World must know business does not rule, politics not dead

Philippe Legrain, Author, 'Open World: The Truth about Globalization', Guardian News Service, London

Progressive politics ought to be about hope: That we can create a fairer society where everyone can make the most of their potential. Yet the prevailing mood on the left is despair. Globalization, many believe, is leading the world to rack and ruin -- and there is little we can do about it. American-led corporate power is elbowing aside government and trampling on democracy.

Critics such as Naomi Klein, Noreena Hertz and George Monbiot claim that companies run the world. Their brands are colonizing our minds. Their sheer size gives them clout. Their financial muscle bends elected representatives to their will. Their freedom to shift factories from country to country disempowers workers. The governments we elect connive in this, either because they are in the pockets of big business or because their power has leached away. So our votes are useless. In place of democracy, we face a grim choice between apathetic acquiescence and doubtless futile resistance.

This is dangerous claptrap. Start with brands. If they are so powerful, why couldn't Coca-Cola convince us to drink New Coke? Why does own-label cereal outsell Kellogg's? The grip of Nike shoes hardly compares with that of patriotism or love. Although some susceptible people, mainly poor kids, may unfortunately be gulled into spending money they can ill afford, this hardly means brands are conquering the world.

Brands are actually signs of corporate weakness, not strength. It is only because fickle consumers have so much choice that companies try to woo them with their branding. Monopolists needn't bother. Moreover, companies that are trying to sell an image or a reputation are incredibly vulnerable to anything that is perceived to damage them. Remember how Shell caved in to a handful of Greenpeace activists over the disposal of the Brent Spar oil platform? As companies increasingly make a virtue of being "socially responsible" -- of being good to their employees, the environment and the community, rather than mere money-making machines -- their vulnerability can only increase. Thus, brands, far from being vehicles for corporate global domination, give people unprecedented sway over companies' behavior.

Corporate power is much exaggerated. Take the oft-repeated "fact" that 51 of the 100 biggest economies are corporations. It is arrived at by comparing companies' sales and countries' gross domestic product (GDP). But this double-counting inflates companies' importance, since one company's inputs are another's sales. A less misleading comparison -- between companies' value- added, the difference between their sales and the cost of their inputs, and countries' value-added, their GDP -- reveals that only two companies make it into the top 50 value-added creators.

In any case, inferring from companies' size that they are as powerful as countries is fatuous. Whereas companies have to attract workers and capital that are free to go elsewhere, countries can impose taxes and regulations: mighty Exxon Mobil pays taxes even in tiny Luxembourg. Supposedly footloose companies cannot, in fact, easily escape governments' writ: They are tied to places in many ways -- by their customers, a skilled workforce or the good roads, schools and hospitals that our taxes pay for. Even if companies became more mobile, governments could collude to nab them, by cooperating over tax raising, for instance.

Companies that fail to persuade customers to buy enough for them to earn sufficient profits to pay shareholders and workers an acceptable return go bust or get taken over, whereas even failed states rarely disappear. The only "companies" with powers remotely comparable to those of states are the drug cartels: Colombia's earn billions of dollars a year, control parts of the country, have private armies and operate outside the law.

Wal-Mart seems puny in comparison. Indeed, because it faces fierce competition from other retailers, it has less scope to mark up its prices than the only shop in an isolated skiing village. Competition can constrain even the biggest companies -- one reason why globalization is such a good thing. Closed domestic markets, where national champions can cosy up to government, are much more likely to be monopolized than open global ones. So even though global companies are bigger than before, they are not necessarily more powerful. It is the absence of competition, not size, that gives companies clout.

If companies were taking over the world, you'd expect them to be grabbing a bigger slice of the economic pie. They exist, after all, to make profits. Yet from a recent cyclical peak of 12.6 percent of GDP in 1997, U.S. corporate profits fell to 11 percent in 2000 and 9.3 percent in 2001 -- in line with the average over the past 50 years of 10.5 percent.

Of course, companies sometimes have an undue influence on governments. So money and politics should be kept as separate as possible and government conducted more openly. Yet business has a right to lobby governments, just as trade unions, environmental groups and individuals do. This does not imply that governments are companies' lackeys.

Governments can -- and do -- tame the corporate leviathans. The European Commission stopped giant General Electric from buying Honeywell. The U.S. government nearly broke up Microsoft, which is still being prosecuted by U.S. states and investigated by the European Commission. Business has to abide by a battery of legislation on workers' rights, product liability, health and safety, environmental protection and much else.

Where governments fear to tread, lawyers do not: Each year people start almost 2 million lawsuits against American companies, which pay out damages of around $150 billion a year. Last but not least, taxes on company profits have steadily risen as a share of rich OECD countries' GDP: From 2.2 percent in 1965 to 3.3 percent in 1999.

The truth is companies are not running the show. We are still free to determine our future -- as individuals, as groups of like- minded people and through the power of our elected governments. If people really wanted to, they could reverse globalization -- as they did in the 1930s, with catastrophic consequences.

Globalization is a choice, not an imposition. Progressives should embrace it because it makes us richer -- in the broadest sense -- and allows governments to spend more on schools, hospitals and helping the underprivileged. It does not imply that Britain has to become like America: Sweden's economy is far more open than Britain's, yet its welfare state is second to none. Globalization comes with several options: We can to a large extent pick and choose what kind of globalization we want. Don't burn your Nikes: Politics is not dead.