Corporate power and neoliberal amnesia
By Matti Ylönen
The power that major firms and their executives wield in world politics has become a hot topic and attention to corporate malpractices has been growing, especially following the 2008 financial crisis and subsequent finance-related scandals involving Liechtenstein, Panama, and other tax havens.
My research with Rasmus Corlin Christensen, which was based on textual sources and interviews with pioneering scholars and policymakers, discovered that the international policy community effectively lost decades of understanding on tax havens, tax avoidance and related malpractices during the Reagan years of the 1980s and their aftermath.
This collective dementia had hugely important real-world consequences. The 1990s and 2000s saw a growing stream of corporate scandals and financial crises that were partly driven by opaque corporate practices, but policymakers and academics were ill-equipped to devise actionable responses to such crises because vital knowledge had been lost.
The rise and fall of the UN commission on transnationals
One key source of understanding had been academic expertise on tax avoidance and tax havens, which the economic historian Charles Kindleberger labelled ‘corporate escape’. This emerged from an eclectic research agenda that started coalescing in the 1960s in International Political Economy, early International Business scholarship and adjacent disciplines.
This research agenda had some important continuities with long-standing traditions of studying corporate power in Marxist studies and in American institutionalist scholarship, which Thorstein Veblen had initiated back in the early 1900s to study the “robber barons” of the railroad and oil industries of that era.
A second source of knowledge on corporate escape emerged in the 1970s from the United Nations. International outrage at the role of the International Telegraph and Telephone Corporation (ITT) in destabilising the democratic government of Salvador Allende in Chile led to a UN Commission for Transnational Corporations, a Center to act as a hub for related policy work and a Code of Conduct for transnationals to prevent major corporate scandals from occurring.
A flurry of activity followed, spearheaded by UNCTC employees and by external consultants, many of whom were also leading academics of corporate power. The UNCTC operated as an independent UN agency between 1975 and 1992 and in its lifetime it published 265 documents including groundbreaking analyses of corporate tax avoidance, tax haven use and other malpractices that were to resurface later on as major policy problems.
The UNCTC also made significant progress on the Code of Conduct with its last drafts covering themes ranging from tackling corporate tax avoidance to human rights, environmental and anti-corruption issues.
Yet, alas, this build-up of actionable analyses on corporate power ended up short-lived.
Both the academic and policy communities collapsed in the 1980s with the neoliberal turn championed by Ronald Reagan, Margaret Thatcher and the structural adjustment policies of the International Monetary Fund and the World Bank.
In 1992 the UNCTC was downsized to an obscure division of the United Nations Conference on Trade and Development (UNCTAD, now rebranded as UN Trade and Development). Its last visible legacy ended last year with the final issue of Transnational Corporations. Published by UNCTAD, this journal had acted as a link between academia and the UN since 1989 and even before that under the title Center for Transnational Corporations Reporter. Curiously, the last editorial statement of the journal gave no indication of its imminent discontinuation.
Back from oblivion
The concept of “corporate escape” started its gradual comeback onto policy and academic agendas in the late 1990s, but with barely any understanding or even acknowledgement of the earlier work in this field.
One major turning point in this comeback was the OECD’s 1998 report Harmful Tax Practices which turned out to be a harbinger of states’ attempts to curb tax havens in the new millennium. The report surprised many with its stark tone and the range of measures it proposed to curb the use of tax havens, but it also signalled a startling amnesia in the corridors of the OECD by failing to mention the OECD’s own previous work against tax avoidance and tax evasion, not to mention the groundbreaking work that the UNCTC and associated academics had published just two decades before.
This amnesia was bound to have a long-lasting influence on the entire trajectory of global governance from the 2000s to the 2020s. Devising new rules to tackle international tax avoidance and the use of tax havens was one of the very few success stories of global governance in that era and it ended up involving significant “reinventing of the wheel”. The forgotten analyses and solutions proposed in the 1970s had to be painstakingly reconstructed – often from scratch – as key policymakers and academics bypassed the opportunity to revisit older analyses.
The example of the UNCTC demonstrates that important institutions and bodies of knowledge can “break” in a way that results in a collective amnesia, with real-life policy impacts. This is why it is important to nurture continuity in the key institutions of global policy and academia in an era of budget cuts and outright assaults on such institutions.
Functioning democracy is much more than just parliamentary democracy: it also lives (or dies) in the institutions of knowledge production. This message is all the important now, as the UN is again carving out more space for itself in the governance of global taxation.
Matti Ylönen is an Academy of Finland Research Fellow at the University of Helsinki, with a four-year research project titled Seeing Like a Tech Firm: Advocacy in the Era of Platform Capitalism (www.see-tech.fi)