Corporate influence on government: An introduction

This section of the Corporate Rule website will examine the processes whereby corporations exert influence over government through a series of case studies. The resources section provides a list of films and writing on the topic, as well as links to sources of information and relevant campaigning groups

Corporate power over government in 'liberal democracy' conjures up images of cash stuffed envelopes being passed in secrecy, of nepotism, 'sleaze' and corruption. Instances where corporate power becomes too apparent to the public are portrayed in media and government discourse as aberrations within a state where parliament works for its voters, not for its own power interests. Politicians and civil servants under the influence of corporations are caricatured as greedy fat cats, bad apples in an otherwise untarnished barrel.

Very often stories like that of Neil Hamilton, the Corporate Affairs minister in the Thatcher government in the UK, who accepted cash for asking questions in parliament on behalf of Muhammed Al Fayed, the owner of Harrods,[1] or of the Nixon administration's sponsorship by ITT in the US in the late early 1970s,[2] give the impression that corporations only exert power over right wing governments. The exposing of Shell's infiltration of the Nigerian government and subversion of its legal system[3] might lead one to believe that complete corporate penetration of government is a phenomena confined to the global South. In fact these incidents only show the visible extremes of corporate power over government.

In truth these seedy images of corruption are a smokescreen impeding a true understanding of the relationship between corporations and governments. Corporations and politicians may not always have the same interests but the task of governments is always the same; to moderate an environment where the rich can continue to profit and the powerful can remain so. Corporate power over liberal democracy is global and ubiquitous. Indeed it could be argued that the two now function entirely symbiotically; with global capital feeding the advance of a globally avaricious neo-liberal imperialism facilitating the unmitigated dominance of corporations. Even the term 'revolving door' between corporations and government presumes that there is a door at all.

An Equal Balance?

In 'representative democracy' the government's stated role is to mediate between the interests of different groups within society. Business, in theory, represents only one of these interests. The government often claims to have taken into account the interests of other groups in society by including pressure groups, Non-Governmental Organisations (NGOs) or trade unions in consultations. The public's opinion is divined through opinion polls, surveys or focus groups and these supposedly representative views are said to be taken into account. However, governmental decisions can be consistently seen to benefit businesses rather than the public. This introduction will examine some of the processes by which corporate interests are elevated above all other concerns

Lobbying

The 'lobbying' element of policy making, that which is supposed to give a voice to the interests of members of the public, is dominated by corporations who exert enormous influence over government by employing private lobbyists. Corporate offices in Westminster or Washington act as industrial embassies, putting forward the interests of their company, their needs in terms of markets, legislation or political advocacy. In the UK lobbying, or 'Public Affairs', has developed into a professional industry worth £1.9 billion and employing 14 000 people.[4] In 2010 the UK government rejected calls for a statutory register of lobbyists.[5]

Industry lobby groups form an invaluable tool in this process. For example the Confederation of Food and Drink Industries (CIAA), which includes Cadbury, Cargill, Coca-Cola, Danone, Nestle, Kraft etc has recently persuaded the European Union (EU) not to introduce 'traffic light' food labelling.[6] These industry groups provide a false separation between the needs of corporations and the actions of government. Lobby groups often masquerade as independent watchdogs through the setting up of front groups, such as the European Policy Centre, a 'thinktank' which British American Tobacco used to lobby for less restriction on the tobacco industry.[7] It is presented as legitimate and normal for governments to look after the interests of these groups, who are seen as 'stakeholders' and part of the 'community'.

