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The battle between countries and companies

The wild profits and net worths that the internet has enabled has created a massive power shift, leaving the corporations to overbear the countries they inhabit. In light of this, what are the consequences for both parties?

Photo of Eric Schmidt, CEO of Google. Flickr/Photographer – Guillaume Paumier

 

The recent outbreak of indignation over tax evasion by multinational corporations finally brings us face-to-face with the most serious problem of our times: more important even than the financial crisis, than terrorism or sexual abuse, more immediately important even than global warming. What's at stake is the continued existence of the state as we've known it for the last several centuries, without whose powers none of those other problems are soluble (despite what libertarian ideologues may have us believe). Without revenue there can be no state, a fact that's perfectly understood by those Republican billionaires whose tame congressmen are currently preventing the USA from being governed. 

A recent visit of Google's CEO Eric Schmidt to London rubbed the point in quite effectively. Explaining that "if you change the tax laws, we'll obey them", he treated UK PM David Cameron with the amused air of a cheeky schoolboy talking to a nagging teacher, but his amiable levity was a mask for the fact that he now wields more power than a mere PM and knows it

In my May 2013 PC Pro column I had this to say about another of the tax-evading internet giants, Facebook:

"Katherine Losse was a pioneer Facebook employee who used to ghost-write posts for Mark Zuckerberg himself, and in her recent book 'The Boy Kings' she offers a disturbing picture of his thinking. The main points of his credo include youthfulness, openness, sharing power and 'companies over countries'. Asked what he meant by the latter he told her 'it means that the best thing to do now, if you want to change the world, is to start a company. It’s the best model for getting things done and bringing your vision to the world.' So the model for a new world is the Californian youth-oriented corporation, untrammelled by pesky laws and regulations, by messy old-world stuff like pensions and having to win elections. The Nation State is just plain out-of-date, it still practices stupid stuff like secrecy and taxation, it doesn't get the New Digital Narcissism where everyone can be an (unpaid) star of their own channel. All rather reminiscent of the 1960s counterculture mixed with a dash of Orwell's Oceania, Eurasia, Eastasia. But actually it starts to look rather like a new variation on feudalism where you'll only get fed if you become a retainer of one of these mega-corporations, as the boring old centralised state and its services wither away."

Many other commentators are recognising the urgency of this threat, for example the authors of The Kilburn Manifesto, or this recent blog post from Robert Reich in which he notes that while politicians are all talking the talk about ending tax evasion and havens, nothing actually ever gets done about it:

"The same disconnect is breaking out all over the world. The chairman of a British parliamentary committee investigating Google for tax avoidance calls the firm 'devious, calculating, and unethical,' yet British officials court the firm’s CEO as if he were royalty. Prime Minister David Cameron urges tax havens to mend their ways and vows to crack down on tax cheats, yet argues taxes must be low in the UK because 'we’ve got to encourage investment, we’ve got to encourage jobs and I want Britain to be a winner in the global race'. These apparent contradictions are rooted in the same reality: global capital, in the form of multinational corporations as well as very wealthy individuals, is gaining enormous bargaining power over nation states."

Of course, modern nation states are still more powerful than corporations like Apple, Google, Amazon and Facebook, if only because they make the laws and can enforce them, and in the last resort by using a police force and an army, which those corporations don't possess. In a sci-fi fantasy film the next step would be for the corporations to buy their own private armies, but that isn't how the real world works - the danger is actually far more insidious than that. It involves a subject I've touched on here in a recent blog post, the idea of the "surplus wage". 

Over the last three decades or so the world's economy has tended to decouple reward from effort, an effect that's visible not just in bankers' bonuses and "fat-cat" managers' salaries, but also in the lifestyle and remuneration of sportsmen, popular entertainers and other celebrities. Slavoj Žižek has analysed this phenomenon in terms of payment of "surplus wages", which are entirely unrelated to actual productivity, but get paid to insiders accepted into certain cliques and professions. This phenomenon can be looked upon as a legal way of looting the wider economy. The ineffectuality of the Left's attempts to agitate about the current economic crisis is in part due to the fact that many people who 50 years ago might have taken to the streets in protest, are now pacified by the slim hope of gaining entry to the privileged ranks of these surplus-waged. Methods of entry can include nepotism, winning the lottery, wangling a local government sinecure, starting an internet business, making it as a footballer or conceptual artist, writing a hit tune in your back-bedroom or winning a TV talent show, being discovered as a model, or joining a drug dealing gang.

The greatest danger we face is that our politicians - those who spend our tax money to run the state supposedly on our behalf - will become entirely suborned by the giant corporations that they're supposed to be taxing, by enrolment into the surplus waged club. There's already ample evidence of this happening, from the instant millionaire status so quickly achieved by the Tony Blairs and Bill Clintons on the international speaking circuits, through various hushed-up bribery scandals of recent years, to the lonely death of Margaret Thatcher in her humble suite at the Ritz. The corporations have most of the money and increasingly most of the power too since they monopolise mass communication channels in ways that our none-too-technically-bright politicians barely comprehend. These corporations are generous in doling out the surplus wage to secure the fidelity of the right people. What if the political class as a whole in effect changes sides, representing only the interests of these corporations? The dismantling of the post-WWII democratic welfare states could proceed unhindered and Chinese authoritarian capitalism would become a template for the future.  

The contempt for politicians which this process creates merely inflames the problem, turning people against the state itself and toward empty Tea Party style libertarian rhetoric. It will require nimble political footwork at a level that no-one I can currently see possesses, to defend the role of the state effectively against this pincer movement of billionaire lobbyists and populist rabble rousers. Amid all the twitter and yap of declining consumer capitalism it's far too easy to overlook the fact that the social-democratic state, rather than the "free market", is what gave us all our current freedoms, that it was the fruit of two centuries of labour struggles - and that it's being stolen from under our very noses. 

About the author

Dick Pountain is a computer journalist and political blogger.

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