Corporate Power & the Global Economy

Corporations sit at the heart of contemporary capitalism. They command vast resources, govern entire swaths of our economy, and wield immense political power. For instance, the 2017 sales of Walmart, the world’s top retailer, was around US$500 billion, around the scale of the GDP of a rich country like Norway. The market values of Apple and Amazon both crossed the trillion dollar line in 2018.  A handful of companies including Bayer-Monsanto, PepsiCo, and Nestlé command the global food system, while just three companies– Samsung, Huawei and Apple– hold nearly 50% of the worldwide market share of smartphones. In today’s global economy, titanic companies perform diverse commercial functions once performed by distinct firms; Amazon, for instance, is a retailer, a credit lender, a publishing house, manufacturer, marketing platform, and filmmaker, amongst many other things.

As the wheels of the global economy turn at the hands of an ever-smaller group of ever-larger and ever-richer corporations, the structural power of these corporations is surging.  Amidst the rise of ‘mega-firms’ and ‘superstar’ companies, even the International Monetary Fund– which is hardly known as a critic of big business– recently sounded an alarm about corporate power and monopolization, noting that such trends are influencing macroeconomic outcomes.

Recent developments surrounding transnational corporations (TNCs) confirm what some political economists have emphasized for decades — that the concentration, and dominance of transnational corporations is profoundly restructuring the global economy. To paraphrase political economist Susan Strange’s assertion in the mid-1990s, TNCs have become central organisers of global economic activity and key decision-makers over who gets what, when, where, and how in the global marketplace. This is far truer today, two decades after Strange’s largely unheeded plea for scholars of international politics to take TNCs seriously and to study corporate power. A sophisticated understanding of the nature, dynamics, and impacts of corporations and the power they exert within contemporary capitalism is essential if we are to understand how the global economy functions and shapes people’s life chances.

The politics of corporations

The corporation is by no means a new political actor. As some of the world’s first transnational enterprises, the British and Dutch East India Companies were central to colonial projects in South and Southeast Asia. They extracted and transferred resources and wealth from peripheral colonies to their respective metropoles, and acted as instruments of direct and indirect political authority. What is more, since the emergence of the international state system in the mid-1600s, constellations of non-state actors, including corporations, have both competed and colluded with governments over rule-making authority, as well as the provision of public goods and services. Indeed, market order in most parts of the world has long been characterised by authority structures in which corporations have maintained tense, but also synergistic relationships with states and societies. In short, from the early days of global capitalism, the answer to ‘who rules?’ has not simply been the state and its elected representatives, but also corporations.

More recent transformations have augmented the corporation’s political and economic powers. The intense liberalisation of national and global markets since the 1970s afforded corporations new freedoms of movement across borders, and significantly in some markets, the authority to self-regulate. The era of economic globalisation has been one in which the rights of corporations to operate, own, and profit increasingly surpasses the capacity of national and international institutions to effectively regulate their activities.

Additionally, advancements in communications and transportation technologies have facilitated the rapid globalisation of production systems. Today, many goods and services are produced through highly networked and geographically diffuse supply chains. Within them producers, sellers, contractors, and consumers are simultaneously closely linked and distant, often making it difficult to identify where key decisions are being made and power resides. What is more, by crisscrossing multiple legal jurisdictions, supply chains have contributed to the de-territorialisation and ‘de-statisation’ of corporate governance. As a result, corporations and institutional investors have been able to distance themselves from the impacts of their productive activities on labour, ecosystems and social stability and thereby shield themselves from criticism and legal consequences.

Big business power over civil society and states

The ways in which civil society seeks to influence corporations has transformed over the last three decades. Many companies have successfully improved their public images from evil, profit-hungry extraction machines into responsible global citizens, using corporate social responsibility (CSR) as a visible component of their interactions with states and society. Indeed, sizable resources have been channeled by individual companies and industry associations into efforts to present corporations as the solution to problems like global warming and modern slavery, rather than a key cause of social and environmental problems. While more radical criticism of corporations and opposition through direct action still happens– and is especially prominent amongst some trade unions and within communities that find themselves at the blunt end of capitalist accumulation, for example in mining communities across the global South– many activists, trade unions and non-governmental organisations (NGOs) now pursue more conciliatory strategies that work alongside corporations within market structures. For instance, the environmental NGO Greenpeace has partnered with large corporations like Unilever and Coca Cola to develop eco-friendly ‘Greenfreeze’ refrigerants, while human rights, labour, and gender-based NGOs like Oxfam are also allying and partnering with big business. These dynamics have enabled corporations to help shape global policy agendas to better support their own interests, and can put them at the centre of governance to co-produce outcomes.

