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According to a tweet by X (previously Twitter) that was posted in October 2023, shortly after the start of the Israel-Hamas conflict, McDonald’s of Israeli origin donated money to the Israel Defense Forces, and another from Oman, McDonald’s, donated money to the Gaza Strip. This tweets suggests that corporations are participating in proxy wars with their own networks. This has interesting implications for our modern world. The conflict has seen aid programs from different branches of the same fast food chain being placed on opposite sides.
A corporation’s actions can have a direct impact on the outcome of wars. During an operation in Crimea, the AFU flew explosives-laden drones towards the Russian fleet when their internet connection went down, causing them to plunge into the water in 2022. It was later revealed that Elon Musk had instructed his team to disconnect the Starlink satellites near the peninsula. According to the billionaire, space giant SpaceX would have been involved in that war and escalation of the conflict.
This episode is a reflection of the extraordinary influence that private companies have gained in the 21st century. They determine what you eat, what you can post online, how you are treated, and where you live.
Corporatocracy is a type of society where private companies hold all the power in the world, not governments. And we are, in fact, much closer to this reality than ever before. The world’s 200 wealthiest economic entities in 2018 were comprised of 157 corporations, with the remaining entities being governments.
During my investigation, I explored how these major corporations have gained such potency and where it may lead.
This letter will take you about 15 minutes to read, almost 20,000 characters.
The text consists of an introduction and three chapters. We will begin by describing how corporations, which are large-scale enterprises that generate more revenue than nations, came into existence. Following that, chapter one will examine how companies impact the modern world and where they gain their influence. The second chapter examines how employers, as well as Google and Meta, have subjected individuals to ‘golden handcuffs’. In the third chapter, we explore the possibility of a future where the world’s biggest companies could potentially hold seats in the United Nations instead of individual states.
Introduction: How Large Corporations Came to Be: A Brief History
Two primary factors that led to the growth of large companies in the first half of the 19th century were the expansion of European markets after the Napoleonic wars and the development of railroads. During the “Gilded Age,” which was from 1877 to 1900 in American history, the first corporations in modern terms emerged that clearly separated the roles of owner and manager.
The foundation for the growth of transnational corporations, which operate in multiple countries simultaneously, was laid by U.S. President Ronald Reagan and British Prime Minister Margaret Thatcher in the 20th century. Removing taxes, cutting social programs and accelerating privatization were among the policies implemented by the Reagan and Thatcher administrations as part of a neoliberal approach.
These reforms, as argued by economist Jeffrey Sachs, in the 1980s played a role in the growth of corporate power in the United States, also known as corporatocracy. Large companies now have a significant impact on various aspects, including politics. The decision-making process for both the Democratic and Republican parties is influenced by their participation. Two agricultural giants, Monsanto and Cargill, are prime examples of this influence. Through lobbying and political contributions, they have a strong connection and influence state policy in areas such as subsidies, GMO regulation, and trade agreements.
According to Sachs, the emergence of corporatocracy was due to the active participation of local officials and businessmen in national affairs, with local companies exerting influence. Other reasons include the establishment of a’megalobby’ by the military-industrial complex after World War II, corporate sponsorship of election campaigns and globalization.
‘Revolving door’ principle influences the creation of corporatocracy in the U.S., where employees move from government agencies to private companies and vice versa. This results in businessmen playing a significant role in politics and politicians showing interest. In other words, as Sachs writes, ‘wealth begets power, and power begets wealth.’ There are many instances of’revolving doors’ in American politics. The list includes senators who left to work for lobbying companies, as well as former U.S. Vice President Dick Cheney, a former vice president and manager of the Halliburton Company, one of the largest oil firms in the country, between his political appointments.
During the 1980s, technological change was spurred by rapid expansion of corporations. By being extremely large, IT companies now profit from the concept of’returns on scale.’ Ruben Enikolopov, a professor at the Spanish University of Pompeu Fabra and an economist, suggests that the more people using the Google search engine, the more effective it is, as it is subject to frequent corrections of inaccuracies.
