Contextualizing corporate control in the agrifood and extractive sectors

ABSTRACT

Corporations have gained enormous power and influence in recent decades as mergers and acquisitions in just about every sector of the global economy have given rise to mega-sized companies that influence almost every aspect of our lives. In this contribution, we examine the rise of corporate concentration and control in two key sectors – agriculture and extractives – where in recent years consolidation has accelerated due to a combination of technological change, weakening state regulation and financial pressures, leaving these sectors largely controlled by just a handful of giant players. Corporate concentration and control in these sectors has important consequences, contributing to heightened inequality, environmental harm, and human rights violations. This paper reflects on the strategies of civil society and social movements in contesting extreme consolidation and corporate power. It calls for a multiscale approach that restores the regulatory powers of states and reestablishes people's sovereignty on a broader scale.

KEYWORDS:

• Transnational corporations (TNCs)
• corporate power
• agriculture
• mining
• resistance movements

Introduction

Corporate concentration has gripped the global economy over recent decades in ways that have not been seen since the early 1900s, when large firms controlled by J.P. Morgan and J.D. Rockefeller were dominant. Recent media headlines have been replete with examples of high profile mergers among some of the world’s largest firms, and the acquisition of smaller firms by larger ones takes place on a regular basis. As a result of these corporate tie-ups, we are witnessing the rise of truly giant global firms that pull the strings that shape a range of key economic sectors. From food and agriculture to the extractive sector, the economic activity that these corporations control has enormous impact on the lives and livelihoods of billions of people around the world. As these firms amass an ever greater share of the global market in their respective sectors, there has been growing concern about the ways in which their power contributes to widening inequality, threatens human rights and the environment, and undermines democratic governance.

Mapping the landscape of corporate control, its consequences, and strategies for resistance was identified by the participants of the Siena dialogue as important initial steps in the overall project, as corporate dominance is a key feature of the global economy that the People’s Sovereignty process seeks to dismantle. From the outset, the idea of this paper was to bring together a broader analytical outlook on corporate power in the global economy from an academic perspective with analysis grounded in civil society and social movement struggles against corporate control on the ground. Both authors brought insights on how corporate power can be addressed in policy and governance from these different angles. This paper thus represents a co-creation of ideas and analysis that brings these two perspectives together, drawing on concrete examples from our own areas of expertise, including the agrifood and extractive sectors.

We first provide an outline of the nature of corporate dominance in society today, with specific reference to the key sectors mentioned above: food systems and the extractive industry. We also provide an evaluation of some of the key impacts of this rising corporate concentration, in particular the ways in which it contributes to broader trends of inequality in the global economy today, its potential to harm human rights and environment, and its political implications that have seen growing corporate capture of policy and governance processes. Finally, we consider the ways in which resistance movements can fight against corporate power, calling for a multiscale approach that restores the regulatory powers of states and re-establishes people’s sovereignty.

The nature of corporate dominance in society today

Ever larger corporate giants have settled in across a range of sectors in the global economy in recent decades. The number of mergers and acquisitions globally has risen from approximately 10,000 per year in 1992 to approximately 50,000 per year by 2018 (Institute for Mergers, Acquisitions and Alliances (IMAA), 2018). As the number of mergers has grown, so has the annual value of merger and acquisition deals. Between 1992 and 2018, the value of these deals at the global scale has increased from approximately US$ 500 billion to approximately US$ 4 trillion. Not surprisingly, the number of publicly listed firms listed on the stock exchange has fallen, signalling that the economy is dominated by fewer, larger firms. In the US, for example, the number of publicly listed companies dropped from nearly 7000 in 1997 to approximately 3500 in 2013, and a similar pattern has occurred in Europe. As firms consolidated and became larger, their profits and average revenues climbed by a factor of three (Foroohar, 2018; Guinea & Erixon, 2019; The Economist, 2016a).