As corporations have gained greater legitimacy and authority as governance actors, there has been a blurring of ‘public’ and ‘private’ governance power within the global economy.  The extent to which private and public regulatory actors interact, collaborate, diverge, and can be still be meaningfully distinguished are open empirical questions requiring investigation across jurisdictions, types of business actor, and issue areas.  This is true in both global North and South contexts. Business actors work closely with government departments on a range of issues, and influence them through activities such as lobbying, financial contributions, and other, more pernicious modes of “state capture”. In the South, many corporations domiciled within emerging economies operate abroad in close connection with home-state institutions such as national development banks, which provide them with finance capital and operational guidelines for their overseas ventures.  Such practices are not new; indeed, they often stretch back to earlier eras of global capitalism. For instance, in the UK, the notion of ‘industrial strategy’ has recently resurfaced, but the practice of states investing in, guiding and co-operating with corporate activity is far from new. As corporations become increasingly massive, rich, and powerful, there is an urgent need to investigate the shifting dynamics of their political power, including the various ways in which business actors exert power, and their interactions with and influence over governance actors like local and national governments, NGOs, and grassroots activists. The rise of the emerging economies, South-South trade and non-Western corporations requires fresh analyses that dig deeper into how corporate-state relations are conceptualized outside of the global North.

New patterns of corporate ownership

Shifting patterns of corporate ownership are also transforming the landscape of corporate power within the global economy.  Increasing trends towards monopolization are affording growing power and dominance to a small handful of companies, such as the big tech companies, where the structure and logic of data-driven businesses (in terms of their network and scale effects) has created near-monopolies in the digital sector. As the number of firms reduces, their size is increasing, which generates less competition and more power, such as over prices, value distribution along the supply chain, and to set labour and environmental standards. To understand this growing market concentration requires considering not only the role of new technologies but also the investment patterns of financial institutions and how portfolio investing can work to reduce competition. Such developments overturn commonly held understandings of how markets work, and are causing political concern on both left and right and within international organisations as calls for new ‘anti-trust’ reforms grow louder.

Shifting geographies and technologies of consumption

Through their control over the means of production corporations play an essential role in how individuals and societies meet their everyday needs. Moreover, through advertising and branding they also have the capacity to shape individuals’ consumer preferences, and through them their sense of identity. As such, consumption is a lens through which many people make sense of the economy, their place within it, and economic change. Today, companies are connecting in more frequent, direct, and subtle ways with consumers through digital and social media platforms with global reach (though with some exceptions, notably in China). By targeting advertising to shape (or manipulate) what consumers desire, platforms like Facebook and YouTube facilitate personalised interactions with corporations, helping to simultaneously create cultural homogeneity and ensure they feed off and are sensitive to cultural differences. As such, digital technologies are powerful tools that can be used by corporations to grow their customer base and protect and enhance their reputation.

New frontiers in political economy analyses of the corporation

The paradox of corporations is that they are ubiquitous yet our knowledge of their political economic behaviour is under-developed. Corporations undoubtedly wield immense political power, yet they are not all-powerful. What is more, while they all aim to maximise profit, enhance brand value, and expand market share, they are not monolithic, nor do they behave similarly across time, space, industry, and policy domain. Only concrete empirical research can uncover the extent and the limits of corporate power today. How do corporations exercise their power in the contemporary global economy, and how do corporations interact with states and civil society? Does the evolving structure, size and organisation of corporations and their global supply chains necessitate new forms of corporate governance? What are the limits to corporate power? SPERI’s research in this area aims to deepen our understandings of corporations and corporate power, the barriers these may pose to a stable, sustainable and equitable economy, and how such barriers can be overcome.

This blog series was collectively planned and written by members of the SPERI research team: Andrew Baker, Laura Bennett, Matt Bishop, Martin Craig, Remi Edwards, Desiree Fields, Laura Foley, Katy Fox-Hodess, Andrew Gamble, Jon Kishen Gamu, Ellie Gore, Colin Hay, Andrew Hindmoor, Tom Hunt, Michael Jacobs, Patrick Kaczmarczyk, Scott Lavery, Genevieve LeBaron, Owen Parker, Tony Payne, Ed Pemberton, Kaisa Pietilä, Andreas Rühmkorf, Liam Stanley and Peter Verovšek.