The distinction between a politician and a corporate lobbyist is becoming increasingly blurred. Politicians are in high demand for high level lobbying positions. During 2010 Patricia Hewitt, Stephen Byers and Geoff Hoon, then government ministers, all told undercover reporters that they would be happy to sit on corporate advisory boards or provide information for £3000 to £5000 a day. In the UK it is legal for serving MPs to be paid consultants to business interests.[8]

Government 'consultation' processes are an opportunity for the state to legitimise policies that benefit corporations. Corporate employees and industry groups sit alongside politicians and representatives of NGOs or pressure groups For example the Department for Rural Affairs (DEFRA) and the British Retail Consortium worked with Oxfam on a consultation over the sale of goods from Israeli settlements during 2009 and NGOs like Safer World sit on the Department of Business, Innovation and Skill's panel on arms exports.[10] These parties are said to represent the 'stakeholders' and the consultation is passed off as positive and representative.

Lobbying sometimes presents itself in the giving of bribes. This is the corruption that state discourse tells us needs to be weeded out. However, in most circumstances bribes are not illegal or even controversial. Very often bribes are presented, not as greasy envelopes, but as donations that, supposedly, would be given regardless of corporate needs, as party political donations, philanthropy or even as legitimate business dealings.

Corporations also fund, part fund, or donate toward the costs of 'public' projects. One example is corporate funding of education through sponsoring facilities and research posts and through academy schools.[11] Rather than empowering these projects through financial support, this practice gives corporations an inordinate amount of power in the direction and future provision of such services, allowing decisions regarding supposedly public projects to be made in the interests of private businesses.

Corporate political donations are presented as unconnected to their political or commercial interests. However, the truth is that donations are aimed at obtaining more access to politicians and parliament, securing government contracts or effecting changes in the law. For example ITT paid costs for the 1973 Republican Party conference in the US in order to avoid the breakup of the company in an anti-trust suit. In an unusually frank memo ITT's chief lobbyist wrote of the donation “I am convinced that our noble commitment has gone a long way toward our negotiations on the mergers eventually coming out as Hal (Geneen, ITT's CEO) wants them. Certainly the President (Nixon) has told Mitchell (the Attorney General) to see that things are worked out fairly... Please destroy this, huh?”[12]. More recently Rupert Murdoch, CEO of News Corporation, has made huge donations to the US Republican party while launching an attack on the Obama administration through the Fox News Network.[13]

Yet another type of acceptable, although deeply controversial, bribe, is the kickbacks gleaned from business deals. During the Thatcher years UK government employees, including the prime minister's son, Mark Thatcher, received commissions from BAE Systems for facilitating the Al Yamamah arms deal, worth £30 billion, between BAE and Saudi Arabia. Again, these kickbacks are legal in the UK. BAE also extensively bribed the Saudi government.[14]

Corporations and government hand in hand

Those who have power, of which politicians and corporate bosses are two examples, are a tight bunch. This doesn't necessarily indicate a global conspiracy, more that the CEOs and the directors of companies have, very often, come from the same class background and have followed the same educational and professional trajectories as politicians. Those trajectories inexorably link them with the status quo and, as such, they have a shared interest. Elite 'old boys' networks give politicians and the business class access to networking events where the confluence of their shared interest can be discussed, refined and planned.

This closeness is often called 'nepotism' or 'cronyism' in the media. The mainstream media loves to expose examples of it. Again, showing up the supposed 'bad apples' in an attempt to cleanse the system. However, the fact remains that politicians and the business class represent the same interests, and are often the same people.

Politicians act as ambassadors for corporations in their foreign relations. For example, in 2010, George Osbourne, the UK Chancellor of the Exchequer, visited India and 'launched' new products for Standard Chartered and Vodafone.[15] Osborne also tried to sort out an expensive dispute with the Indian income tax department on behalf of Vodafone, over its acquisition of Hutchison Whampoa.[16] During 2010, Shimon Peres, the Israeli president, embarked on an official visit to South America with representatives of several military companies attempting to secure 'defence' and 'security' contracts.[17]

Corporate penetration of government

Corporations maintain a constant presence inside government. Current, former and future directors of multinational corporations work for HM Civil Service, in government procurement roles and on obscure advisory committees as part of the civil service or appointed directly by ministers. These committees often play an advisory, rather than policy making role, but are an important channel to communicate corporate needs directly to the requisite parts of government.

