Book review: Silent Coup – how corporations overthrew democracy
Tony Saunois, CWI secretary
‘Silent Coup – how corporations overthrew democracy’ is a devastating critique of the power and control wielded by major conglomerates, and the secretive institutions and global legal systems they have built up over decades. They have constructed institutions and little-known legal systems which have the potential power to overrule governments and peoples.
Silent Coup is written as a narrative of the journey the authors took to all continents collecting evidence. They present a case of the totally undemocratic control exercised by powerful multinational companies over national governments and local populations in the pursuance of the interests of profit and exploitation.
The book is documented evidence of one aspect of the dystopian nature of how monopoly capitalism in the 21st century functions. It is a warning to workers and socialists of the power wielded by the ruling capitalist classes if they are to be confronted. It poses the question: “Who really controls power and decision-making in our world today?”
Both Claire Provost and Matt Kennard – members of the Centre for Investigative Journalism – are exposing much that is rotten and corrupt in modern-day capitalism. Matt Kennard is co-founder of Declassified UK, a news outlet investigating British foreign policy. It produces material that is valuable to follow in a critique of capitalist society today.
The authors argue that the facts they reveal are “about corporate justice, corporate welfare, corporate territories, and corporate armies – all on a global scale. This is a story that affects you no matter where you live.”
The Committee for a Workers’ International (CWI) in our analysis has pointed to some trends in modern capitalism: for multinational conglomerates developing their own parallel legal system of government, private armies, private cities – a modern version of ‘company towns’, and acquiring some features almost of nation states. These trends have their limits, yet they have developed a lot further in the recent period and reflect a new era of capitalism. These are all vindicated by the details of how modern capitalism is functioning in this book.
The story begins in El Salvador and the ‘legal’ case taken by a Canadian-based company called Pacific Rim. This is a tale of an attempt by the government to limit mining which was causing water shortages. Which body was to act as jury and executioner? It was the little-known ‘International Centre for the Settlement of Investment Disputes’ (ICSID). This is a branch of an agent of imperialism – the World Bank – in which the US, Japan, China, Germany, and the UK have the most voting power out of over 180 members. The World Bank was established in 1944, along with the International Monetary Fund (IMF), as part of the Bretton Woods agreement. The ICSID is hidden away from prying eyes in the complex of offices of the World Bank in Washington DC.
There has been an explosion in the number of cases heard by it in recent years. By mid-2014 it had heard nearly 500 cases almost all since the mid-1990s. This was the era when neoliberal free market capitalism was let off the leash following the collapse of the Stalinist states in the former USSR and Eastern Europe. This temporarily opened an era of a unipolar world dominated by US imperialism, which by the early 21st century gave way to the multipolar world we have today.
By 2021, the number of cases heard by the ICSID had risen to almost 900 – with more than one new case a week that year. This growth reflects the new multipolar world and the growth of the power of multinational giants. It is part of the international investor-state legal system.
Little-known legal system
What has developed over decades allows investor access to a little-known legal system. Through thousands of treaties, a state gives advance consent to allow foreign investors to take them to international tribunals, such as the ICSID. This means that countries that signed up contracts for foreign investors were also signing up to resolve any dispute between the national government and companies by agencies such as the ICSID – a subcommittee of the World Bank and other imperialist institutions. A huge lucrative legal industry has sprung up around this system.
In the early period of the ICSID, most cases were from companies taking legal action against countries in the neocolonial world. Now, as this book reveals, this is in the process of changing. German investors had filed cases against countries in the neocolonial world. But in 2009, Germany found itself in the dock, when the Swedish company Vattenfall filed a case against Germany with the World Bank’s ICSID over its controversial new coal-fired power plant near Hamburg. This change illustrates the growing power of these enterprises, to the point where they come into conflict with competing nation states.
The international investor-state dispute system has evolved over decades; possibly being traced back to a conference of international bankers held in San Francisco in 1957. Around 500 of the world’s senior bankers, industrialists, and politicians gathered together and began campaigning for a new ‘capitalist Magna Carta’ to enshrine and protect the rights of private investors worldwide. A key figure at this gathering was the German banker, Hermann Josef Abs, head of Deutsche Bank and director of several giant corporations like Daimler-Benz and Lufthansa. His rise in the financial world took place under the Nazi regime in Germany, but it didn’t end with its fall. Although he never joined the Nazi Party, Deutsche Bank had handled its accounts.
World events in this era in the neocolonial world, such as the nationalisation of the oil fields in Iran in 1951 and the Suez Canal in 1956, were undoubtedly events that drove the ruling capitalist classes in the imperialist countries to instigate steps to try and protect their interests. The current system evolved over a period of decades but illustrates the power of the conglomerates which now exists.