Chapter 1: How Corporations Wield Their Power
For a long time, private enterprises have earned more than whole nations. American retailer Walmart is the world’s largest corporation and in 2022 had revenues of $611 billion. This amount exceeds the revenue of all but eight countries in the world, including the United States, China, and Germany. When compared, Canada’s revenue in 2022 was $422 billion.
This phenomenon is not exclusive to Walmart. General Motors, a car manufacturer, has earnings that exceed those of entire nations like Finland, the UAE, and Israel. Shell, an oil and gas corporation, has comparable profits to those of South Korea, the Netherlands, and Norway. Many other companies are continuing this pattern.
Even though citizens of these countries may exercise some power over their statehood and personal lives through elections, the clients of these corporations have little say. Nick Dearden, the head of the British non-profit organization Global Justice Now, highlights that citizens have limited means to hold corporations accountable for breaking laws. Instead, companies use trade and investment as a means of exerting influence over governments.
Two main methods of achieving this are donations to political parties and presidential candidates, as well as lobbying government officials to influence decisions on policy matters. Lobbying occurs worldwide, but is seldom regulated.
For instance, from the 1950s to the 1980s, tobacco companies in the United States financed research that challenged the dangers of smoking and donated millions of dollars to both the Democratic and Republican parties. Its purpose was to prevent the country from prohibiting tobacco advertising and sales. This form of lobbying is still being practiced today, with U.S. companies spending over four billion dollars in 2022 alone.
It is worth noting that the focus of this discussion is primarily on the United States. This is because the majority of world’s biggest corporations are situated there. In fact, 74% of companies with revenues over one billion dollars are located in just 10 countries, with 595 in the U.S., 297 in China, 195 in Japan, 65 in South Korea, and 58 in Canada.
It is worth mentioning that Wall Street, oil and pharmaceutical companies, as well as military-industrial complex (MIC) corporations, have a significant impact on American politics. According to article on the arms trade, military-industrial corporations profit from global conflicts by selling weapons to both sides of a conflict. Therefore, U.S. military corporations made significant efforts to shift the Vietnam War into a more active phase. The growth of the conflict enabled them to boost production and, as a result, profits.
Throughout the twentieth century, the American public transportation system was subject to constant lobbying from oil and gas companies, which ultimately led to the decline of railroads. In alliance with automakers, they persuaded several presidential administrations to direct funds towards the construction of highways and wide streets. Therefore, new streetcar lines and subways were not constructed across the nation. Presently, the United States has the second-highest carbon footprint in the world.
Also, US pharmaceutical companies have a lot of power, including the ability to set drug prices independently. The cost of insulin for diabetics increased by 200% between 2007 and 2018. Unless they are insured, patients must spend at least one thousand dollars every month to avoid death. The cost of a vial of the drug in the US is 99, while it costs between 8 and 11 dollars in EU countries. This report discusses the legislation in Europe’s countries that requires companies to sell life-saving drugs at a set price.
It also demonstrates how corporations misuse the power of their power to avoid taxes. Offshore companies are estimated to deprive the government of over 500 billion dollars annually, which is almost equivalent to Canada’s annual budget. The economies of developing countries are worst affected by the lack of effective tax authorities, which cannot identify intricate tax evasion schemes.
Powerful corporations violate human rights globally with impunity, using paramilitary groups to beat and even kill workers, funding wars, and ruining farmers. The task of holding them accountable is exceedingly difficult.
Due to legal barriers, actions committed in one country may not be criminalized where the transnational corporation is registered. The weak legal framework in developing countries, where most of the violations occur, makes it difficult to investigate and prosecute multinational companies. Additionally, international law lacks enforcement mechanisms and only provides recommendations. Multinational corporations are major investors and employers in developing countries. Governments of these countries act cautiously to avoid scaring away foreign investment.
In some countries, the poor suffer due to the actions of transnational corporations, while in others, the rich get richer. Economist Jeffrey Sachs summarizes. Over the course of 30 years, this corporatocracy has created a class of wealthy Americans (1% for those with annual incomes exceeding $400,000 a year) and super-rich Americans (0.01% for those with annual incomes exceeding $8 million a year).
Since 1980, the income of wealthy Americans has increased by 226%, while middle and lower-class earnings have increased by no more than 85%. This pattern is also evident in European nations.
