US, EU kicks treaty binding transnational corporations

The United States and the 28-member European Union (EU) have assiduously promoted – and vigourously preached – one of the basic tenets of Western multi-party democracy: majority rules.

But at the United Nations, the 29 member states have frequently abandoned that principle when it insists on “consensus” on crucial decisions relating to the U.N. budget – or when it is clearly outvoted in the 193-member General Assembly or its committee rooms.

That’s exactly what happened Thursday at the U.N. Human Rights Council (UNHRC) in Geneva which adopted, by majority vote, a proposal to negotiate a legally-binding treaty to prevent human rights abuses by transnational corporations (TNCs) and the world’s business conglomerates.

But following the vote, the United States and the EU, have warned they would not cooperate with an intergovernmental working group (IGWG) which is to be established to lay down ground rules for negotiating the proposed treaty.

Stephen Townley, the U.S. representative in the HRC, told delegates: “The United States will not participate in this IGWG, and we encourage others to do the same.”

There are also a host of practical questions about how an internationally binding instrument would apply to corporations, which are not subjects of international law, and how states would implement such an instrument, said Townley, special assistant to the legal adviser at the U.S. State Department.

The vote was 20 for, 14 against and 13 abstentions in the 47-member HRC. The United States and EU members, including France, Germany, UK, Italy, Ireland, Austria, Estonia and the Czech Republic, along with South Korea and Japan, voted against the resolution.

Spearheaded by Ecuador and South Africa, the resolution received positive votes from China, India, Indonesia, Kenya, Pakistan, Philippines and Algeria, amongst others.

The Arab nations, including Saudi Arabia, the United Arab Emirates and Kuwait, along with Mexico, Peru and the Maldives, abstained.

Anne van Schaik, accountable finance campaigner with Friends of the Earth Europe, told IPS the voting list “makes clear we are up against powerful forces”.

“Who will not back away from using old bullying techniques?” she asked.

She said the EU has clearly stated it will not cooperate in implementing the proposal.

And after the vote, the United States said this legally binding instrument will not be binding for those who vote against it.

“So we can expect some fierce opposition,” Schaik said, even as the IGWG plans to hold its first meeting sometime next year.

“But we are cheerful because it is not every day public interest wins over corporate interests which are backed by the EU and the U.S.,” she added.

Both United States and the EU have argued that the three-year-old U.N. Guiding Principles on Business and Human Rights is adequate as a yardstick to monitor the business practices – and malpractices – of corporations and big business.

“We have not given states adequate time and space to implement the Guiding Principles,” Townley told delegates.

He said “while we share and appreciate the concerns expressed by some delegations and civil society colleagues that we need to do more to improve access to remedy for victims of business-related human rights abuses, our concern is that this initiative [for a legally binding treaty] will have exactly the opposite effect.”

Philip Lynch, director of International Service for Human Rights, told IPS that in order to be effective, it is crucial that any treaty on business and human rights be negotiated with input from all relevant stakeholders and that it cover all business enterprises, not just transnational corporations.

“We consider it very important that the European Union participates in this negotiation process,” he said, since the EU is both the headquarters for many corporations, and global leaders in the implementation of the U.N. Guiding Principles on Business and Human Rights.

“We also hope that the negotiation of the treaty can complement and build on the consensus underpinning the Guiding Principles, which enjoy strong EU support,” he added.

Speaking of the proposed treaty, Schaik told IPS this is something that Friends of the Earth has campaigned for years, if not decades.

“We have always wanted the U.N. to take responsibility to develop such a mechanism, since they are the only international democratic decision-making body that is able to work on such a proposal.”

So, it is better than, for example, having legislation adopted by some countries, or regional bodies (if this would have been feasible at all), she added.

Secondly, Schaik said, what is very positive as well is that in the resolution, a roadmap is already laid out for the first steps of this working group.

“The division of the votes clearly shows that the countries who are host to a lot of TNCs, such as the EU, as well as Norway and the U.S., are against this proposal,” she noted.

Asked how the Western opposition could be countered, she pointed out the U.S. warned, even before the vote, that countries who voted against it would not be obliged to respect the resolution.

“This is of course total nonsense, but it does mean that both civil society, as well as the countries who voted in favour, will have to do what they can in order for this working group to be successful.”

She said: “We have built at very short time a coalition of more than 610 organisations and 400 individuals.”

She said the treaty alliance is already making plans on how to follow up on this victory, “and I think particularly for groups in Europe, the U.S. and Norway there is an important task to keep pressuring their countries to respect the resolution.

“We will campaign, set up email actions, present research, organise speaker tours and take to the streets, if necessary, to ensure the working group will be successful,” she said.

Source: Common Dreams

The network that runs the world

Science may have confirmed our worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

The study’s assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making transnational corporations more stable.

The idea that a few bankers control a large chunk of the global economy might not seem like news to many. But the study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world’s transnational corporations (TNCs).

“Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder. “Our analysis is reality-based.”

Previous studies have found that a few TNCs own large chunks of the world’s economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy – whether it made it more or less stable, for instance.

The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company’s operating revenues, to map the structure of economic power.

The work, to be published in PLoS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues.

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability.

Concentration of power is not good or bad in itself, says the Zurich team, but the core’s tight interconnections could be. As the world learned in 2008, such networks are unstable. “If one [company] suffers distress,” says Glattfelder, “this propagates.”

“It’s disconcerting to see how connected things really are,” agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank.

Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system’s behaviour, he says, requires more analysis.

Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Sugihara says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk.

One thing won’t chime with some of the protesters’ claims: the super-entity is unlikely to be the intentional result of a conspiracy to rule the world. “Such structures are common in nature,” says Sugihara.

Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, “is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups”. Or as Braha puts it: “The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy.”

So, the super-entity may not result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest.

When this article was first posted, the comment in the final sentence of the paragraph beginning “Crucially, by identifying the architecture of global economic power…” was misattributed.

The top 50 of the 147 superconnected companies

1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
9. UBS AG
10. Merrill Lynch & Co Inc
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation
26. Lloyds TSB Group plc
27. Invesco plc
28. Allianz SE 29. TIAA
30. Old Mutual Public Limited Company
31. Aviva plc
32. Schroders plc
33. Dodge & Cox
34. Lehman Brothers Holdings Inc*
35. Sun Life Financial Inc
36. Standard Life plc
37. CNCE
38. Nomura Holdings Inc
39. The Depository Trust Company
40. Massachusetts Mutual Life Insurance
41. ING Groep NV
42. Brandes Investment Partners LP
43. Unicredito Italiano SPA
44. Deposit Insurance Corporation of Japan
45. Vereniging Aegon
46. BNP Paribas
47. Affiliated Managers Group Inc
48. Resona Holdings Inc
49. Capital Group International Inc
50. China Petrochemical Group Company

* Lehman still existed in the 2007 dataset used

The New Scientist