This section will focus on corporate influence over global governance and financial institutions, such as the EU, the World Bank, the IMF and so on. In particular, it will focus on their role in setting the global development, finance and trade agendas that sustain corporate interests.
Broadly speaking, these global institutions can be grouped into international finance institutions (IFIs), multilateral development banks (MDBs), development finance institutions (DFIs), trade unions, and international political and economic unions.
The IMF and the World Bank
Many of the major global institutions were created after World War II in order to aid international economic cooperation. Perhaps the two most influential, the International Monetary Fund (IMF) and World Bank Group, were established at the 1944 Bretton Woods summit. The IMF was formed to promote international monetary cooperation, exchange rate stability and to provide temporary financial assistance to countries. The World Bank comprises of lending institutions, the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). Also affiliated are International Finance Corporation (IFC); the Multilateral Investment and Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). They also provide ‘technical assistance’ to state governments.
There are also a number of regional multilateral development banks such as the African Development Bank; Asian Development Bank; European Bank for Reconstruction and Development; and the Inter-American Development Bank.
Structurally, the decision making bodies of the World Bank and IMF are dominated by industrialised nations. Developing countries have little voting power and,in contrast, the US alone holds over 16% of voting shares, an effective veto. Furthermore, the head of the World Bank is always an American and the IMF is always headed by a European national ensures interest and control of the institutions sits firmly in the hands of the 'western' powers.
The World Bank and IMF are perhaps best known for being major proponents of the Washington Consensus, a package of neoliberal policies pushed upon developing countries from the 1980s onwards in response to the Latin American economic crisis. These were often in the form of explicit conditions attached to development assistance and reform packages. The main tenets of the Washington Consensus were: liberalisation of trade, investment and the financial sector; tax reform; deregulation and privatisation of nationalised industries; the reduction of government deficits through cuts in government spending. A ‘one-size fits all’ package of policies was imposed upon countries with little concern for the borrowers’ individual circumstances. The prescription of specific economic policies further undermined the political and economic autonomy of nation states. The result, for many countries, was disastrous: rising unemployment, inflation, poverty and a fall in economic output.
Historically, the World Bank has given much of its support to large scale infrastructure projects, leaving in its wake a host of displaced communities, environmental degradation and social upheaval. Over the last decade, it has extended its reach into more and more areas of socio-economic life through its self-styled positioning as a ‘knowledge bank’ and shaper of development discourse. Thus health, education, pensions, privatisation of public services, biodiversity, ecosystems and climate change have all become areas in which the World Bank is active and, often, seeking to lead the way.
The World Bank’s education strategy has been described as “a global vehicle for the commercialisation of education, which creates tensions with the key principles of a right to education.” It has been active in advising towards greater provision of private education in an approach more concerned with investment returns on education and the economic potential those educated.
Although a long term supporter of the private sector and facilitator of financialisation (see for instance the promotion of private pensions and health insurance in Latin America) a recent trend has been towards the growth of direct support for private sector businesses and corporations. The private sector arm of the World Bank, the International Finance Corporation (IFC), has grown rapidly over the last 10 years. The activities of the IFC are justified in relation to the assumption that a well developed financial sector is vital for economic development and poverty reduction, as well as being the best route to supporting small or medium sized businesses. However, of the $18billion lent in 2010, two thirds went to large OECD multinational corporations, including $40 million to Petra Diamonds Ltd to finance a three-year expansion of the Williamson mine in Tanzania.
Other DFIs are following suit. In 2000, 90% of multilateral development bank funding went to public sources and only 10% to the private sector, by 2007, the proportions were 30/60. What’s more, over half of the IFCs lending is now carried out indirectly through financial intermediaries, such as Banks and private equity firms whose profit maximising motives aren’t aligned with development objectives. The IFC’s own classification system states that 58% of projects carry medium or high risk adverse social or environmental impacts. This money goes towards financing projects, is lent directly to businesses or goes into equity investments in other companies.
ICSID, far from being an objective arbiter, has attracted accusations of being a tool to further open markets for corporations. In 2009 Ecuador withdrew from ICSIS stating that it “signifies colonialism, slavery with respect to transnationals, with respect to Washington, with respect to the World Bank.”
In the area of climate finance, the World Bank has been involved in shaping carbon markets and financing through their Climate Investment Funds. Whilst one hand wrestles for control over multi-billion dollar climate mitigation and adaptation architecture, the other is feeding the largest contributing factors. Its energy lending portfolio continues to fund fossil fuel extracting corporations. Between 2009 and 2010, the World Bank gave $6.3 billion to fossil fuel projects, a 138% increase on the previous year. This includes a controversial loan of over $3 billion to South African energy giant Eskom to build a new coal burning power station.
MDBs and the UK
In the UK, the Department for International Development (DFID) and the Treasury steer government policy towards the global institutions. DFID’s policy positions are set by the International Financial Institutions department (IFID) and the Global Funds and Development Finance Institutions department (GFDD).
