Book Review: 'The Silent Takeover' by Noreena Hertz
| | RISQ Reviews | 11 June 2003 |
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Author: Nynke Hendriks
Noreena Hertz - The Silent Takeover: Global Capitalism and the Death of Democracy (London, Heinemann, 2001, €25)
 The increasingly smaller margins of politics are the subject of this smart and well-documented book by Noreena Hertz. In just over 200 pages Hertz discusses the power shifts that have taken place in Western democracies since the early 1980s and how political decisions have resulted in a world where corporations are wealthier than many nation states, politicans are paralyzed by their need to attract business revenues and unelected supranational forums control legislation. The Silent Takeover raises vital questions concerning the current state of our democracies and offers some suggestions as to how to reclaim your vote.
It seems that books about globalization might roughly be divided into pre-9/11 and post-9/11 books given its influence on their framework of reference. The Silent Takeover was published just before 9/11 and although it would have been interesting to take note of Hertz’s views on these events and subsequent changes in politics, this does not affect in any way the relevance and insightfulness of her book.
Hertz teaches at the University of Cambridge’s business school and has worked as an advisor supervising the setting up of Russia’s first stock exchange. She is therefore in an excellent position to reflect on the increasing powers of corporations and their role in the democracies of today. The strength of the book is inter alia due to the fact that Hertz sees both sides of the coin, capitalism is not dismissed offhand, neither are corporations merely viewed as evil forces. Her extremely readable analysis shows that capitalism and corporations may have a worthwhile role to play in society, albeit in a different form.
The Silent Takeover first retraces the emergence of globalization back to the era of Reagonomics and Thatcherism of the 1980s. Their neo-liberal politics of privatization, business tax cuts, (cross-border) trade liberalisation and deregulation of the labour market were disseminated across the world by other governments and lending institutions such as the IMF and the World Bank. By the early nineties their once radical capitalism had become the accepted and dominant world ideology, among right-wing and left-wing governments alike.
The liberalization of trade and finance not only enabled corporations to export more (exports doubled between 1980 and1997) but also allowed them to set up operations and branches across the world in places where operating and trade conditions were most advantageous. As a result, national governments increasingly loosened restrictions on labour, anti-trust, the environment and cut corporate taxes in a bid to keep businesses within their borders. This eagerness to attract corporations has led to a situation in which multinationals, increasingly able to operate globally, have gained such clout that politicians are left with little room to manoeuvre. For example, increases in income tax and corporation tax would drive corporations abroad as would stricter environmental regulations. The WTO (1994) has further liberalized trade regulations and, in addition, proved to be a most influential supranational body that frequently uses it sanctioning powers to prevent national states from applying environmental or social regulations which contravene corporate interests. Like corporations, the WTO is not an elected body and can, therefore, not be held accountable. This is one of the key issues in The Silent Takeover: in a world where unelected bodies wield such power and politics seem to be primarily geared towards corporate interests and have become increasingly homogeneous, why would politicians still deserve our vote? Statistics show that, for example, according to polls in the UK, the percentage of the electorate who had ‘great confidence’ or ‘quite a lot of confidence’ in parliament dropped from 54% to 10% between 1983 and 1996 and that the membership of political parties is at an all-time low since the war.
If the traditional political vote no longer seems to make a difference, Hertz proposes the use of the 'consumer vote' as a tool for (political) change. Consumer activism may, for instance, take the form of supermarket activism, i.e. shopping for products and services of ethically sound companies, or of shareholder activism, i.e. investments into the right companies.
Although the media play a considerable role in our perception of corporations, Hertz stresses that the media have to a large extent become part of the corporate world with major business interests and that their commercial dependence has weakened the reliability and independence of the information provided. The increasing corporate control of information endangering the free press is another aspect endangering the state of today’s democracy.
E-activism provides a way to develop new sources of information which remain outside the control of corporations. It furthermore enables consumers to target corporations directly. However, Hertz, also warns of exaggerated optimism about consumer activism and such new sources of information as they are prone to oversimplifying highly complex problems and reducing issues to black and white, good and bad. Another drawback of consumer activism is that it disproportionately empowers those with purchasing and organizational powers and therefore fails to reflect properly on society. The continuing importance of governments with their elected power to supervise, regulate and sanction must therefore not be diminished.
