Global South Lecture 8: November 16, 2007 Corporate Power and Globalization

Recap Last week we tried to explore the link between corporate wealth and national development We saw that the link is not automatic, but may come about through particular forms state interventions

Contrasting models  We looked at two models – India and South Korea  In India, high profits, low economic growth, low wages, some gains in political rights of workers  In South Korea, low profits, high economic growth and expansion of productive capacity, falling income inequality, limited or no political rights during the period of growth

Large corporations  Complementarity between ‘physical’ and ‘human’ capital  Between ‘tangible’ and ‘intangible’ capital  This is what brings about increasing returns to scale  Google’s growth 

South Korea  The connection between corporate growth and national development was established by the developmental state But what happens when the state does not intervene or withdraws from intervention? Is there still a link between corporate growth and national development?

Globalization  The advocates of globalization argue that and even stronger link can be established between corporate growth and national economic growth when states do not regulate or discipline business or do so minimally.  Is this the case?  Are corporations in this ‘global’ era creating national growth?

Caution  We are only talking about national economic development, with some rise in wages and reduction in income inequality  Many may not think of this as development (but we leave that debate until later)

Globalization and corporate wealth  What is globalization?  David Held et al: David Held et al: “Globalization can usefully be conceived as a process (or set of processes) which embodies a transformation in the spatial organization of social relations and transactions, generating transcontinental or interregional flows and networks of activity, interaction and power”.  Noam Chomsky Noam Chomsky

How are corporations doing?  In the list of the top 55 economic entities, 14 are corporations  Volkswagen is about the size of Venezuela, and Wal-Mart is about 2.5 times  World’s largest list World’s largest list

What is the source of this wealth?  Schumpeter: Innovation  Adam Smith: Division of Labour  Marx: appropriating surplus value from the labour of others  Dependendistas: colonial ‘unequal exchange’  Feminists: ?  Harvey: Accumulation by dispossession  Any others views? So what happens during globalization? Profits come from which of these sources?

Compare  Compare with an earlier era:  Henry Ford and Fordism

The Fordist formula  Fordism had several characteristics:  Product Innovation  Division of labour : the assembly line (process innovation)  Political control

Ford’s Policies  in 1914 Ford announced that he was going to pay $5 as daily wage (double the national standard)  reduced the working day from nine hours to eight  ‘bought’ worker loyalty to his cars

Fordism  “Fordism” thus came to refer to the strategy of profiting from a high-wage economy, by producing commodities for the ‘masses’ as cheaply as possible by the application of assembly line techniques, and buying worker loyalty for its products.  Fordism is believed to have been behind the rise of the US as the dominant capitalist power by the end of WWII. History (1) History (2)HistoryHistory (2)

To ponder:  Who best explains the source of Ford’s profitability  Schumpeter, Smith or Marx?

What changed during Globalization?  Gereffi: Commodity Chains  What is a Commodity Chain?  What is the source of profit in a commodity chain?  Note: now we speak more of “value chains” than “commodity chains”

How does this affect: (1) National economic development? Q. Under the commodity chain regime, do national governments in the developing world act like developmental states? (Recall Kicking away the ladder) (2) How does it affect development understood more broadly?

How do these organizations create wealth?  Blackwater  Haliburton  Wal-mart  Google  Microsoft  Mondragon Who is most relevant – Smith? Schumpeter? Marx? Harvey? all of them in combination?

UN Global Compact “Business, trade and investment are essential pillars for prosperity and peace. But in many areas, business is too often linked with serious dilemmas - for example, exploitative practices, corruption, income equality, and barriers that discourage innovation and entrepreneurship. Responsible business practices can in many ways build trust and social capital, contributing to broad-based development and sustainable markets”.

UN’s ten principles Link What do these principles seek to affect? How would they affect: Development? national economic growth? jobs? Social relations? World orders?

Historical structures (Cox) Social forces Land relations? Industrial capitalism? Forms of state Democracy/dictatorship “developmentalism” World Orders Hegemonic/non-hegemonic