10 Corporations That Give Capitalism a Bad Name
Free markets are essential to economic growth and political liberties. There’s no denying this anymore. International trade and tolerable tax policies are what leads to wealth and leisure. Many people argue that international trade, tolerable taxes, and other market-friendly institutions lead to inequality and oppression rather than prosperity and liberty, though. They are wrong, incredibly wrong, but they often point to corporations that, in the past, did horrible things in the name of economic prosperity. Indeed, even today, corporations do bad things. State-sponsored corporations in Ghana, for example, are destroying the environment and running roughshod over property rights looking for gold.
The bad things corporations do, though, can be pinpointed back to two things ignored by corporations and anti-market ideologues alike: 1) lack of private property rights protections; and 2) financial backing of government. Most, if not all, of the problems, past and present, caused by corporations can be traced back to these two policies. So although the multinational corporation is much-maligned and misunderstood, it has indeed been responsible for giving markets and freedom a bad name. Here are 10 corporations that gave capitalism a bad name:
10. Volkswagen (1932-present). Founded in 1932 by the German Labour Front, a national socialist trade union, and blessed by Adolf Hitler himself, Volkswagen began making cars for the volk almost immediately thanks to the financial backing of the Nazi Party. Without Nazi support, Volkswagen would never have come into being. During World War II, Volkswagen used slave labor to build its machines, which were, in turn, used by the German military to kill, maim, and capture its many enemies. After the war, Volkswagen became one of West Germany’s flagship corporations, and it has done much good for the world since 1945, but the company’s origin has always been a sore spot for Volkswagen’s PR department. It wasn’t until 1998 that Volkswagen admitted its use of slaves in manufacturing auto machinery during the war.
9. Mozambique Company (1891-1972). Rather typical of most state-sponsored companies at the time, Mozambique Company was tasked with governing some of Mozambique’s territories for the Portuguese monarchy. Instead of developing the region, though, the Mozambique Company used slave labor to raze the areas it was in charge of and deplete Mozambique of its natural resources. The violations of human rights committed by the company were used by independence-minded anti-colonialists in their struggle against the Portuguese Empire.
8. United Fruit Company (1889-1970). The United Fruit Company (UFC), an American company in based in the United States, is most often used by anti-market ideologues to show how and why capitalism is bad for all but a few. The UFC grew so quickly that it held powerful sway over a number of Central American republics, so much so that the countries came to be known as “banana republics” thanks to their inability to get out from under the thumb of the American corporation. The United Fruit Company gained its power by coming to own large swathes of land (it was the single largest landowning in the country of Guatemala). The UFC was bought out in a hostile takeover in 1933, but labor strikes and increased oversight by some powerful factions in Washington contributed to the financial decline of the company. In 1970, the UFC was again bought out and merged with a meat packing company in the U.S. The new company, called United Brands, was caught trying to bribe the president of Honduras, and the UFC was tarnished for good. In 1984, the remains of the company were acquired by investors and reformed into Chiquita Brands International, the company that is responsible for those delicious bananas you get at the supermarket.
7. French East India (1664-1769). The French East India Company was founded to compete with its Dutch and British predecessors, but it had much less lasting success than the other two, largely because it had to compete with so many other domestic factions in Paris for the attention of the Crown. Blake Smith, a historian currently at the University of Chicago, is doing excellent work on the French East India Company. Here is one of his articles.
6. Mitsubishi (1917-present). Mitsubishi started as a shipbuilding company but quickly moved into automobile and aircraft manufacturing. During World II, Mitsubishi, which was once Japan’s largest privately owned company, was in cahoots with the Japanese military and was building the latter’s death machines. Mitsubishi made the much-feared Zero fighter (and it’s less well-known cousin], the Oscar). Mitsubishi obviously survived the war effort, and today it employs people from around the globe, but only after it underwent extensive restructuring. How many deaths is Mitsubishi responsible for? How close did Mitsubishi’s executives grow to the imperial elite of Japan? These are questions that have, to my knowledge, continued to go unanswered.
