When you’re writing a book, there are themes and stories you must pursue, they make up the tale you’re trying to tell. And then there are other, tantalising themes that bubble away under the surface or that you glimpse in passing from the corner of your eye. With Double Entry, these intriguing side stories involved the ‘mystique of double entry’ (a whole chapter now lying on the cutting room floor) and esoterica like the five Platonic solids and the Golden Mean (or divine proportion) which fascinated Luca Pacioli and Leonardo da Vinci, as well as 20th century artists like the Italian futurist Gino Severini.
With Six Capitals, it was something taking shape beneath the story I was telling of an accounting revolution and the shift to the information age and era of ‘sustainability’ I was trying to capture. I couldn’t pause too much to think about it while I was writing, because it was only a speculation, but I continue to see its signs everywhere. It is: the transfer of power from nations to corporations.
The stats show this shift is taking place: in 2000, 51 of the 100 largest economies in the world were corporations, not nations. And in 1980 the aggregate revenues of the world’s 1000 largest companies were about 30 per cent of the GDP of the OECD countries. In 2010, a mere 30 years later, this had exploded to around 70 per cent. Another telling development is the fact that, unlike the crash of 1929, after the crash of 2008 the public sector rapidly mobilised to bail out (most of) the failing banks and other institutions – and ever since corporations have been posting record profits and nations have been flatlining or going bust.
This is exacerbated by multinationals’ perfection of the art of tax avoidance. And despite the big talk from Joe Hockey, the US and others at the G20 summit last year that they’d launch a ‘very aggressive‘ crackdown on tax avoidance, and the Senate inquiry into corporate tax avoidance in Australia, the challenge of capturing the billions of dollars a year in lost corporate taxes seems immense if not insurmountable. Multinational corporations have jumped ship, out of the nation and into the global ether.
The proliferation of trade agreements further entrenches the power of corporations at the expense of nations. For example, when Mexico put restrictions on high fructose corn syrup, three different US agribusinesses sued the Mexican government under NAFTA‘s investor-state system. Mexico lost and was forced to pay out $169.18 million to private interests.
The controversial Trans-Pacific Partnership currently being negotiated by 12 nations including Australia, Canada, New Zealand, Japan, Singapore and the United States looks set to formalise this increasing encroachment of corporate power over national sovereignty with its inclusion of a similar investor-state dispute settlement (ISDS) provision. This is despite assurances by the Australian government that it would not entertain ISDS provisions that ‘restrict our ability to pursue legitimate public policy objectives.’ Given the carbon-promoting, business-courting, confused, retro nature of the current federal government’s public policy objectives, this is no comfort at all. I’m with GetUp, which calls the TPP ‘The dirtiest deal you’ve never heard of‘.
The rise to prominence of nation states is a phenomenon of the modern era. But the multinational corporation is a thoroughly postmodern entity, everywhere and nowhere at once. In all the recent discussions of corporate tax evasion, the story told by Sam Dastyari on 8 April seemed to get to the heart of the problem – and therefore to point the way to possible action. He wrote:
‘The idea that any company would choose to pay more tax than it legally needs to seems extraordinary on the surface. But that is exactly what happened in Britain in 2013, when Starbucks unexpectedly decided to voluntarily pay 20 million pounds ($38 million) in taxes.’
So, what prompted this extraordinary move? Its customers. When Starbucks’ tax practices were publicly exposed, consumers revolted. ‘Protests and boycotts from customers left Starbucks with little choice; either start paying their fair share of tax or cop a significant sales backlash.’ Does our power now reside not in our role as citizens and voters in a nation state, but as consumers and shareholders in a global web of multinational corporations?
On the question of the power of the state versus capital, Thomas Piketty’s Capital in the Twenty-First Century makes clear the steady rise of capital and the growing impotence of states. The book expounds Piketty’s robust belief in states and national governments, and in their capacity to claw back their tax base, their power, their 20th-century ordained central role in economic life. But his chapter 13, ‘A Social State for the Twenty-First Century’ – which asks the question ‘can we imagine political institutions that might regulate today’s global patrimonial capitalism justly as well as efficiently?’ – seems to answer it with an impossible ideal: a progressive global tax on capital. As Piketty himself concedes: ‘But a truly global tax on capital is no doubt a utopian ideal.’
Will nation states go the way of industrial modernism, into the dustbin of history? Are multinational corporations the new locus of power, the new organising principles of the 21st century? And if so, are our ire and activism better directed at them than at governments, which are after all composed of increasingly indistinguishable political parties that court big business at the expense of the rest of us anyway?
In other news, thanks to a comment on this blog, I’ve just bought the brilliantly titled Economics of Good and Evil: The quest for economic meaning from Gilgamesh to Wall Street by Czech economist Tomas Sedlacek, who was recruited aged 24 as an economic advisor to Vaclav Havel. The Introduction is called ‘The Story of Economics: From Poetry to Science’ and has as its first epigraph, from Zdenek Neubauer: ‘Reality is spun from stories, not from material’. Already I’m riveted. I’ll be writing about it here the moment I’ve finished it.
Tomorrow I’m off to Melbourne to take part in a Leadership Dialogue at Swinburne University, which promises to be a fascinating discussion of the ‘quiet revolution’ in accounting. Hope to see you there.