Who Governs?

 

 

 

 

 

We have all become used to multi-nationals demanding subsidies to open (or keep operational) local manufacturing or service centres and if the government does not or cannot meet their demands they're off to bully and bribe someone else and place their business with someone else regardless of the impact on their workers or the communities they operate in.

 

About eight or nine years ago, in a flight of fancy, I dreamt up an imaginary scenario in response to what I saw as the growing power of giant multi-national companies and the influence they have over nation-states in this and other regards. 

 

It seemed to me, even then, that such organisations had developed power to such a degree that,  in terms of the tax they paid or the laws they observed, they were effectively volunteers. Most of them had tax avoidance departments to ensure that elected governments got a bare minimum, if anything, from the desired local taxation regime and even so, they would close plants, sack workers and generally hold to ransom any tax jurisdiction that dared to ask for anything they thought "unreasonable". And that's not to consider those organisations which were intent on outright and illegal tax evasion.

 

The financial collapse of 2008 showed that many of the large banks were "too big to fail". Governments, desperate to avoid meltdown in the banking system, poured taxpayers cash into keeping the economy and the banks "liquid". It seemed that, no matter how badly they behaved and how dysfunctional they were, large multi-nationals were above and beyond the power of the modern nation state to deal with.

 

The recent instances of multi-nationals with huge UK turnovers somehow paying peanuts in UK tax just extends the numbers of  examples from which we can choose.

 

The scenario I invented envisaged the possibility of a shooting war by nations states on multi-nationals. The specific case I outlined was the French President kidnapping and holding hostage the CEO and Chief Financial Officer of an oil company to stop the company taking actions (as the President saw it) contrary to French economic interests. Probably due to my inherent lack of imagination and skill, I didn't develop the idea any further, but I did discuss it in the pub with my mates, who all thought it a bit extreme.... they were right of course, but it was supposed to be art not politics or science. 

 

Anyway, that's just a long winded way of approaching the recent Grangemouth debacle. It had all the ingredients: a previously British owned manufacturing plant whose outputs and services  are vital to Scotland and the UK's economy, a Swiss base multi-national (Ineos) with an obscure financial regime whose master plan includes cutting the wages and benefits of the workforce, a trade union bent on resisting these cuts, the need for long-term investment, a decision on who stump up for that investment and threats of closure if the company did not get its way.

 

We all know the outcome; the representatives of the Scottish and UK Governments stood hand wringingly by while the employers humiliated their workers and the governments and got every bit of the cash and cooperation they craved. The workers and the governments got shafted, and seemed grateful for it. The interests of the company were paramount. The interests of the employees, the Scottish Government, the UK Government were swept aside. As for the interests of the people and community of Scotland or Falkirk or the UK, they get a horse laugh.

 

All my adult life I have been fed a narrative of unions=strikes=bad for the country. The irony is that this was a strike, not by the union but by the company, and the government showed no desire to do anything effective about it, even if it could.

 

Now, all of  a sudden, it seems that everyone thinks the big companies are getting just too big and too powerful. In this Scotsman article Alf Young examines the "hedge fund like" structure of Ineos and warns that companies with this approach are impossible to deal with. They put the interests of their shareholders first, last and always (and the shareholders all probably know each other). Jim Ratcliffe, the effective owner of Ineos, is British. Did he consider patriotism, the needs of the country or fellow feeling with his fellow Brits in making his decisions? NFL. The senior managers of the plant are Scottish. Did they betray any solidarity with their compatriots when "negotiating" over the deal? NFL.

 

These companies, and there are more and more of them, have no loyalty to anyone, no attachment to anywhere and no spark of humanity in their decisions and actions. They have the heart of stone of a 19th century mill owner in a Victorian penny dreadful or melodrama. The company logo could be a disembodied hand twirling a luxurious black moustache with a scroll of cackling laughter beneath.

 

 

 

Owen Jones in the Independent states it clearly "A Swiss-based private company has held to ransom not just hundreds of workers and their families, not just their community, but an entire nation". 

 

The problem is: what to do? Do we continue to echo Eck, smile and wring our hands while pretending we did our best in a difficult situation? Or do we find a way for the nation state to stand up to, to match and defeat these companies or at least bring them into line?

 

This is more of a problem for Labour than for the Tories or the Orange Book so-called Liberal Democrats - they both believe with a religious fervour in the power of the markets, and therefore companies, to be the mechanism for delivering the needs of the populace without interference from governments. Labour, on the other hand, believes in the need for at least some state intervention and support. If Labour's vision is to be enabled, we need the ability for democratically elected governments to engage with multi-national corporations on the basis of, at least, parity if not superiority.    

 

But it's also an opportunity. It seems to me that the power of large companies with budgets bigger than states and tactics more ruthless than any iron-man dictator, cannot continue unchecked. It's not just jobs that are at stake. The history of the 20th century shows that it is state power that creaks when governments cannot control and deliver to their populations what those populations need for a decent life. This is especially so in democratic states. And whatever the big organisations may wish in terms of operational freedom to make their decisions to suit their own ends, chaos doesn't suit them either. With the weakening of the state comes instability and corruption and out goes any enforceable framework of law and order and any system within which they can make money and expect to be able to keep it safe from banditry. 

 

Whatever happens I'm sure that no-one will be dusting down the all-out-war scenario of state-to-industry relations. Just what they will do is a fascinating question.