In the 21st century, IT corporations are some of the most influential companies globally. Meta and Google hold a massive amount of information about almost every individual on the planet. They can sell personal data without users’ consent and dispose of it at will.
Moreover, these corporations establish their own content moderation policies, which can be highly selective. The restriction of former US President Donald Trump’s Twitter, Facebook, and YouTube accounts in 2021 sparked significant controversy. However, the accounts of the Chinese embassy in the United States, which promoted fake publications about Uighur women, and the blog of Iranian Ayatollah Ali Khamenei, which spread conspiracy theories, continued to exist on these platforms.
Chapter 2: How Life Outside Corporations Became an “Impossible Hell”
A life without constant interaction with corporations is not possible in today’s world. If you’ve read this letter, then you probably have used the products of multinational technology giants at least twice today: when you first started your computer and when you opened your email client.
Jerrold Nadler, a Democratic congressman, likened modernity to a “gilded age” where IT companies are as heavily dependent as railroads were in the past century. In 2019, a journalist from The New York Times tried to live without the five major IT corporations (Amazon, Facebook, Google, Apple and Microsoft) for a month and a half and called the experience “an impossible hell”.
From an economic point of view, it is difficult to measure the dependence of users on Big Tech companies (the collective name of the largest and most influential U.S. companies in the IT sector), emphasizes economist Ruben Enikolopov in a conversation. According to him, it is quite easy to analyze the “dry” value of, for example, oil – you need to take the cost of one barrel and multiply it by the required total quantity. In the case of digital services, everything is more complicated, because social networks are free.
Therefore, researchers have to resort to hypothetical scenarios: for example, in 2018, scientists from three American universities asked volunteers how much money they would take for giving up IT products. Participants in the research paper estimated a year-long ban on Google Maps at 3.6 thousand dollars, the refusal of e-mail – in 8.4 thousand, and the discontinuation of the use of the Google search engine – 17.5 thousand.
Corporations from the BigTech sector possess power that even the largest countries in the world are forced to reckon with. Elon Musk’s companies are a prime example. The White House publicly condemns the billionaire for “disgusting propaganda of anti-Semitic and racist hatred,” yet at the same time, it enters into a contract with SpaceX for 1.2 billion dollars. This money will be used to launch Pentagon objects into space and establish a “Star Shield” – a secure communication system for the US Department of Defense based on Starlink satellites.
In undisclosed discussions, officials from President Joe Biden’s administration emphasize that Starlink satellites are more resilient against China’s efforts to disable them than any communication equipment from the Pentagon. The American government literally depends on Elon Musk – and they have no alternatives.
SpaceX’s monopoly gives Elon Musk direct leverage over American authorities. For example, knowing his indispensability, the billionaire hypothetically can exert pressure on the presidential administration and other government agencies to ease the tax burden on his company. He can use a threat of blocking access to Starlink if his interests are not taken into consideration.
Not only governments but also individual people depend on corporations. This became especially noticeable after the 2008 financial crisis. Trying to regain society’s trust, companies started paying more attention to their employees. This was particularly evident during the COVID-19 pandemic, when over 40% of the largest American companies provided paid leave to individuals who contracted this new virus.
Yet, the actions of corporations result in a new level of dependency. Large companies de facto become alternative states, assisting people in essential areas of life. For example, in housing – companies like Google, Tesla, Disney, and Meta invest billions of dollars in building homes for employees, which they can buy at below-market prices. Walmart provides employees with the opportunity to obtain interest-free loans for buying a flat, and Starbucks assists with the down payment when buying a house.
Healthcare is also affected by this, as corporations provide employees with medical insurance and cover health expenses. Siemens provides medical insurance with preventive programs, and Apple has established medical centers that are exclusively for its employees.
As a result, employees become dependent on their employers. Upon termination, such a person loses not only their income but also subsidies for housing and medical insurance (often for their family members as well), and often even legalization in the immigration country if the company helped them with relocation.
In the 1970s, economists referred to this as “golden handcuffs.” This term is used to describe a situation where an employee is tightly tied to a company through incentives and benefits, even if they are unhappy with their current job.
