because Korten himself divided his books in those same sections, with each one consisting of around 4-5 chapters, making for a straightforward analysis of the book. The book itself has been highly regarded in the economic community, being referred to by some as the “Bible of the protest against the globalization movement”. Due to it’s highly anti-capitalist/globalization tone, it has generated a lot of responses from people who disagree with his views, making for an extremely polarizing piece of literature in the business world. Main Points: While Korten’s book helps shed some light on the ethical issues that corporations and globalization brings about, we still feel that both have an integral role in the current economy, and it’s just not feasible to maintain a stable economy without globalization in the current state, and any changes would have to be implemented long term. Globalization and corporations also lead to increased quality of products in a bid to outdo each other. Rather than many small firms pushing out a similar product, we end up with things such as Microsoft and Apple constantly trying to outdo each other in order to get the attention of the consumer. In order to combat some of the issues with the current system, we believe that, ideally, governments could attempt to implement some regulations to restrict the power that corporations currently exhibit.

Possible Improvements Korten could consider changes in the current capitalist system that are not so radical Could implement changes such as strict environmental regulations and fair workers’ compensation Korten seems to overlook the fact that using a Utilitarian approach the benefits of Globalization are greater than the costs 1. Korten goes over the top with critiquing the capitalist system when some things that he could consider that aren’t so dramatic are things such are more government run corporations and a good well fare system. An example of this would be similar to what we have in BC with healthcare, public schooling, bc hydro, bc transit, icbc and well fare 2. Balancing out the good and the bad consequences, globalization is necessary for economic growth. Some of the things that he cites as being negatives can also be seen in a positive light as it can be argued that in the exploitation of workers at low wages might still be better than them not being able to find work at all. The other arguments mentioned in our critique such as globalization lowering prices and leading to more growth and technological advancement, seem to outweigh the costs that our environment can be negatively impacted and workers can be paid unfair. This can be addressed though by putting in place strict policies for environmental regulation and fair worker compensation

References http://nooventures.edublogs.org/2007-11-04-when-corporations- rule-the-world-by-david-korten/ http://livingeconomiesforum.org/ http://www.mapcruzin.com/rev_corp_rule.htm http://www.reclaimdemocracy.org/book_review/when_cor porations_rule_the_world_korten.html http://deoxy.org/korten_assault.htm “When Corporations Rule the World” by David Korten Business Ethics by Richard T. DeGeorge

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