When Corporations Rule the World.

The specter of economic insecurity haunts a growing portion of the world's people. In industrialized countries, workers are seeing their job opportunities decline and their incomes erode. The median income in the United States has dropped by 4.6 percent since 1979, for example, and middle class families are spending an increasing share of their incomes on the basic necessities of housing, utilities, and healthcare. In developing countries, the situation is often far worse - from the heavily-polluting Maquiladora factories on the U.S.-Mexico border to the textile sweatshops of Southeast Asia, people struggle in toxic environments for wages that guarantee little more than their next meal.

David Korten argues that these conditions result from the expanding power of multinational corporations, the largest of which now have more economic clout than most nations - yet which are fundamentally authoritarian and antidemocratic, and therefore pose a growing threat to the ability of nations to protect their people and resources from uncontrolled exploitation. Noting that the 500 largest industrial corporations control 25 percent of the world's economic output but employ only one-twentieth of one percent of the world's population, Korten concludes that corporations benefit disproportionately from economic globalization, often at the expense of individuals and communities. What has happened in the United States is particularly telling; even though profits are at a 45-year high, between 1980 and 1993 the Fortune 500 companies cut their payrolls by more than 25 percent, eliminating nearly 4.4 million jobs and helping to drag down middle-class incomes.

Challenging the world's most powerful institutions on so fundamental a level might seem like tilting at windmills, were the challenger not an accomplished player in the very system he decries. Korten considers himself a conservative; after earning his Ph.D. in business from Stanford and teaching at Harvard Business School, he spent 30 years working on development projects throughout the Third World. Eventually, he founded his own non-governmental organization, the People-Centered Development Forum, after concluding that "the Western development enterprise has been about separating people from their traditional means of livelihood... to create dependence on the jobs and products that modern corporations produce."

Korten is meticulous in documenting the process by which corporations have become, in his view, the "dominant governance institutions on the planet," as well as the primary vehicles for transmitting cultural values. (He sees the latter achievement, for example, in the global entertainment industry and in the growing use of advertising in U.S. schools.) He provides a detailed account of the means by which corporations have consolidated power, including the use of lobbying organizations, business roundtables, and the World Bank and World Trade Organization, and casts light on the closed-door negotiations that steer public policy. The book synthesizes much of the recent literature critiquing the global economic system - bringing together entrepreneur Paul Hawken, the Nobel laureate Jan Tinbergen, and John Cananagh of the Institute for Policy Studies, among others.

In Korten's view, corporate behavior is largely to blame for the growing concentration of wealth that is one of the distinguishing features of our era. He observes that by 1991, sales of the ten largest corporations exceeded the combined GNP of the 100 smallest countries, and the top 300 transnationals owned some 25 percent of the world's productive assets. Corporate decisions to cut jobs or relocate to low-wage, low-regulation countries therefore have a heavy impact on the global distribution of wealth. The millions of U.S. jobs that Fortune 500 companies shed during the 1980s came at a time when their sales increased 1.4 times, their assets 2.3 times, and the average annual compensation of their chief executive officers 6.1 times - to $3.8 million. Korten asserts that this is "part of an ongoing process of shifting wealth from those who are engaged in the production of real value to those who already have large amounts of money...."

The result is a world where the income of the wealthiest 20 percent of the population is 150 times greater than that of the poorest 20 percent. In the past, such inequality has been a harbinger of economic instability. During the 1920s, for example, 0.5 percent of the families in the United States controlled 32.4 percent of the total wealth - an inequity that was rudely corrected when the Great Depression dropped their share to 19.3 percent. Since then, the concentration of wealth has crept back up. In Korten's analysis, current trends are promoting not just economic insecurity but social unrest, a growing stream of refugees across the globe, and environmental degradation. When Corporations Rule the World sounds a warning call even to those who have benefitted from the prevailing regime.

Like most conservatives, Korten has no enthusiasm for big government, but he sees an active government as essential for establishing an efficient market. Korten seeks to clarify the conditions on which the 18th-century political economist Adam Smith based his free market theory, which provides the foundation for present-day economic systems: the market must be competitive; the full costs of production must be borne by the producer and included in the selling price; capital must be local and directly managed by the owner of the business. According to Korten, today's accelerating process of merger, acquisition, and strategic alliance allows corporations to undermine these conditions by forging monopolies in fact if not in name. The final sections of the book offer policy recommendations for building market efficiency by strengthening local control over political and economic institutions. Specifically, Korten recommends barring companies from all forms of political activity, eliminating subsidies for big business, and dispersing capital. He also suggests expanding the social safety net; among the more radical of his proposals are guaranteed income and a 20-hour workweek.

Despite his damning assessment of the present situation, Korten's message is essentially one of hope. "Economic globalization is neither in the human interest nor inevitable," he writes. Stepping into a realm where few economists dare to tread, he argues that our seemingly insatiable quest for money and material consumption "is in fact a quest to fill a void in our lives created by a lack of love," and "is a consequence of dysfunctional societies in which money has displaced our sense of spiritual connection as the foundation of our cultural values and relationships." Korten envisions a world in which political power is vested in local institutions, where business ownership is rooted in the community, and communities are increasingly self-reliant. What he proposes is not a return to isolationism, but the creation of a "multi-level system of nested economies" that would include, at the international level, a United Nations with greatly expanded authority over trade and economic regulation.

While many of his recommendations could have a powerful appeal for both the harried, time-deficient citizens of developed countries and the poor of the developing world, Korten's picture of the future remains vague. The book lacks an overarching vision of what the world would look like if his recommendations were implemented. In part, this seems deliberate; Korten emphasizes that his purpose is not so much prescriptive, as it is to challenge readers and stimulate thinking. Even so, readers are likely to wish that he had provided a clearer explanation of how multinational corporations could be controlled by the community-based initiatives he recommends.

Korten's recommendations resonate with a growing consensus in the environmental and human rights movements, on the need for smaller, more humane economies - a need that has yet to be widely recognized in mainstream political dialogue. The problem, as Korten puts it, is that people "are being won over to a political agenda that runs counter to both their values and their interests." Understanding that predicament may be the first step towards reclaiming our public life.