In the global food and agriculture sector, mergers and consolidation have been occurring on an ever larger scale since the 1980s and 1990s. With the advent of the genetic modification of seeds, mergers and acquisitions in the sector heated up, seeing global seed companies join in arms with global agrochemical companies, as these industries became ever more enmeshed with one another as genetically modified seeds were increasingly altered to be resistant to specific brands of herbicides (Glover, 2010). In the 1990s and early 2000s, for example, Monsanto purchased over 30 firms, while other large corporations in the sector also made similar acquisitions. By 2010, the six largest companies in the sector controlled 75% of the US$ 54 billion pesticide industry, and 62% of the US$ 39 billion global seed market (ETC Group, 2015).

Starting in 2015, a new round of mergers shook up the sector, with the six leading firms eventually being reduced to just four. In this period, Dow and DuPont announced their merger in late 2015, quickly followed by the announcement of the purchase of Syngenta by Chinese chemical giant ChemChina. The following year, Bayer announced its purchase of Monsanto. These deals were completed over the course of 2017 and 2018, leaving a situation where just four agrochemical giants control 70% of the global pesticide market and the top four seed firms control 67% of the global seed market (Clapp, 2018; International Panel of Experts on Sustainable Food Systems (IPES Food), 2017; Mooney, 2018). Concentration in the food and agriculture sector goes beyond seeds and chemicals, as we have seen growing consolidation among the top firms all along agrifood supply chains in recent years, from the farm equipment sector, to the fertilizer industry, to commodity trading, to processing and distribution and retail. The market share of the top four firms in each of these segments of agrifood supply chains is highly concentrated (Howard, 2016).

In the mining and extractive sector, multi-billion dollar mega deals among the biggest transnational mining corporations have characterized the development of the industry for decades. One of the most recent mergers and also one of the biggest in history was the consolidation of China’s two largest state-owned enterprises (SOEs) – the Shenhua Group and the China Guodian Corporation – in November 2017. The deal, which was valued at almost US$ 273bn, created the China Energy Investment Corporation, now one of the biggest players in coal mining, thermal power, renewable energy, and coal-to-liquid conversion industries. This latest mega-sized mining merger is only the latest in a broader pattern of consolidation. Just a few years earlier, the acquisition by Glencore, for example, one of the largest mining companies (Forbes, 2019), of Anglo-Swiss mining company Xstrata in 2013 ‘created one of the world’s largest natural resources conglomerates, with a combined workforce of 190,000 people across 50 nations, and a portfolio of 90 commodities, including copper, barley, oil, and vanadium’ (Husseini, 2018). In 2017, over 500 such mergers and acquisitions were reported in the sector valued at around US$65.37 billion, 40 percent of which where in the Asia-Pacific region and China (Ernst and Young, 2018).

There are number of factors that account for the surge in corporate consolidation and power in recent years, not just in the agrifood and extractive industry, but also more broadly. One of these is the nature and pace of technological change in the global economy. Recent research shows that industries in which rapid technological progress is occurring tend to be correlated with larger firm size and sector concentration (Autor et al., 2017). Technological change in recent years has been increasingly connected to the rise of computer based digital infrastructure and intellectual property protections. This has meant that the power of firms that rely on digital and software developments can benefit from their ability to lock others out of the marketplace as they grow in size (Katz, 2019; Khan, 2017).

In the food and agriculture sector, technology has been important in explaining consolidation, as technological advances are protected by intellectual property rights, enshrined in global trade rules under the World Trade Organization (WTO), that enable the largest firms to exclude other market players from capitalizing on technological innovations. As food and agriculture firms increasingly dive into digital technologies to drive innovation in the sector, such as through digital farming and genome editing, the power of these firms to exclude competitors and grow in size only increases (Clapp & Ruder, 2020).

In the case of mining and the extractive industry, portfolio management remains the key driver of consolidation, under a more divestment-led outlook where ‘diversified producers looked to divest those assets no longer considered core to the business’ (Ghosh, 2018). Industry analysts, however, have also pointed to a trend towards a return to investment-led strategy. One factor identified with this shift is technology. For example, growing interest and demand in electric vehicles (EVs), partly in response to environmental regulations, has ignited investments into future supply of commodities used in battery technology. Companies that are producing EVs are now looking to invest in mines producing these raw materials (Ernst and Young, 2018).