The top UK representatives at the IMF and World Bank are the Chancellor of the Exchequer (currently George Osborne) and the Secretary of State for international development (currently Andrew Mitchell). The UK is the 4th largest shareholder in both the World Bank and IMF, holding over 4% of the vote in each and is the largest donor to the World Bank.
The UK’s own DFI is the little known Commonweath Development Corporation (CDC), which provides financial support for multinational corporations with UK taxpayers money (Vodafone are amongst those topping the list). Last year saw allegations of fiddled expenses, making millionaires of its executives and supporting projects that will bring high returns for investors rather than reduce poverty. For instance, forgoing investment in Ghanaian agriculture and infrastructure in favour of a luxury shopping mall. CDC has also been fighting the corner for tax haven use and wilfully supporting corrupt companies; and spends slow days attempting to ban Private Eye investigator Richard Brooks from its public events.
The EU and the EIB
The European Investment Bank (EIB) is a public financial institution that operates on behalf of the European Union (EU). In terms of lending, it is the largest public financial institution in the world. Much of the EIB’s lending is to the private sector and, like many DFIs, is increasingly done through the use of private equity and financial intermediaries. The development effectiveness of the EIBs operations is questionable to say the least whereas there is little doubting their support of private sector growth and facilitating the access of European corporations into developing country economies.
Like the World Bank before it, the EIB has a penchant for destructive large scale infrastructure projects, dams and mines. In the Democratic Republic of Congo the EIB is a stakeholder in Grand Inga which when finished, will be the world’s largest dam at 40,000 megawatts and costing up to $100 billion. Though there are still question marks over how exactly all this finance will be raised, making the dam profitable is an easier prospect – export the energy. The key export route will be a “6,000km long electrical transmission line that would be built through the tropical rainforest, across the Sahara Desert and Darfur, through Egypt and the Mediterranean to bring electricity to its destination – not local Africans, but generally wealthier European consumers.”
Also amongst the beneficiaries are corporations and private financial institutions. Australian corporation BHP Billiton, the world’s largest mining company, signed a Memorandum of Understanding with the DRC government to develop Grand Inga III in 2006. BHP is a corporation with an impressive record of environmental disasters, including Ok Tedi in Papua New Guinea and Illawarra and Yeelire in Australia. Moreover, as the vulture fund FG Hemisphere owns $104 million of DRC debt (inflated from the $18 million it was originally purchased at), the DRC will not see any profits from the Inga I and II dams for at least 15 years and will likely have to take on new debts to sustain it.
The activities of the EIB in the DRC are driven not only by the prospect of huge corporate profits but also by the energy needs of the European Union (EU). EU energy consumption is rising in the face of depleting oil and gas supplies, leading to a greater dependence on imported energy. By 2030 the EU will be importing 65% of its energy, 84% of its gas and 93% of its oil. This prospect has left knees quaking on the boulevards of Brussels and is behind the ‘energy grab’ that has seen public money pumped into IFIs and corporations to construct pipelines and electricity grids across Africa, Central Asia and Eastern Europe that will supply energy to Europe, bypassing the countries of origin. Amongst these is the Baku-Tiblisi-Ceyhan (BTC) oil pipeline, which crosses Azerbaijan, Georgia and Turkey, a stabilisation clause exempts BP from national environmental and social laws, as well as protecting the corporation from higher tax rates.
The EU has long been sympathetic to corporate interest with lobbying and conflicts of interests barely disguised. Corporations lobby EU institutions through their own lobbyists, through hired lobby consultancy firms such as Gplus, or through industry bodies and coalitions such as the European Banking Federation. Unsurprisingly, a voluntary European Commission lobbying transparency register set up in 2008 has done little to curb the trend.
Banking on the financial crisis
In the wake of the 2008 financial crisis, lobbyists were out in force to try and put the brakes on any regulation that would hinder their activities. Banks such as RBS and Goldman Sachs are members of the International Swaps and Derivatives Association (ISDA), a group central in lobbying to limit the regulation of derivatives trading. ISDA, with a seat on the European Commission’s Working Party on Derivatives, is in a more than adequate position to influence policy makers. They pushed the line that speculation caused no financial risk, despite derivatives and other “financial weapons of mass destruction” playing a key role in both the financial and food crises, the latter of which pushed a further 100 million people to the edge of starvation. AIMA (The Alternative Investment Management Association) weighed in on the side of hedge funds, practically holding the EU to ransom in threatening that any directive to regulate them would result in job losses and would “hurt schools, hospitals, shopping centres, things that affect ordinary EU citizens.”
