The End of Sovereignty and the Influence of Corporate Power: Twin Challenges to Corporate Accountability

Publishing date: April 01, 2019

by Benjamin Cokelet, Founding Co-Executive Director, PODER

Adapted from a similar blog post on fiscal governance

20 March 2019

Imagine that your ancestors have lived on the shore of Lake Texcoco, in the valley known today as Mexico City, for thousands of years. They have experienced Aztec resettlements, climatic events, and the Spanish conquest of Tenochtitlan. Through it all your family and their identity have survived, inextricably linked to the land and water that sustains you. However, seventeen years ago the government of Mexico first proposed to build a new international airport less than a kilometer from your home, threatening your history, livelihood, community, and environment. Twice now you’ve successfully organized to defend your rights, but now it’s 2018 and the stakes are higher: contracts have been handed out, public debt has incurred, excavation and construction have begun, and the price tag is already over 10 billion USD.

This situation – all too real for the people and communities of Texcoco – has been playing out for months in Mexico. The government of Enrique Peña Nieto hatched its plan in private, appropriating land, issuing bonds, assigning construction and operation contracts, and financing the project largely with public revenue, all while evading freedom of information requests, audits, and scrutiny. Faced with ballooning costs, uncertain revenue, and economic, environmental, and social unviability, the new government of Andrés Manuel López Obrador chose to cancel Texcoco and relocate the new airport to a military base. While seemingly a victory for you and your community, the public burden of the project remains and the loss of confidence in infrastructure projects is indelible.

During the struggle you learned that five wealthy families are the beneficial owners of over half of the new airport’s contracts, many without having to bid. One of these families also directly finances the project, not to mention numerous revolving door cases between the airport regulator, construction companies, and creditors. Now the new government must take losses to exit these contracts. You also learned that international bondholders and securities investors are reticent to accept the government’s liquidation terms. Furthermore, credit-rating agencies have downgraded Mexican bonds and issued warnings about planned megaprojects.

The new international airport – one of countless examples in Mexico and around the world – highlights twin challenges for corporate accountability everywhere: the end of sovereignty and the influence of corporate power. The power of transnational corporations and global economic and monetary institutions to influence national budgetary and financial decisions, including bond issues, debt pricing, and access to credit, is overwhelming. Similarly, the risk in any given country of the corporate capture of State decision-making is real, whether over public contracting, infrastructure financing, or the regulators themselves.

Facing such obstacles, as a Texcoco resident what reasonable expectation do you have that the supply of information (transparency) and the demand for results (accountability) are in the public’s interest? The answer to your question has everything to do with an economic system larger than any one country.


To tell from the recent World Economic Forum in Davos, big business is most preoccupied with the state of global capitalism, not the State or its budgets per se. If national politics – democracy in many cases – is mentioned, most often it is as a means, not an end. Currently the concern is whether global leadership – presumably from the network of multi-lateral institutions – can manage social conflict and staggering economies in order to hold open the floodgates of the world market. In these situations capital tends toward market-based solutions, not State action (except for police actions in times of perceived crisis), to ensure the future.

According to hedge fund investor Seth Klarman, “As the post-World War II international order continued to erode, the markets ignored the longer-term implications of a more isolated America, a world increasingly adrift and global leadership up for grabs.”

The void created by the retreat of the U.S. hegemon under Donald Trump has others on edge, too. Larry Fink, CEO of behemoth investor BlackRock, with assets under management equivalent to what would be the world’s third-largest economy, states it plainly: “Stakeholders are pushing companies to wade into sensitive social and political issues – especially as they see governments failing to do so effectively. …  And in turn, the world depends on you [CEOs of transnational corporations] to embrace and advocate for a long-term approach in business. At a time of great political and economic disruption, your leadership is indispensable.”

While ironic that Klarman and Fink call for corporate leaders to ensure global order when their companies, Baupost Group and BlackRock respectively, are implicated in the very issues they signal for concern, their comments indicate the accelerated shift of global capital – which arguably began at Bretton Woods in 1944 – away from nations as champions and instead to the international integration of supra-institutions, including the oft-cited International Monetary Fund, World Bank, Organization for Economic Cooperation and Development, and United Nations, as well as the less-known Bank for International Settlements, Group of Seven, and International Centre for Settlement of Investment Disputes, to name a few. This international architecture, positioned above and beyond national jurisdictions, is where global capital makes, enforces, and adapts to financial, investment, monetary, and other rules on behalf of transnational interests, most often to the detriment of nation-states.

The main effect of this shift is none other than the palpable end of national sovereignty, not only over all things economic, but over public goods and spaces writ large. Where modern liberal politics once existed to defend the commons, today our postmodern world privatizes the public square and exalts private property above all else. This is our new normal, with real implications for corporate accountability everywhere.

The example of Mexico is particularly illustrative, one of numerous cases around the globe. Since the 1980s almost every major industry has been privatized, from railroads to mines, banks to refineries. Also, highways, airports, seaports, and postal services, to name several, have seen varying degrees of privatization. Literally the public square – historic sites, sidewalks, streets, green spaces – has been branded, licensed, leased, or sold to private interests. With transnational corporations becoming the engine of economic change as they take over public functions, including collecting financial flows and other wealth and directing them northward (mostly to the U.S., though that’s changing particularly in the case of China), it would seem that capital has largely replaced the State.


