Global Trends in Corporate Power - Assignment Example

Global Trends in Corporate Power No doubt, it is hard to evade the immense power of corporations in political, social, cultural, economic, and environmental arenas. They significantly influence the lives of many people around the world in complex and imperceptible ways. Some people regard growth of large corporations as a positive force that sparks economic growth, lower prices, jobs, and quality products and services. However, others perceive them as a threat to worker’s welfare, natural environment, public policy, and cultural values. One thing is for sure- the inescapable presence of large corporations in the globe is poised to remain for the near future (Herman 21). The growth and changes of corporate power can be traced back many years ago under the influence of several factors, supports, and oppositions. Up until the World War II ended, multinational economies had taken roots in most developed countries (Herman 121). They continued taking shape, developing and spreading internationally at a rapid pace after the world war. A strong populist movement that harshly responded to the growing corporate power led to anti-trust laws that saw the fall of some large corporations, such as the Standard Oil. However, the 20th century witnessed the waning and waxing of the resolution to enforce the laws. Following the Great Depression, high labor union movement that peaked in the 1950s and the federal government kept corporate power in check. The government asserted the claim that the primary purpose of corporations should be to serve the common good of the public. The then dominating macroeconomic paradigm, The Keynesian economy, often justified that the government had an active role in economy policy. However, the 1970s experienced a failure of the Keynesian economic policies to address unemployment and inflation issues. Conservative politicians fought for the growth of large corporations by faulting the enforcements of anti-trust laws and lowering tax rates on corporations.The fall of the Eastern Bloc nations and the Soviet Union near the end of the twentieth century also gave room for the spread of free-market capitalism. Capitalism played a crucial role in enhancing quick expansion of large American corporations such as Coke, McDonalds, and Levis into new markets that had been dominated by Communist countries. International agreements on free trade and privatization are fueling the removal of trade barriers. Corporations are now riding on preferential treatment by nations. Their impacts on people’s welfare are felt from Wall Street to the poorest country on the globe. Global distribution of Multinational Corporations (MNC) suggests the vast influence of corporate power. The United Nations reported that there were approximately 75000 MNCs operating globally in 2005. The developed industrial economies boast of being the mother countries of about three-quarters of the MNCs. Denmark is a home of 12% of the total MNCs, followed by South Korea (10%). Germany follows with 8%, then Japan (7%), China (5%) and lastly U.S. (3%). India and Brazil are the leading developing countries that home a significant number of MNCs. However, a greater share of geographic distribution of only the very largest corporations is in U.S. and Japan. MNCs are now dispersing to developing countries. The size and direction of the corporate power global trend can be assessed using various approaches. It is worth noting that it is still hard to assess the worldwide trend in corporate power due to lack of a standard approach. The first approach is the industry concentration ratio. It computes the ratio of the largest firms’ receipts to the total industry revenues. A ratio that is above 0.40 suggests an oligopolistic industry. In 2002, the industry concentration ratio in the U.S. indicated that industries such as tobacco, cellular communications, and petrochemicals were oligopolies. On the other hand, industries such as real estate and insurance were less concentrated (Roach 11). The skyrocketing ratios over time indicate that the biggest firms in a particular industry are gaining more power than that of the smaller competitors. Additionally, global figures of concentration ratios show that many industries are world oligopolies. They ranged from 0.21 to 0.67 in 1990 across 27 industries, with an average of 0.39. The global ratios also suggest relative stability over time- the period between 1962 and 199 witnessed little change in the concentration ratios across 15 industries. The global and national rates thus revealed that the levelof economic power in large corporations has remained constant in the last few decades. Corporate economic statistics such as profits is another approach that is useful in assessing the trend of corporate power (Roach 12). The statistics can be tracked over time relative to wider economic