The trade deals secured by modern-day conglomerates, which protect the interests of foreign investors, span every continent. Silent Coup reveals some of them. In South Africa, the then new post-apartheid African National Congress (ANC) government introduced a law requiring mining companies to be 26% owned by “black Africans”. This was part of the ANC leadership’s policies to use their newly won control of the capitalist state to change the racial composition of the capitalist class. Cyril Ramaphosa, now president, used his control of a ‘black-owned’ investment firm to become a billionaire on the basis of these laws that did nothing to ease the exploitation and suffering of black mine workers.
The Italian investment company Foresti asked for a case it had taken out against the South African government to be dropped, and was instructed to pay hundreds of thousands of dollars in legal fees to the Nelson Mandela government. The case lasted three years and the government faced a legal bill of millions. While the South African government claimed this as a victory, the investors behind the scenes had secured a deal with the government compelling them to transfer only 5% of their ownership to black South Africans rather than the 26% mandated by the new post-apartheid mining laws.
This development of the global power of the multinational corporations, in effect overriding nation states or governments, exposed in stunning detail by Kennard and Provost, is a clear trend of increasing significance. However, they do omit to identify the limits of this trend and the continued crucial role of the nation state in capitalism. In one respect, some sections of the capitalist class have come into conflict with the limitations of the nation state. However, capitalism and imperialism have not overcome the nation state. The growth of national antagonisms and conflicts in this era of capitalism in crisis reflects this.
Kennard and Provost do not only deal with the issue of the global legal system protecting financial investment by powerful companies. They also explore how the so-called ‘development’ policies in the neocolonial world are used for the benefit and to increase the profits and influence of corporations worldwide. This is done through a web of institutions, like the International Financial Corporation – yet another branch of the World Bank. Again this is not a new institution but its size and reach have hugely expanded. It is funded by contributions from 184 member countries – from state finances, which, in effect, are then recycled to major companies for ‘development’ projects, often dressed up as ‘aid’. In one case, in India, a private healthcare company marketed ‘specialty hospitals’ to the local elites and international ‘medical tourists’. The private healthcare company is controlled by the billionaire brothers Malvinder and Shivinder Singh. For international “aid and development”, it received US$100 million from the IFC!
Silent Coup also highlights other trends and developments of modern dystopian capitalism. The increasing ties between charities, NGOs, and big business are one aspect of this. Corporate funding of NGOs is not new, as the authors point out. Coca-Cola in the US has been doing it for thirty years. But this process has mushroomed in recent years. Save the Children, in 2013, unveiled an unprecedented partnership worth £15 million with Glaxo
SmithKline. One year earlier, the same company was fined US$3 billion in the US for bribing doctors and encouraging the prescription of antidepressant drugs for children, which were unapproved and unsuitable for them! Following the crash of giant corporations in 2008, intervention in ‘aid’ projects reached new levels. CEOs sit on United Nations panels discussing ‘development priorities’. Agencies like the United States Agency for International Development boast of partnering with the likes of Walmart and Chevron.
Particularly revealing are the chapters covering the establishment of special economic zones – SEZs – across the world. Special deals were made on tax for investors; labour rights are weak or non-existent, to benefit the conglomerates investing in the zones. Over the last 50 years, more than half of the world’s countries have carved out pieces of territory to form SEZs. According to the international trade union organisation ILO, more than 66 million people work in 3,500 zones. From China to Chile, such zones, in one form or another, have been established. The pilot scheme for them was Shannon, in Ireland, established in 1959. From Beijing to Myanmar, thousands of SEZs can trace their history back to Shannon.
In India and elsewhere, other forms of private carve-outs are made. Lavasa, outside Mumbai, India, was the first of the country’s cities built and entirely run by a corporation. Instead of a mayor, a city manager would be appointed by the board of Lavasa Corporation Limited. No mayor but a CEO! If such projects are to be completed is another question but the trend is clear. Amazon and other multinationals have also raised the prospect of such company towns and private cities being constructed.
The ‘privatisation of borders’, with private security firms policing them, and the explosion of private security firms as a global phenomenon, is well documented in the book. In one survey, in 2011, there were approximately 19.5 million private guards across 70 countries. Today there are far more. In the US, 1.1 million private security guards compare with 600,000 police officers. This has gone, side by side, with a massive growth of mercenary forces and a de-facto privatisation of the military in many countries. Although not mentioned in this book, the notoriously vicious Wagner Group in Russia is an extreme version of this trend. The authors point out that in Hereford, in the UK, they found more than a dozen private security and military companies located near the headquarters of the British Army’s Special Air Service (SAS) headquarters.
Provost and Kennard do a service to the reader in detail about how the powerful corporations operate and the threat they pose, along with other vital trends present in modern capitalism. This information is a weapon to be used to expose capitalism in this era. They do not offer an alternative or solution. However, the information they provide can assist those who are advocating a socialist alternative to the rule of corporations and capitalism.