The Common Good
January-February 2000

Under the Heel of Business

by Ruth Rosenbaum | January-February 2000

Many corporations in the global marketplace have severed their social contract with workers and local communities.

1997 I was part of a group of U.S. women traveling in the mountains of Haiti to meet with women from the village of Medor. We were exploring the establishment of partnerships between U.S. sponsors and Haitian women interested in starting small businesses. Each woman spoke of selling salt, oil, thread, flour, or other commodities that were part of daily life.

When asked why they wanted to start a small business, a young Haitian woman gave an answer I will never forget. "I want to start this small business so I can feed my small children a meal each day," she said. In the stunned silence, we asked what she does now. "Now I feed my children a meal two or three times a week. The rest of the time they chew sugar cane so they will not feel hungry." Any attempt to understand "business ethics" must be anchored in this woman’s reality.

In the years since the end of World War II, the world has seen the local economies of individual nations transformed into an increasingly interwoven fabric: global finance and a global economy. We read about corporate mergers, takeovers, buy-outs, and conglomerates. Success is measured by the billions of dollars "earned" by a corporation and its shareholders, or by a country’s gross national product, or by the inflation rate. All of this affects the complex relationships between companies and the countries in which they operate.

Yet rarely do we read about the effects of the globalization of the economy on individual countries as a whole, or on groups of people within a country. This lack of attention to the effects of globalization on individuals and communities serves to mask many of the global economy’s negative effects.

In the United States, the original charters under which companies were granted incorporation gave a company the power to function as a "person" under the law. This was given in return for the company acting as a responsible member of the community in which it operated. It is important not to minimize these charters of incorporation because they made possible two things: the legal protection of board members from individual responsibility for actions in which the corporation might engage, and the partial sale of the corporation to partial owners or "shareholders."

What has strained the legal relationship between corporations and the communities in which they operate is the change in the way corporations see themselves. Since the 1960s, corporations have shifted from viewing themselves as local to a particular geographic community to defining themselves as national, international, multinational, and transnational corporations. In this process, the links by which corporations relate to local communities have often been severed, destroying the mutually beneficial bond that once united workers, managers, and markets within a given community.

One aspect of the globalization process is the re-designing of the legal organization of the corporation so as to limit tax liabilities. These same taxes were often established to serve a local community in providing for its physical and social infrastructure. Now, the legal definition of a company’s subsidiaries, divisions, or wholly owned assembly plants is designed to meet the needs of the corporation rather than the communities and countries in which they operate.

For example, maquiladoras are assembly plants owned and operated by predominantly U.S. corporations in Mexico and elsewhere, often near the U.S. border. Corporations use the availability of cheap labor as a means of lowering production costs for the products and services they provide. The tax structure governing maquiladoras in Mexico does not provide for the payment of corporate income taxes to the local communities. This lack of payment structure contributes in great part to the lack of funds available for the development of physical and social infrastructure including roads, sewers, electric power, schools, and other services that we take for granted in the United States.

In Matamoros, Mexico, across the border from Brownsville, Texas, there are families of maquiladora workers living on the basurera, the abandoned garbage dump. When asked why they chose to live on a garbage dump that is contaminated, dusty, and with no provision for water, family after family replied that they had to choose between paying rent or feeding their families because the wages in the maquiladoras were so low.

INSTEAD OF CREATING an integrated global village that recognizes the value of local and national communities, many corporations continue to weave webs of production, consumption, and finance that bring economic benefit to less than one-third of the world’s population. Concomitantly, the remaining two-thirds (consisting of the bottom 20 percent of the world’s richer nations and the bottom 80 percent of the world’s poorer nations) remain outside these ever-tightening webs of economy, resulting in what can easily be called economic apartheid.

We hear or read about this global economic system as though it were created by some inevitable force over which we have no control. The truth is that this particular kind of economic system has been established by decisions of human beings. We have to ask the fundamental questions, who are the groups that set the standards for the behavior of corporations, and what is the source of their power? Systems created by human decisions can be changed.

Our basic beliefs as faith communities impel us to raise the questions, and to move the issue of corporate responsibility in a globalized economy from standards of legality and ethics to standards of morality and justice.

RUTH ROSENBAUM, TC, Ph.D, is executive director of the Center for Reflection, Education, and Action (CREA) in Hartford, Connecticut.

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