data. The period between 1983 and 2005 saw an increase of the global GDP by a factor of 3.89. On the other hand, the globe’s 50 largest firms registered a revenue increase by a factor of 3.89. The similar growth rates of the two variables indicate that the economic power of the globe’s biggest corporations has not increased in relation to the rest of the economy. However, data on corporate assets suggest an opposite conclusion- the world’s 50 largest firms increased their assets by 686 % between 1983 and 2001. Valid data indicates that the total fixed non-residential capital assets in the U.S. increased by only 77%. The data imply but fail to prove, a considerable increase during 1980s and 1990s in the concentration of productive assets of the globe’s largest firms. The power of labor unions against growth of corporate power can also give an insight into the trend of corporate power (SooKyoung, HaeJung, & Judith 10). Reliable data shows that union powers have been declining, suggesting the growing ability of corporations to weaken their opponents. The period between 1980 and 1994 saw a union membership reducing in 13 of 19 countries, from 46% to 40 % on average. The shifting of jobs in developed countries from manufacturing to service-oriented sectors has fueled the drop in membership. Service jobs are hard to unionize. Consequently, firms are aggressively opposing unions especially when moving production to low-wage nations. Additionally, some governments like that of the U.S. took a stance against unions, further fueling the weakening of labor unions. Several governments such as Ethiopia, Uganda, Kenya, and other developing countries have welcomed the growth of corporations into their countries (Popa & Irina 140). Most public figures like Margaret Thatcher of England and Ronald Reagan of America also supported the spread of Corporations worldwide. Significant parts of the public, workers, and investors have also supported the MNCs. The benefits that large corporations bring to a nation are reasons why they receive a vast amount of support. Large companies cut consumer prices by being able to incur low production costs since they can use improved technology and cheap labor. Additionally, large business entities can offer a familiar product of consistent quality in various countries and regions. They also provide workers with excellent pay and fringe benefits such as pensions and healthcare. Many corporations are stable and cannot go bankrupt, thus attracting investors seeking stable returns and security to their investments (Roach 19). Most people and non-profit organizations consider large corporations as crucial since they receive significant amounts of donations from them. However, the growing size of corporate power has received several oppositions emanating from labor unions, environmentalists, and several social groups (Luu 552). Strings of corporate scandals in the last few decades have fueled the debates. Opposition forces claim that there are evidences of most corporations neglecting their responsibility of obeying existing laws. Most of these claims revolve around exaggeration of profits using fishy accounting practices to exaggerate stock prices. Some top corporate executives may sell a significant amount of dollars worth of stock at inflated prices. However, the ordinary investors incurred significant losses when the corporation’s financial problems eventually came into light. Another reason that oppositions give is that large companies can use their vast political influence to evade bearing external costs. Some people and groups also mention unethical practices by some firms aimed at shutting small businesses out of operations. Hence, some governments discourage MNCs in order to protect growth and development of homegrown industries. Environmentalists have faulted the existence of large corporations that contribute substantially to pollution. Furthermore, large corporations lead to spread of moral degradation and cultural wars. Works Cited Herman, Edward S. Corporate Control, Corporate Power. 2nd ed. Cambridge: Cambridge UP, 2002. Print. Luu, Trong Tuan. "Corporate Social Responsibility, Ethics, and Corporate Governance." Social Responsibility Journal 8.4 (2012): 547-60. ProQuest. Web. 22 Feb. 2015. Roach, Brian. “Corporate Power in a Global Economy”. Modules. Tufts University, 12 Mar. 2007. Web. 9 Mar. 2015. http://www.ase.tufts.edu/gdae/education_materials/modules/Corporate_Power_in_a_Global_Economy.pdf Popa, Mirela, and Irina Salanta. "Corporate Social Responsibility Versus Corporate Social Irresponsibility." Management & Marketing 9.2 (2014): 137-46. ProQuest. Web. 22 Feb. 2015. SooKyoung Ahn, HaeJung Kim, Judith A. Forney. "Fashion collaboration or collision? Examining the match‐up effect in co‐marketing alliances", Journal of Fashion Marketing and Management: An International Journal, Vol. 14 (2010): 6-20 Read More