'There are always casualties

'There are always casualties

in winning business ventures'

Yanuar Nugroho
Director, Business Watch Indonesia
Researcher, Unisosdem Jakarta
yanuar-n@unisosdem.org

The head of The Indonesian Control Body for Stock Market
(Bapepam) Herwidayatmo last month stated that the number of
public investors in Indonesia now number only 55,000, down from
1995 when there were more than two million investors.

Herwidayatmo said this is caused by three main factors: The
economy, lack of good corporate governance and investor
disappointment with stock market services. Are these reasons
valid? Let's look at some other facts.

Between 1973 and 1995, the portion of developing countries in
global trading skyrocketed from 6.6 percent to 24.7 percent and
from the mid 1970s to 1996 foreign currency trading jumped more
than 1,000 fold, i.e. from US$1 billion to $1.2 trillion per day.

The UN reported in the Human Development Report that in 1960,
the top 20 percent of the world's richest individuals controlled
70.2 percent of world's business while the bottom 20 percent
controlled a mere 2.3 percent. In 1989, the former had controlled
82.7 percent, and the latter only 1.4 percent (UN, 1992). In the
U.S., the top 5 percent of families increased theirs by 23
percent and the top 1 percent by a whooping 50 percent.

Even in Indonesia, a researcher pointed out that 61.7 percent
of market capitalization is controled by 15 families. Another
study published last year shows that while 51 of the world's 100
largest economies are now corporations, only 49 are nation-
states.

We might have not seen what the process of the above mentioned
capital and profit accumulation contains. The writer Ellwood
(2001) reveals that since 1950 global business output has soared
from $3.8 trillion to $18.9 trillion, a nearly five-fold
increase. This means we have consumed more of the world's natural
capital in this brief period than during the history of mankind.

William Rees (2001), an economist and ecologist estimates that
around 10 acres to 14 acres (4 hectares to 6 hectares) of land
are used for the consumption of the average person in the West;
yet, the world's total available productive land is about 4.25
acres per person. The difference is what Rees calls "appropriated
carrying capacity", which basically means that the rich are
living off the resources of the poor.

According to the World Bank (2001), in 1960 gross domestic
product in the richest 20 countries was 18 times that of the
poorest countries. By 1995, this gap had widened to 37 times.
About 12 economies in Asia and Latin America account for 70
percent of exports from the developing world and absorb almost 80
percent of investment flow to the developing world and receiving
more than 90 percent of the portfolio investment flow.

Clearly, free trade-centered globalized distribution of
benefits and cost are unequal. This is indicated by market
exchange rates and purchasing-power parity, as the global gap
becomes rapidly wider.

Ellwood (2001) again states that The World Conservation
Union's (IUCN) 2000 Red List of Threatened Species warns that the
global extinction crises is accelerating, with dramatic declines
in the populations of many species.

IUCN sees habitat loss, human exploitation and invasion by
alien species as major threats to wildlife. In the last 500
years, human activity has led to the extinction of 816 species --
while scientists calculate the normal extinction rate is one
species every four years.

It is more likely that this situation is not caused merely by
globalization. This would entaiil a a business phenomenon rising
up as the result of a more intensive interaction in the trade,
financial transaction, media and technology sectors, with a
single goal: Capital gain and profit accumulation.

To accumulate profit, business practices are attempting to be
released from adhering to rules that take into account production
location, capital sources, environmental concerns, technology,
local people's participation, etc.

Corporations are more often than not granted dispensation from
these rules, becoming a privileged class unto themselves. In the
current climate of globalization, businesses can unaccountably
reject labors' demands or put the squeeze on government
regulations by investment boycott or threatening to relocate
operations from one country to another, where lax regulation
enforcement promises a better environment for quick and dirty
profit accumulation.

Capital flight without regulation or penalty finally turns
into the most deadly weapon freely given to business. The capital
flow in East Asia in 1996 was $93 billion, but just a year later
flew out in higher amounts: $105 billion (UNDP Report, 1999).
Lay-offs happen more frequently without regard to the work
performance of laborers.

Recently, for example, to maintain its dividend and profit,
Reebok Indonesia abandoned its contract, planning to leave its
investments in Indonesia while looking for a new country to
invest in. More than 11,000 workers are now facing lay-offs --
Nike and other shoe factories in Indonesia may follow suit.

These illustrations reflect the main force driving current
business practices. The economist Theodore Levitt in 1958 and
Milton Friedman in 1962 had already declared that "business has
no other responsibility other than the accumulation of profit".
This current global mantra involves at least three aspects.

First, at the very center of global business practice are the
transnational businesses of trade, finance, media, bank,
transportation, etc. Second, the main actors are business people
mainly in the many transnational corporations (TNCs). Third, the
current pace of globalization can only be maintained by expanding
the ideological culture of consumerism.

The fact that the chief executive officers (CEOs) of hundreds
of TNCs have control over globalization is indeed inescapable.
And those with no access to assets and capital are stranded in a
world owned and controlled by these people.

Beyond all this is simply power. At the heart of the
deregulation projects of the neo-liberals, there lies the
deregulation of the reaching-power of capital and financial asset
owners. Removing various business operation rules is delegating
privilege and vast power to them. Business has thus become
immensely powerful to an earlier unimaginable level: The literal
capture of the legitimate power of government.

We might now be able to understand why the legitimate
authority of government to manage our shared life is more and
more silently being taken over by the power of business. Just
when we really need the government to address so many complicated
issues, it has become powerless, as in Indonesia and many other
developing and developed countries -- including the United
States. For a shared life, a powerless government controlled by
business corporations is as at least as dangerous as a repressive
one.

We are often treated to propaganda when businesses open. "Our
business will bring wealth to our society. We provide good
paying, local-hire jobs and preserve the environment." Then,
after laying-off hundreds of people and destroying entire
ecosystems, they will say, "So sorry, there are always casualties
in any successful business venture".