5. Dutch East India (1602-1799). The VOC, as the Dutch East India Company was known, exemplified corporate plunder and colonial oppression in the 17th and 18th centuries. Its demise was only met after Napoleon’s revolutionary armies conquered the Netherlands, and for nearly 200 years the VOC brutally oppressed and exploited Asian lands in the name of monopoly and Dutch interests of state. The VOC was created to give the Netherlands a presence in the burgeoning world of global trade that had been started by Spain and Portugal after the former’s colonization efforts in the New World. The VOC wanted to cut off Spain and Portugal (and, later, the U.K., France, and U.S.) from world trade, and monopolize industries in order to benefit Dutch society. This logic led directly to not only the horrible things that happened in VOC-governed territory, but also to the corruption and unnecessary wars that happened in the Netherlands.
4. Hudson’s Bay Company (1670-present). Yes, the HBC still exists today, as a retail giant in Canada, the U.S. and U.K., and parts of northern Europe. The Hudson’s Bay Company was formed to help the English compete against the French in the North American fur trade market. What the HBC ended up doing, however, was participating in wars started by London and Paris, and contribute to the extermination of the aboriginal inhabitants of the New World. The aborigines were not exactly victims, of course, as the nations of the New World played an integral role in the fur trade and the geopolitical system that took root in the New World, but they did lose out in the long run and the HBC is partly responsible for this. The HBC has such a long history that it deserves its own “Top 10,” which will come out through the RCH pipeline soon, so stay tuned.
3. British East India Company (1600-1874). The British East India Company governed over large areas of what is now India, and is responsible for the U.K.’s possession of the subcontinent to begin with. In addition to conquering India and setting up a system of governance that divided and ruled, the British East India Company fought wars against France, the Netherlands, Portugal, Spain, and numerous autonomous Asian states that were, because they lost to the East India Company, eventually absorbed into larger political units that cared not one iota for their well-being. As with the Dutch East India Company, the British East India Company was responsible not only for oppressive government and economic malaise, but also environmental degradation and outright massacres of populations. After the bloody and senseless Indian Mutiny of 1857, the company was essentially nationalized by London in early 1858, and the last vestiges of the company were formally dissolved in 1874.
2. Swedish Africa Company (1649-63). Both the Swedish and the Danish Africa Companies were founded by Dutchmen who were dissatisfied by how the Dutch West India Corporation was handling itself. (The Dutch, and British, and French, West India Companies were responsible for monopolization efforts in Africa and the Americas.) The Swedish Africa Company, in its short time of existence, contributed to the near disappearance of elephants from what is now Ghana, and to the Danish-Swedish War of 1657-58. The appearance of a company bearing the name of one nationality (Swede) while being founded and run by another (Dutch) was actually not all that odd, even in the mid 17th century. This practice has been around for a long, long time. The Norse Africa Corporations founded and managed by Dutchmen were dissolved when the Dutch West Indies Corporation owned up to its management failures. The Danish and Swedish governments disappeared from Africa, though plenty of Danes and Swedes continued to live and work there, as employees of the British, French, and Dutch West India Companies. Oh, and the Swedish Africa Company bought slaves from the locals and sold them to New World land owners.
1. Royal Dutch Shell (1890-present). Founded in 1890 as a Dutch oil company, Royal Dutch Shell came to be after the Dutch firm merged with a British firm in 1907 in order to compete with Standard Oil on the global marketplace. Royal Dutch Shell is 60 percent Dutch-owned and 40 percent British-owned, and the company essentially fueled the British Empire’s wars against Germany and their rebellious colonies. Aside from contributing to war efforts that led to the deaths of millions, Royal Dutch Shell has also been implicated in the environmental degradation of the Niger Delta, the North Sea, and the Amazon jungle (remember the issue of property rights?). In June of 2006, the company’s first non-Dutch or non-British chairman was appointed: Jorma Ollila, a Finnish national who made his name at Nokia.
There are not enough American corporations on this list. Fair enough, but the aim here is global in scope. Feel free to add some of the omitted corporations in the comments section.
Chinese corporations are responsible for a lot of problems in today’s world, but little is known about them or, at least, more research is required. Look for a Top 10 of Chinese corporations soon enough!
Since a lack of private property rights and a presence of government sponsorship is apparent in all of these corporate ventures, it is necessary to bring up the concept of “rent-seeking,” which is ably explained here ] by economist David Henderson. Have a good weekend!