But technological innovation is also a big challenge for the mining industry, one that could also drive and define future merger & acquisition decisions. Older and more established companies that rely on proven technologies face declining productivity and higher costs. As a 2018 report of International Institute for Sustainable Development (IISD) states: ‘Companies need to address inefficiencies in their operations to stay competitive, while ensuring they maintain their social license to operate’ (Corneau, 2018). Analysts have been pointing to the need to address an ‘innovation deficit’ and are looking at how consolidation could bring about ‘sharper competencies at identifying, testing, piloting, adopting and scaling new technologies at speed’ (Bryant & Gill, 2019).

But it is not just technological change that is driving consolidation in the global economy. Since the 1990s, states have increasingly embraced neoliberal market policies that prioritize free markets and shareholder value. As states have embraced a neoliberal agenda, they have increasingly retreated from their regulatory role. In this context, we have seen a weakening of antitrust policies that previously had kept corporate consolidation under check. For example, in the early 1900s, the US enacted competition laws that sought to reign in the political power of corporations by regulating the structure of markets in ways that maintained competition. But over the course of the 1970s and 1980s, these laws were weakened with the rise of neoliberalism (Khan, 2017; Wu, 2018). Instead of competition policy looking out for the interests of smaller firms, US antitrust policy began to prioritize consumer welfare. In other words, consolidation was tolerated, so long as it led to cheaper prices for consumers. What this approach misses, however, is that as corporations grow bigger in size and wipe out competitors, they can increasingly raise prices over time once they have a lock on the marketplace. Similar trends have occurred in other countries around the world (Bartalevich, 2013; Wigger & Buch-Hansen, 2017).

Financial investment patterns have also played a role in consolidation in these sectors. As the world economy has become more ‘financialized’ – with financial motives, markets, and institutions increasingly driving change in the global economy (Epstein, 2005; Krippner, 2011) – institutional investment patterns have influenced corporate decisions on mergers. There has been a huge rise in institutional investment, for example, in index-based funds (that track performance of firms within a sector), which has resulted in a massive influx of capital into some of the world’s largest firms, giving them the funding and leverage to purchase their less well financed rivals (Clapp, 2019). These trends have also resulted in what is known as ‘common ownership’, where a small group of large asset management companies – i.e. BlackRock, State Street, Vanguard, Fidelity and Capital Group – now collectively constitute the largest shareholder in most of the world’s largest publicly traded firms (Azar et al., 2018; Elhauge, 2016). The resulting pattern is one of double concentration, where a small group of financial investment firms are significant shareholders in a small number of giant global companies.

Why corporate dominance matters

The rise of giant megacompanies across the global economy matters for a range of reasons. We cannot assume that there are neutral impacts from corporate consolidation, as fewer players dominating large markets typically results in increased power for those firms. This power can take a range of forms, from structural power in the economy, to lobby power, to the power to shape discourse and ideas in society more broadly (Fuchs, 2007). The recent surge in corporate consolidation has raised concerns about the impact on equity, human rights and the environment, and political control.

With respect to inequality and wealth concentration, there is growing research that indicates that corporate consolidation and concentration encourages anticompetitive practices among firms, which typically includes collusion among the dominant market players to shape markets and control prices (Azar et al., 2018; Elhauge, 2016). Even mainstream economists have warned that corporate consolidation can create distortions in markets that foster inefficiencies and other harmful effects on society (Diez et al., 2018). There is also concern that these distortions can contribute to inequality in the economy more broadly, not just domestically, but also globally (Khan & Vaheesan, 2017; Wu, 2018). If firms are able to increase prices without an associated increase and the quality of the product or service, then the likely outcome is a massive transfer of wealth from citizen consumers to giant corporations. This pattern of wealth transfer from the many to the few only fuels further inequality.

Looking more closely at consolidation in the food and agriculture sector, it’s not hard to see how increased corporate concentration can result in greater inequalities and threats to farmer livelihoods. With fewer giant firms controlling a larger share of the seed market, for example, there are increased opportunities for these firms to cooperate in terms of product offerings in ways that enable these firms to have more power over seed pricing, which affects farmers’ bottom line by raising the cost of their inputs. Higher input prices can spill over and be passed on to consumers in the form of higher food prices, which further drives social inequalities. Corporate power in this sector, then, directly threatens both the livelihoods of food producers and food security for society more broadly.