Multinational corporations attempts to penetrate governments span continents. For instance Shell have an all-pervasive influence over the Nigerian government Leaked communications between Shell and the US embassy showed the company boasting that the company “had seconded employees to every relevant department” and so knew “everything that was being done in those ministries”.[18]

Sometimes corporate presence in government takes the form of a 'revolving door' between government and industry. For instance Sir Robert Walmsley was Chief of Defence procurement from 1996 to 2003, after a career in the navy. After retiring from the Civil Service Walmsley quickly became Senior Advisor to Morgan Stanley, and a director of Cohort, Ultra Electronics, British Energy, EDO Corporation (now ITT), General Dynamics and Stratos Global Corporation.[19]

Many of these companies had benefited from government military procurement under Walmsley, and one of them, General Dynamics (GD) had very recently secured prime contractor status, worth £1.7 billion, to supply the Bowman radio system to the Ministry of Defence (MOD).Walmsley was asked by the Advisory Committee on Business Appointments to delay taking up the post for a year to avoid the impression that he was being 'rewarded' by GD for his help procuring the contract (Perish the thought).[20]

Vodafone has been involved in a long-running legal battle with HM Revenue and Customs (HMRC), which accused the company of breaking tax regulations when it used a Luxembourg company, Vodafone Investments Luxembourg (VIL), to dispose of its shares in Mannesman. The regulations seek to ensure that UK companies with subsidiaries in 'tax havens' pay at no less than the UK tax rate. Vodafone lost the legal case but the settlement given by HMRC was extremely advantageous, requiring Vodafone to pay only a fraction of the tax owed.[21] The negotiations between Vodafone and HMRC's legal team must have been aided considerably by the fact that Vodafone's Head of Tax, John Connors, had worked for HMRC up until 2007. The wheels may well have been further greased by Sir Christopher Gent. He had been Vodafone's CEO until his resignation in 2006 before taking up a position on both the 'Tax Reform Commission', convened by George Osborne, and the 'Economic Recovery Committee', a team formed to guide the Conservative Party's policy through the financial crisis. Vodafone’s finance director, Andy Halford, who was directly involved in the negotiations with HMRC, is a member of George Osborne’s 'Business Forum for Competitiveness and Tax.'[22]

The Media

The corporate media exerts a special power over government. News corporations have the power to shape public opinion of politicians and government policy. As a result, the corporate media has unprecedented access to politicians and can strike deals with the government over policy in return for positive coverage. Rupert Murdoch, the CEO of News Corporation, the world's largest media corporation, had access to private meetings with Tony Blair after his election in 1997.[23] He also conducted several meetings with the current Tory government shortly after its election. There were no notes taken of these high-level meetings.[24] Media corporations are able to trade political pledges from governments, and address their specific market needs (such as Rupert Murdoch's quest to purchase all shares in BskyB).[25] In return, they offer support in their publications or on their networks for political parties and policies.

One of the most insidious examples of the corporate media exercising its power to both benefit government, and its own relationship with the state system, is of course its reporting of 'corruption'. High profile, glamourous exposes of governmental 'sleaze', which invariably focus on personalised, individual wrongdoing, often run for weeks, and become the cultural currency for public understanding and discussion of corporate influence over government. This blindsiding through sensationalism serves not only to give the impression that the government and corporations are actively fighting corruption, but draws all attention away from inquiry into how widespread this influence is or, indeed, any analysis asserting that profit driven corporate influence over government is in fact systemic.