Following the description of how corporations have been able to gain such control and reduce the powers of governments, Hertz proceeds to discuss the latest phase of the ‘silent takeover’: a phase in which new dimensions are added to corporate action whereby corporations take over the traditional tasks of the nation state. In a time where governments retreat and face increasing constraints on state revenue, business is expanding its scope of activity.
The example of Ted Turner’s $1 billion dollar gift to the UN and other examples whereby business people engage in political activity, e.g. to create strong business alliances between Jordan and Israel and between Taiwan and China, represent a trend of more political engagement by business people in a time when politicians increasingly focus on business.
The engagement of corporations is not confined to political issues alone, as businesses increasingly tackle social and environmental issues, e.g. by sponsoring schools, literacy programmes and supporting local businesses and health care research. Corporate engagement springs inter alia from the acknowledgement that ‘cause marketing’ enhances the corporate image, builds brands, generates media attention and increases sales. Statistics show that over 85 per cent of American corporations use cause marketing.
The reversal of roles between government and business whereby the latter takes on political activity, determines the political agenda and gets things done quickly while government impotence and bureaucracy hamper decisive action raises the question as to whether such corporate action is a satisfactory substitution for traditional politics. Hertz emphasizes that this engagement is in many ways a positive development given that the speed with which corporations can act and the wealth they have at their disposal enable them to render superior services, provided always these actions are ‘managed correctly’. However, this poses the key problem, i.e. who manages these actions correctly?
As noted above, the national government’s power of controlling businesses has already been restricted by supranational organizations such as the WTO. Governments’ supervisory powers may be further curbed as their dependence of corporate welfare increases. Hertz notes and illustrates with specific examples that corporations may well use such welfare actions to stop governments from holding them accountable.
It is therefore doubtful whether the corporate charity outweighs the drawbacks. Although corporations may very well have benign intents it must be remembered that social justice is not the ‘core activity’ of their business, profit is. The providers of social action are unelected businessmen. Their causes are based on market appeal rather than need to the detriment of those with little purchasing power. And if times are bad, funds are likely to be withdrawn.
If governments refrain from laying down terms for corporate engagement and accountability and loose their powers of control, Hertz warns that not only will political support be further diminished, it may ultimately leave people without the possibility of holding anyone accountable and without representation.
The increasing uncertainty about the role of politics and a loss of faith in the interests governments serve are at the basis of the gradual emergence of a new political movement, i.e. the social justice movement. Interestingly, Hertz draws parallels with the progressives’ movement in the US at the start of the last century: the problems of harsh labour conditions, corruption and the poor-rich divide and amidst a similar sense of unease regarding the balance between political and corporate power gave rise to citizens’ organizations. Organizations which fought for and obtained, inter alia, the women’s vote, social reform legislation and anti-corruption laws. The citizens’ organization’s political protest was combined with consumer pressure, e.g. the refusal to buy goods produced by child labour, and this combination proved extremely effective at that time. Hertz essentially propagates a similar solution to reclaim the state right now, i.e.by way of a social justice movement combined with consumer activism, noting that the final stage of the silent takeover amounts to the end of politics itself, i.e. politics as we know it today: ‘Until the state reclaims us, we will not reclaim the state’.
The Silent Takeover’s principal merit is that it offers a profound analysis of the current state of Western democracies without ignoring the complexities of politics and the many advantages of the free market system. Hertz makes a convincing case for the way in which the power base of politics has withered since the 1980s as governments have placed themselves in a situation where their hands are tied and left-wing and right-wing differences have become large irrelevant. The wide range of concrete examples and staggering statistics contribute to the overal readability of a book which does not require any advanced knowledge of globalization issues.
Hertz essentially propagates a combination of consumer activism and social justice movement protest as a solution to counteract these developments within the State. She recognizes the weak points of these protests, such as the danger of oversimplification of issues for the benefit of its (media) appeal and protests that centre on the group’s own interests rather than the common good. Furthermore, she explicitly acknowledges that such solutions do not offer a long-term solution, arguing that the only long-term solution must come from politics itself, from the true restoration of representative democracy. Given that Hertz argues that politicans have a vested interested in maintaining the status quo, it is not exactly clear how the political system may be changed. Unfortunately, a detailed discussion of such long-term political change falls outside the scope of this book. What is clear is that a democracy where everyone’s voice is heard rather than the voices of some individuals or corporations is essentially the ideal world according to Hertz.
See also the article 'Drop Saddam's Debt' by Noreena Hertz
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