Consolidation in the sector also compromises product choice and farmer autonomy. As the global seed market became more consolidated in recent decades, for example, the number of firms selling seeds dropped dramatically, making non-genetically modified seeds increasingly scarce and difficult for farmers to source (Howard, 2016). As a result, farmers are increasingly finding themselves stuck on a GM technology treadmill from which it is difficult to exit. In response to the proposed merger of Dow and DuPont back in 2015, a coalition of farmer and civil society groups highlighted this dynamic, stating ‘the seed companies have fostered a dependence on seed and chemical cropping systems with declining effectiveness – and the industry’s response has been to develop newer and more expensive traits’ (American Antitrust Institute, Food & Water Watch and National Farmers Union, 2016).

Human rights and the environment are also at risk as a result of growing corporate consolidation and power. Destructive industries like mining, logging and agribusiness are driving attacks against land and environmental rights defenders. According to Global Witness, ‘more than three people were murdered each week in 2018, with countless more criminalized, for defending their land and our environment’. The report also found that ‘mining was the deadliest sector’, being responsible for 43 deaths (Global Witness, 2019). Deaths and conflicts related to water sources, agribusiness, logging and hydropower also continued. Rural and indigenous women in particular have borne the brunt of the extremes of corporate power. In the Philippines, a number of human rights violations against indigenous women linked to mining activities have been reported. These range from displacement brought about by land grabbing, loss of livelihoods and impacts on culture as a result of environmental destruction, increased vulnerabilities to disasters, prostitution, domestic violence, increased discrimination to enforced disappearances, threats and intimidations, and killings (Pasimio, 2013).

Large-scale investments by private companies as well as state-owned enterprises are also among the main drivers of land and resource grabbing. These in turn have fuelled land and resource conflicts that have pitted communities of farmers and indigenous peoples against large corporations. Over the past decade and a half we have witnessed what the Transnational Institute (TNI) has referred to as the Global Land Grab, a new wave of large-scale land acquisitions that are changing the nature of land governance policies and causing severe negative impacts on rural communities (Transnational Institute, 2012). Across the globe, over 2,300 cases of large-scale land acquisitions have been reported as of October 2019 (Land Matrix, 2019).

The Environmental Justice Atlas has documented close to 3000 environmental conflicts around the world ranging from displacement of communities due to environmental pollution and destruction, loss of livelihoods, land grabbing, enforced disappearances, militarization and killings (EJ Atlas, 2019).

Along with concentrating market power, corporate consolidation risks enhancing the political power of mega-sized firms because it means less competition for their lobbyists who seek to influence government policies. It is typically easier for fewer, larger firms to work together to lobby for common interests (Khan & Vaheesan, 2017). The amount of money funneled into corporate lobbying generally increased markedly from 1997 to 2012 (The Economist, 2016b). In the US alone, for example, lobbyists spend approximately US$2.6 billion annually to present their views and influence policy in Washington, DC (Drutman, 2015). These firms can influence policy and governance not just through direct lobbying activities, but also via their structural influence in the broader economy and their ability to tap the media and public relations campaigns to shape discourse and ideas more generally (Fuchs, 2007; Ruggie, 2018).

Corporate players in food and agriculture and the extractive sectors are very active in the lobbying game. In the food and agriculture sector, for example, Monsanto spent close to US$7 million in 2013 to lobby the US government. In that same year, Syngenta and Dow spent approximately US$1.5 million and US$1 million, respectively (Open Secrets, 2013). Before Bayer purchased it, Monsanto’s lobbying activities included advocating for the approval of Roundup Ready alfalfa and sugar beets, fighting against GM labelling, and pushing for a congressional caucus on ‘modern agriculture’ (Union of Concerned Scientists, 2013). These same firms have also lobbied at the EU. Dow spent nearly €4 million in lobby efforts in Brussels in 2015, the year it merged with DuPont, while in that same year BASF spent approximately €2.3 million, Bayer €2 million and Syngenta €1.5 million (Pesticide Action Network Europe, 2016).