The void of national sovereignty, to a great degree caused by global capital and its institutions, has essentially been filled by corporate power. Traditionally the State was needed to mediate among business interests so as to ensure competitiveness. The modern liberal duties to legislate, execute, and enforce regulations on business were seen as necessary to ensure that the public interest prevailed over any particular private interest. That was then, this is now: short-term profit-optimization financial strategies guide corporate decision-making in the postmodern world to the detriment of common shareholders and stakeholders alike.

Today, State decision-making – once the manifestation of the public interest – to a varying degree has been captured by global capital and transnational corporations. In some countries, such as Indonesia, Brazil, and South Africa, among others, the economic system never developed past the stage of crony capitalism, whereby an oligarchy – through a revolving door of influence between government and business elites, often illegally – obtains and maintains among a privileged few decisive influence over everything from macro-economic policy to procurement.

The case of Mexico is especially flagrant. As of last count, 37 people own or maintain influence over 28% of the national economy through interlocking corporate directorships, the revolving door, and corruption, making it arguably the most unequal country on the planet. Since the 1960s one organization – the Mexican Council of Businesspeople – comprised of the owners of Mexican capital meets regularly with the president or his proxy to engage in a simple quid pro quo: the executive branch provides privileged information to the elite prior to announcing official decisions, for example about megaprojects such as the new airport or the recent oil and electricity privatization, in exchange for the business sector publicly expressing support for the president and his government so as to confer legitimacy. Essentially, in Mexico corporate capture has become institutionalized.

In other countries, including the United States but certainly throughout the world, corporate capture is unregulated or even legal, as in the case of lobbying in the U.S. Oftentimes the corrosive effects of cronyism and capture go unnoticed because they’re predictable. However, it’s when the rule-maker or the rules themselves change (the “bad kind of corruption”) that we tend to notice. Together crony capitalism and state capture have the effects of thwarting the State’s managerial capacities, eliminating competition among firms, and promulgating the inequality of prices, profits, and wages.

In its own right corporate power is formidable. But in the void of sovereignty and in the presence of capture, well, it’s overwhelming as both the engine of global capital and the determinate factor in public decision-making. With rapidly decreasing mechanisms to legislate and enforce regulations on corporations in any one country, the decisions about multi-billion dollar airports, fiscal flows, country credit worthiness, and the like are more often determined in the executive suite of a transnational asset manager in New York City than in the halls of government in Mexico City.

As it were, corporate accountability and fiscal governance were not the topics du jour at Davos, nor is the transparency and accountability advocacy practiced by NGOs, philanthropists, and academia. Instead, the global economic system is the order of the day. For advocates the question should be: why aren’t we focused on it as well?


The campaign to defend your community against the new international airport is an ostensible victory, but somehow feels hollow. This past time elite families benefited disproportionally by winning public contracts. The interests of transnational bondholders, investors, and credit-rating agencies seemed to come before yours, the people of Texcoco. And if not for a change in government the weak State captured by corporate interests would’ve imposed the megaproject over your best efforts. You have no assurances that this situation won’t repeat itself in the future. What role, if any, should corporate accountability play to assuage your fears?

As advocates, our work is at a crossroads. One path leads us to expand our transparency and accountability efforts to the network of multi-lateral institutions that propagate global capital, incorporating analyses of power and corporate capture into our work, refining and enhancing our accountability efforts at home and abroad. Another path – the one we’ve followed until now – leads us to more of the same: diminishing returns in our national strategies as declining sovereignty and increasing transnational corporate power render our efforts irrelevant. I propose the former.

If a fight to reclaim the public interest awaits us, we must boldly but intelligently confront the twin challenges that lie before us. Our efforts must address the human rights concerns of the people of Texcoco. We must learn from and build power with social movements that seek equality and justice, including communities, workers, indigenous peoples, feminists, and many more. We must change the social norm for expectations of corporate accountability, away from technocratic fixes and domestic government engagement to a wider embrace of research, organizing, and accountability efforts. We must make ours a cultural movement for change to re-territorialize the global landscape with postmodern alternatives to global capital. We must think and act globally, as global citizens.

As an example, PODER – one of several organizations contributing to the movement for corporate accountability – fosters local-global campaigning in Latin America by accompanying communities and other stakeholders to gain and wield business intelligence and access to decision-making so as to push back against corporate-sponsored human rights abuses. The objective is to support local “corporate accountability guarantors” at strategic nodes of the global economy to serve as informed, campaign-savvy horizontal accountability mechanisms, essentially checks on corporate power.

We must also engage critically though constructively with one another to ensure that our efforts do not unwittingly play into the hands of global capital, a system that has proven itself masterful at creating, adapting to, and benefiting from social division and tensions. If we’re smart, we will learn to use a variety of tools, including many contained within capitalism, as weapons in our fight. Shareholder and proxy strategies, expanding ESG (environmental, social, and governance) indicators to include fiscal governance, domestic financial reform legislation, beneficial ownership disclosures, whistle-blowing laws and protections, human rights impact assessments, and so many more means will help us achieve our end.

What will be our new commons, the public square, the public interest re-imagined? To my way of thinking we must “rage, rage against the dying of the light.” Corporate accountability will be relevant – yes, even to the people of Texcoco – and will operate in the public interest when we expand and organize to make it so. Let us prove that democracy is anything but window dressing for capitalism.