Corporations, government and war

An example of corporate influence over government contributing to controversial government policy was the US/UK's 2003 invasion of Iraq. The interests of private companies in the marketisation of Iraq's oil were a significant factor in the decision to go to war. Several US politicians stood to personally gain from the invasion of Iraq, through their involvements with corporations who stood to gain contracts once the Iraqi market was prised open. For example, US Vice-President Dick Cheney was CEO of Halliburton until 2000. He was still being paid by the company in 2003, when it was awarded nearly a billion dollars-worth of contracts to work with US troops.[26] British companies also stood to gain lucrative contracts in post-war Iraq.[27]

The invasion of Iraq was not the first war to be fought for corporate interests. Wars are, more often than not, fought for resources and corporations have an interest in controlling these resources. During the 70s a group of companies led by ITT and Anaconda Copper Mining Company attempted to steer US foreign policy toward the toppling of Salvador Allende, who was nationalising corporate assets in Chile. ITT suggested that the US should back a coup, which it later did,leading to decades of brutal dictatorship.[28]

The interests of corporations, as well as spurring wars, also influence governments to maintain the status quo. The maintenance of the status quo often requires the subjugation of ordinary people in favour of militarism, dictators and juntas. For example, the Oslo 'peace process' between Israel and the Palestine Liberation Organisation (PLO) was a process designed to consolidate and institutionalise Israeli control over Palestine. Israeli companies working in the occupied territories were one of the first groups to be consulted.[29] Israeli business interests benefit from the occupation of Palestine and lobby for the maintenance of Israeli militarism. This leads to a lack of political will to end the occupation, despite its disastrous effect on Israeli society.[30]

Similarly, the shared interests of the US and the Saudi Arabian governments in maintaining the control of Saudi oil has led to militarism and repression. In order to control resources on behalf of US corporations, the US has supported the maintenance of the Saudi regime and the repression of the Saudi population. In order to protect their relationship with the US, the Saudi state has been forced to repress their own population ever more brutally. Saudi oil is controlled by Aramco, whose shareholders are the US's largest oil corporations.[31]