Mining companies have reportedly spent around US$9.5 million for their lobby efforts in the United States alone, pushing to influence the policy environment. According to UNCTAD, in 2018 governments introduced a total of 112 policy measures affecting foreign investments. Of these, 66 percent are measures to liberalize, promote and facilitate new investments (UNCTAD, 2019). Lobby groups like the Chamber of Mines in the Philippines, for example, boasts on its website how its role was ‘instrumental in the passage of the Philippine Mining Act of 1995, working closely with the Mines and Geosciences Bureau to craft legislation that would promote and ensure responsible mining in the country’ (Chamber of Mines of the Philippines, Company Profile). More recently, the mining lobby in the Philippines was also instrumental in blocking the confirmation of the late environmentalist Gina Lopez, as environment secretary. Lopez, in her short stint with the Department, instituted a comprehensive audit of large mining corporations operating in the Philippines.

Strategies for resisting corporate power

As corporations consolidate and increase their power, resistance to their control over segments of the economy that matter for everyday life becomes more complex and challenging. Resistance in such a context needs to be multiscale and take the unique nature of corporate power into account. While the state is in many instances captured by corporate power, in particular through lobbying, structural influence, and discursive framing, the it remains an important actor that can shape policy and regulation in ways that can restrain the power of giant firms. International agreements among states, for example, can have stronger influence over global norms that uphold the right to livelihoods and a clean environment than would be the case with corporate social responsibility and private governance regimes alone (McKeon, 2015). Below we briefly outline four examples of global and national initiatives that seek to reign in the power of megacompanies. Civil society organizations (CSOs) have engaged actively with these efforts in order to extract greater corporate accountability in the wake of human rights abuses and environmental violations linked to corporations.

United Nations guiding principle on business and human rights (UNGP)

The UNGP, or more popularly known as ‘Ruggie Framework’, named after United Nations Special Representative and Harvard professor John Ruggie, is a set of guidelines ‘for states and companies to prevent, address and remedy human rights abuses committed in business operations’ (Business and Human Rights Resource Center; United Nations, 2011). The framework is anchored on three pillars – state responsibility to protect, business responsibility to respect, and the shared responsibility of states and businesses to remedy cases of human rights abuses. Civil society engagement on the UNGP has focused on pushing states to implement these guidelines by ensuring that laws and policies are in place to regulate business operations and foster respect for human rights. CSOs have also been at the forefront of pushing governments to develop their respective national action plans on business and human rights. CSO engagement with businesses have taken various forms, from documenting and exposing cases of abuse to more cooperative engagements to pressure campaigns on specific companies to take their responsibilities seriously. In the Philippines, for example, civil society organizations, environmental groups and concerned individuals rallied support for a landmark petition that they presented to the Commission on Human Rights, calling for an investigation of the responsibility of big oil and gas companies (Carbon Majors) regarding human rights violations or threats of violations from the impacts of climate change. There are also initiatives to put the UNGP to the test by examining how the guidelines could have prevented abuse in key emblematic cases.

National action plans on business and human rights

There is a strong push for the enactment of national action plans (NAPs) on business and human rights as a mechanism to promote the implementation of the UNGPs, specifically the duty of states to protect human rights. To date, some 22 States have put together their NAPs, while another 23 States have already initiated processes to develop their NAPs (Office of the High Commissioner on Human Rights (OHCHR), 2019). In some cases, the processes to develop these plans are driven by civil society engagement. The voluntary nature of UNGP not withstanding, the NAP processes could provide spaces for civil society to put pressure on States to examine existing regulatory mechanisms, hear out cases of corporate abuses, and demand stronger actions to exact corporate accountability. In October 2019, for example, Thailand enacted its NAP on business and human rights, becoming the first country in Asia to do so. The Thai NAP outlines as key priority areas the following: labour, community, land, natural resources and environment, human rights defenders, and cross border investments and multinational enterprises. The Thai government acknowledged the urgency and necessity of the plan as a response to ‘counter the violations of human rights as a result of businesses’.

Extraterritorial obligations (ETO)

Civil society organizations have also pushed states to abide by their extraterritorial obligations (ETO) to protect human rights. A group called the ETO Consortium sees ETOs as the ‘missing link in universal human rights protection system, without which human rights cannot assume their proper role as the legal bases for regulating globalization and ensuring universal protection of all people and groups’ (ETO Consortium, 2013). In Thailand, civil society groups under the ETO Watch Thailand have used the ETO Principles as a reference point for their campaigns to demand accountability for human rights abuses perpetrated by Thai companies in Cambodia, Myanmar, Lao PDR, and Thailand.

