'There are casualties in successful businesses'

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".