There is also another threat to people from large companies, which is monopolization. It is beneficial for corporations to come to a compromise and prevent smaller companies from entering the market. In developing countries, oligarchs often effectively halt market development in this way, after which “capitalism for themselves” begins to operate. For example, in Russia in the 1990s, success in business was guaranteed by proximity to Yeltsin’s “family,” and in the 21st century – to Putin’s friends.
Luigi Zingales and Raghuram Rajan, authors of “Saving Capitalism from Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity,” point out that a careful balance is necessary for encouraging competition through cautious regulation. It is important for states to protect free markets by implementing fair courts that treat transnational corporations and small startups equally.
The Big Tech sector is accused of monopolizing the market by corporations, as stated by economist Ruben Enikolopov. Large corporations essentially buy out rivals. The most remarkable instance is the Facebook acquisition of Instagram and WhatsApp. In essence, one company dominates the social media market and another occupies control of search engine.
According to Enikolopov, the laws of a functioning free market are violated by this action. Users are negatively affected by monopolization as it leads to a lack of alternatives, lower quality (in a monopoly, companies have less motivation to develop), price increases, and imposition of conditions. There is no other choice – people have to accept it.
Chapter 3. What Will the Future Be Like When Corporations Have Taken Over Everything
Corporations subordinate themselves and all the world’s resources. An international group of scientists in 2019 noted: a small core of superpowerful corporations has become the dominant force controlling agriculture, marine and forestry industries, mineral extraction, and energy resources. It has been reported by researchers that just 100 companies contribute to over 70% of global greenhouse gas emissions. Essentially, the planet’s biosphere is already controlled by corporations.
The outlook for the future with corporations in control is split, but there are several adverse scenarios. Some researchers of corporate governance, such as Harris Gleckman from Massachusetts University in Boston, fear the literal takeover of the world by private companies. He writes that the “future is in danger,” and soon large companies will be invited to make decisions at the UN on par with states.
After that point, private governing bodies will replace the representations of countries,” Gleckman said. The scientist sees the prerequisites for this in the mechanism of “multilateral partnerships,” which the UN has already initiated. According to it, decision-making on global issues, including ocean management and financial market regulation, should be done jointly by corporate leaders, governments, and NGOs.
In turn, economist Ruben Enikolopov considers the threat of Earth being exclusively controlled by corporations unlikely. “The state is not an abstraction; it consists of people who sense potential threats. No politician wants to lose their influence. Whenever an organization gains excessive power, the state’s regulatory mechanism is activated, as stated by the expert.
According to him, Ireland is a country that offers low taxes and has become a hub for numerous transnational IT companies. “They could pressure the Irish government into significant tax breaks, but the US and the EU won’t allow that. I would express the thoughts of officials like this: ‘Have you completely lost your mind? You’re not going to pay anything, and you’re going to launder everything through Ireland? No, that won’t fly,'” Enikolopov explains.
There are also those who believe that the best world will come precisely thanks to corporations – among them, for example, Alex Weitzel, Director of Strategy at the American consulting company RampRate. He acknowledges that many companies contribute to the climate crisis, negatively impact healthcare, supply weapons to dictators, and sponsor coups, and “their negligence and greed kill and will continue to kill people.”
However, Weitzel is convinced that corporate mistakes lead to fewer side effects than government blunders. According to him, the increasing authoritarian tendencies in the world testify to this – “governments are ineffective and paralyzed, while corporations constantly improve thanks to new management systems.”
In the 1988 thriller “They Live,” the protagonist finds sunglasses that allow him to see the true world – slogans like “Obey,” “Consume,” “Marry and reproduce,” “No independent thoughts,” “Watch TV” are written on corporate billboards. Money declares: “This is your God.” In the film, this is explained by aliens taking over Earth, who have ensnared people into rampant consumerism.
And of course, the real world is much more mundane. Any concentration of power leads to the strengthening of authoritarianism. And it doesn’t matter whose hands it accumulates in – states or corporations. People control both. Throughout history, the balance between private and public spheres has allowed systems of checks and balances to be maintained. Only the division of power prevents one sphere from becoming so powerful as to subjugate all others.