Legally Binding instrument on TNCs and human rights

In July 2014, the United Nations Human Rights Council adopted Resolution 26/9, paving the way for the negotiation of an international legally binding instrument on transnational corporations (TNCs) and other business enterprises with respect to human rights. Civil society engagement has been crucial not just in pushing the passage of the resolution but in sustaining and generating greater interest among states, the academic community, civil society and social movements for the legally binding instrument. One such group organized to put forward a global response to the broader issue of corporate accountability is the Global Campaign to Reclaim Peoples Sovereignty, Dismantle Corporate Power and Stop Impunity (Global Campaign, 2011a). The Global Campaign is a network of over 250 groups that include social movements, civil society organizations (CSOs), trade unions and communities affected by the activities of TNCs. These groups represent concerns about TNC activities around the world with respect to land grabs, extractive mining, exploitative wages and environmental destruction. In 2014, the Global Campaign proposed an International Peoples Treaty, which outlines a political framework to support local, national and international movements and communities to resist the power of TNCs and to establish alternative economic frameworks. The Global Campaign also spearheaded efforts to establish a UN Binding Treaty to regulate TNCs, stop human rights violations, and end impunity and ensure access to justice for affected communities (Global Campaign, 2011b).

Conclusion

Corporations have gained increasing power in the global economy in recent years, in particular in a context of growing consolidation among the world’s largest firms. As we have outlined in this article, the agrifood and extractive industries have been emblematic of this growing corporate concentration and control. Technological change, weakening state legislation in an era of neoliberalism, and changing financial investment patterns have all contributed to these patterns of increasing consolidation in these sectors. The effects of this consolidation, as we have outlined, are concerning. As the cases of the agrifood and mining sectors show, there has been a growing trend toward inequity, human rights violations and environmental impacts, as well as increased corporate hold on policymaking through lobbying and other forms of corporate influence. These trends pose enormous risks and vulnerabilities not just for those who depend on the agrifood and extractive sectors for their livelihoods, but for food systems, the environment, and the global economy more broadly.

Civil society organizations have an important role to play in efforts to expose these dynamics, and to hold corporate actors to account. Their actions are vital to reveal the impacts of corporate power in society through direct information campaigns that frame the consequences of corporate consolidation as violations of human rights. CSOs also are vital actors in checking corporate power by calling for and engaging in stronger governance initiatives that hold these firms to account. These efforts, as we have shown, need to be multi-scalar in nature to match the growing global reach of TNCs and their power. CSO strategies include engagement and participation in global initiatives such as the UNGP and the Legally Binding Instrument on TNCs and Human Rights, which are important international initiatives seeking to impose rules that will strengthen accountability on a global scale. They also include national level actions, such as national action plans on human rights and measures to ensure states abide by their extraterritorial obligations on human rights.

The trend toward the consolidation of corporate control and power that has unfolded in recent decades need not be the norm. As giant global corporations gain power, they work in ways to exclude competition and gain even more power. Reining in corporate power is thus vital to clear space for a people’s sovereignty process to begin: to reimagine and build food systems and production systems that respect human rights and the environment, and that are participatory, culturally grounded, and context specific.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Jennifer Clapp

Jennifer Clapp is a Canada Research Chair in Global Food Security and Sustainability and Professor in the School of Environment, Resources and Sustainability at the University of Waterloo. Her most recent books include Food, 3rd edition (Polity, 2020) and Speculative harvests: Financialization, food, and agriculture (with S. Ryan Isakson, Fernwood Press, 2018). She is currently working on a book on corporate concentration in the agricultural input industry.

Joseph Purugganan

Joseph Purugganan is the Head of the Philippine Office of Focus on the Global South, a progressive policy research and campaign organization working on the themes of political economy of development, peoples’ alternatives, power and democracy, climate and gender justice. He spearheads Focus’ work on trade and investment and corporate accountability. He is one of the convenors of the Trade Justice Pilipinas campaign platform, and the Asian Task Force on the Binding Treaty.