Rules to guard against nepotism and conflicts of interest between corporations and institutions fail to prevent the ‘revolving doors’ of power whereby ex-officials and parliamentarians leave to take senior positions or board seats at corporations and industry lobbies. They provide their new employer with ample insider knowledge and access to officials and key decision makers. In April 2010, the Royal Bank of Scotland hired Günter Verheugen, the former EU industry commissioner, as senior advisor and vice chairman of their Global Banking and Markets division. This, two months after he had been involved in the reform of the Better Regulation Agenda and other attempts to regulate the banking sector.
The World Trade Organisation (WTO), which came into being on January 1 1995, was created to regulate trade between member countries, supervise the negotiation of trade agreement s and facilitate dispute resolutions. It replaced the long standing General Agreement on Tariffs and Trade (GATT) and extended its remit, going beyond trade in goods and now encompasses services and intellectual property, with moves being made towards finance. As with GATT, negotiations take place in ‘rounds’ during which member states discuss barriers to trade such as tariffs, labour laws, quotas and patents. Since 2001 members have been tussling over the Doha round, which has development as its focus. The Doha round stalled in 2008 over the ‘special safeguard mechanism’, a proposal that would give developing countries the chance to regulate certain agricultural imports so as to better protect the livelihoods of their farmers.
On paper, the WTO is meant to function democratically with decisions made by consensus. In reality, decision making is often dominated by the US, EU, Canada and Japan. For instance, many developing nations haven’t the resources to house negotiators in Geneva, the location of the secretariat, whilst other countries have staff running into the hundreds. Additionally, ‘green room’ negotiations, private meetings of the industrialised nations exclude developing county representatives. Opposition to green room discussions on agriculture between the US and EU at the 1999 Seattle WTO ministerial meeting were a factor in the breakdown of negotiations; with the meeting itself shut down by sustained protest and direct action.
Like the World Bank and IMF, the WTO is responsible, through encouraging all countries to adjust to its rules and disciplines, for pushing a neo-liberal, free market agenda. They are accused of putting the rights of corporations above human and labour rights with governments liable to be sued if their trade policies interfere with business activities. Publicised disputes include the US and EU filing complaints over calls for ‘GM free’ labelling; the WTO ruling that the EU ban on hormone injected beef was illegal; and Venezuela opposing the US’s clean air act in order to sustain its petroleum exports. Settlement of disputes rely heavily on unaccountable committees providing 'technical' advice, such as the Codex Alimentarius Committee on food standards. The process favours wealthy nations and corporations with the backing of technical committees and legal might.
Amongst the WTOs most controversial regulations is the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS). TRIPS imposes strict rules on patents, copyrights and trademarks including those of plants and natural derivatives. Impacts include patents being used to protect and maintain high prices for pharmaceutical products, including HIV/AIDs medication. Although officially no non-governmental organisations were allowed to influence the TRIPS creation process, various industry lobbyists played their part. The Intellectual Property Committee, at the time a coalition of a dozen of the largest US corporations, was set up to influence the negotiations; whilst the Union of Industrial Employees Confederations maintained the European business position.
Groups such as the European Services Forum (ESF), which includes BT, Vodafone, Lloyds and Goldman Sachs hold regular meetings with EU trade officials to share strategies for WTO negotiations. ESF pushes for developing countries to open its markets in telecoms, tourism and IT. As with the other global institutions, corporate lobbying continues to influence the WTO, leaving us to doubt whether the Doha development round will do more than simply deepen the financialisation of developing country markets.
The above global institutions have great power and influence over the world’s economies and the lives of billions. Not only in a literal sense, through their policies and programmes; but also through their roles as agenda setters and shapers of development discourse and norms. Whether one believes that their very existence is problematic, or in their potential as a force for good – it is clear that the influence of corporate interests over their activities has brought forth many negative consequences and turned them away from public serving ideals. What’s more, it makes the expanding remit of these institutions a worrying prospect.
Global institutions run by states exist for the maintenance of corporate power and are permeated by corporations at every level. There are other global institutions - such as federations of trade unions and NGOs - which could play a key role in challenging the corporate institutions discussed above, yet these are also affected by corporate rule as it becomes more and more of a challenge to build global structures that aren't permeated by corporations.
 Zoe Godolphin, The World Bank as a new global education ministry? Proposed education strategy lacks a focus on human rights, 21 January 2011
 Anders Lustgarten, Conrad’s Nightmare: The World’s Biggest Dam and Development’s Heart of Darkness
 Africa Energy Intelligence, ‘SNEL’s Profits to be Seized’, January 28 2009
 European Commission, An Energy Policy for Europe, January 2007
 A form of investment which has no value in itself but is ‘derived’ from the value placed on a particular asset (e.g. grain, oil, gold or mortgages). Traders then, in a variety of ways, bargain on an expected future price of that assets. The trade in derivatives can impact on the price of that asset in the real world. For an outline of derivative types see: http://en.wikipedia.org/wiki/Derivative_%28finance%29