APRIL 2015 / NO. 1
TAGS: CORPOCRACY, WORLD ECONOMIC FORUM, CEO, POLITICIANS, CRISIS, MANAGEMENT, SHELL, UNILEVER, PHILIPS, HEINIKEN, ING, RABO BANK, ABNAMRO

The corpocracy of companies

“The dream of prosperity and happiness for everybody has been disturbed by the ‘corpocracy’ of companies which determines everything”, Professor Ewald Engelen, University of Amsterdam
The above statement is impactful and made in what I see as one of the most influential publications in Europe in 2014. We would like to share the highlights with you.
The story starts every year with the World Economic Forum in Davos, Switzerland, where the heads of the corporate world meet: CEOs, political friends and the consultancy-whisperers. They blame the politicians who are not able to solve the crisis, corporate management already has a focus on the future, and multinationals take the lead in solving the big future challenges: sustainability, growth and poverty. But five years after the largest financial crisis since the 1930s, the causes of the crisis are not still not solved: deep systemic problems remain unsolved and the welfare state is going down.
The neo-liberal utopia of privatization, liberalization and deregulation from the free market, globalization, free traffic of goods, services, capital and labor, from iPads to Starbucks, Thatcher and Reagan, from prosperity and happiness for everyone, have dropped us off and have led to huge disappointments for the majority of citizens in Western Europe. Of course, mobile devices have become cheaper, roaming is free, and we can now withdraw cash everywhere. But our income has decreased, job security is gone, healthcare and education have become worse and more expensive, democracy has been reduced, and the pressure of high taxes entangles people. Citizens got an illusion of democracy and an illusion of employee participation. The corporate world has the power to blackmail and achieved: wage moderation, less protection against dismissal, better educated labor, lower corporate taxes, more control over university research, piggy-backing on the Royal family, development cooperation in line with the corporate world, currency union, free trade agreements, less regulatory pressure, more subsidies, corporate tax deductions, places in the front row, free tickets, company names in a museum, a nearby railway station, one-on-one discussions with the Prime Minister and more. This can all be arranged, and is called ‘corpocracy’. Worldwide corporate taxes have decreased by some 50% on average since the 1990s!

Corpocracy is a wonderful world

The most powerful pay the lowest taxes and the powerless pay the most taxes. In 2000, the corporate world contributed 10% to the Dutch Tax Office. In 2013 this was only 4%. The other side of the coin is that everybody else pays these taxes. Dutch multinationals such as Shell, Unilever, Philips, Heineken, ING, Rabo Bank, ABNAmro ascribe their success to our constitutional state, our legal system, our infrastructure and our education. However, the cost of maintenance is paid by the taxpayers. Who has in fact benefitted most from all of this?
Bankers, CEOs, Members of Supervisory Boards, lawyers, accountants, tax specialists and some snobbish politicians.
For the past 20 years the middle class in the US has been suffering, and for the last 10 years the situation of the middle class in Europe has been similar. Corporate savings in the Netherlands in 2014 amounted to € 60 billion. In the US this is US$ 5,000 billion.
What does the corporate world do? It doesn’t invest in the domestic economies, not in research & development and not in their own employees. It still invests in shareholder value.

How then can capitalism become subservient again to the middle class?

The corporate world should think of paying decent salaries, of meeting their tax obligations, cleaning up their mess, and stopping the race to the bottom of the earth, while keeping democratic standards and values.
“If we are not able to stop the downturn of the middle class in the US and Europe, democracy will face new problems and more pressure than we have ever faced before”
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