Click here for case studies on corporate power over government

[1] Parliamentary Privilege, Paul Foot, Socialist Review – http://pubs.socialistreviewindex.org.uk/sr180/notes.htm#foot, viewed 20/12/2010
[2] From San Diego to Santiago: ITT and the Nixon Administration, December 2010 Corporate Watch, November 2010 – http://corporate-rule.co.uk/drupal/node/101, viewed 20/12/2010
[3] Shell and the Niger Delta, Corporate Watch, December 2010 – http://corporate-rule.co.uk/drupal/node/75, viewed 20/12/2010 and Wikileaks Cables: Shell's Grip on the Nigerian State Revealed, David Smith, The Guardian, 08/12/10 – http://www.guardian.co.uk/business/2010/dec/08/wikileaks-cables-shell-ni..., viewed 20/12/2010
[4] Friend or Foe? Lobbying in British democracy, Dr Phil Parvin, Hansard Society. - http://www.hansardsociety.org.uk/files/folders/357/download.aspx. Viewed 23/12/2010
[5] Government rejects call for lobbying register, Tania Mason, Civil Society Finance, October 2010 – http://www.civilsociety.co.uk/finance/news/content/5391/government_rejec..., Viewed 23/12/2010
[6] The Best Influence Money Can Buy, Helen Burley and Oliver Hoedeman (Corporate Europe Observatory), New Internationalist, January/February 2011 - http://corporate-rule.co.uk/drupal/node/147, viewed 20/12/2010
[7] Ibid
[8] In the Halls of Shame, Vanessa Baird, New Internationalist, January/February 2011 - http://corporate-rule.co.uk/drupal/node/148, viewed 20/12/2010
[9] Corporate Watch, Private conversations with supermarket management
[10] As Used on the Famous Nelson Mandela, Mark Thomas, 2006, (Ebury Press ISBN 009190921 X)
[11] See, for example, Degrees of Capture: Universities, The Oil Industry and Climate Change, Greg Muttitt for Corporate Watch and the New Economics Foundation, 2003 - http://archive.corporatewatch.org/publications/degrees_of_capture.pdf, viewed 20/12/2010
[12] From San Diego to Santiago: ITT and the Nixon Administration, Corporate Watch, November 2010 – http://corporate-rule.co.uk/drupal/node/101, viewed 20/12/2010
[13] See Rupert Murdoch donates $1m to the Republicans, Ewan Macaskill, August 2010 – http://www.guardian.co.uk/media/2010/aug/17/rupert-murdoch-donation-repu..., viewed 20/12/2010
[14] Flying the Flag (Arming the World), John Pilger, 1995 – http://video.google.co.uk/videoplay?docid=7896356728565502659#, viewed 20/12/2010 and Secrets of Al Yamamah, David Leigh and Rob Evans – http://www.guardian.co.uk/baefiles/page/0,,2095831,00.html, viewed 20/12/2010
[15] Osborne Kick Starts India Visit With Tata talks and Vodafone Launch, James Hall, Daily Telegraph, October 2010 – http://www.telegraph.co.uk/finance/globalbusiness/7911178/Osborne-kick-s..., viewed 20/12/2010
[16] Parliamentary committees, revolving doors and Vodafone's tax settlement, Corporate Watch, 10/11/2010 - http://www.corporatewatch.org.uk/?lid=3835, viewed 20/12/2010
[17] Buying into Occupation and War, Palestinian Grassroots Anti-Apartheid Wall Campaign, March 2010 – http://stopthewall.org/downloads/pdf/buy-in2-occ.pdf, viewed 20/12/2010
[18] Wikileaks Cables: Shell's Grip on the Nigerian State Revealed, David Smith, The Guardian, 08/12/10 – http://www.guardian.co.uk/business/2010/dec/08/wikileaks-cables-shell-ni..., viewed 20/12/2010
[19] Brief Biography: Robert Walmsley, Reuters – http://www.reuters.com/finance/stocks/officerProfile?symbol=GD&officerId..., viewed 20/12/2010
[20] Blair Defies Watchdog Over Jobs for the Boys, Francis Elliot, 01/08/2004 - http://www.warmwell.com/04aug2watchdog.html, viewed 20/12/2010
[21] Parliamentary committees, revolving doors and Vodafone's tax settlement, Corporate Watch, 10/11/2010 - http://www.corporatewatch.org.uk/?lid=3835, viewed 20/12/2010
[22] Cut the Crap, The Cuts as Profit Oppurtunities, Corporate Watch 15/12/2010 – http://www.corporatewatch.org/?lid=3856, viewed 20/12/2010
[23] Memo Shows How Blair Aided Murdoch, David Hencke and Rob Evans, The Guardian, November 1st 2008 - http://www.guardian.co.uk/politics/2008/nov/01/media-rupertmurdoch
[24] Conservative links to Murdoch under scrutiny as private meeting revealed, James Robinson and Rob Evans, The Guardian, 22nd December 2010 -
http://www.guardian.co.uk/politics/2010/dec/22/conservative-links-murdoc..., viewed 20/12/2010
[25] Ibid and OpCit
[26] Halliburton Makes a Killing on Iraq War, Pratap Chatterjee (Corpwatch), March 20th 2003 – http://www.corpwatch.org/article.php?id=6008, viewed 20/12/2010
[27] See, for example, Corporate Carve Up: UK Companies in Iraq, Corporate Watch, 2004 - http://www.corporatewatch.org.uk/download.php?id=41, viewed 20/12/2010
[28] From San Diego to Santiago: ITT and the Nixon Administration, Corporate Watch, November 2010 – http://corporate-rule.co.uk/drupal/node/101, viewed 20/12/2010
[29] The Political Economy of Israel's Occupation, Repression Beyond Exploitation, Shir Hever, 2010
[30] Ibid, for example page 37
[31] See, for example, The House of Saud, PBS Frontline, 2005 - http://video.google.com/videoplay?docid=4383835181717429209#, viewed 20/12/2010.