Economic institutions and their functions

Economic Institutions

The history of corporations dates back, somewhere before the 17th century, in Europe, where they were used only for governmental purposes, in projects that benefited the public such as the building of hospitals etc. Their activity was strictly controlled by the state and was not allowed to bring profit. In the 17th century, corporations started to think in terms of profit, which was used to fund the colonial empires' expansion and to control trade throughout the empires. The first corporation was East India Company, set up in 1600 under the strict control of Queen Elisabeth I.

In 1886, U.S. were the first state to treat the corporation as a "natural person" and its rights were that of the 14th amendment of the Constitution. From that date, year after year, corporations started gaining rights and freedoms which brought them to a new level, that of becoming transnational, global.

David C. Korten, in "When Corporations Rule the World" states that in their quest for profit, corporations became the "cancer" of today's society, forcing everybody to act in a destructive way. Moreover, the author considers that a part of the blame goes to the state, through its institutional forces and permissive policies that allow the existence of radical ideologies of corporate libertarianism and which, at a certain point are undemocratic, because they destabilize the market. Furthermore, Korten argues that human being existence relies on "a community-based, people-centered alternative" which should continuously fight against "extremist ideologies of communism and capitalism"

The World-system is defined as being a social system, with no restrictions, organization, member groups, regulations of legitimation, or rationality. The system is some how functional due to contradictory groups; they, through pressure, hold it together and at the same time divide it because each group wants to reshape the system in order to best fit its purpose. In a world system the division of labor is not an occupational one but a geographical one. That is, states are divided as such: there are core states, semiperipheral areas and peripheral areas. Core states are economically advanced countries, with strong state apparatus and a national culture. Peripheral areas are feeble aboriginal countries, which have a low level of sovereignty or, even worst, which are still under an empire's control. Semiperipheral areas are those in between core states and peripheral areas that is, they have several economic activities, a sort of state apparatus, and even some cultural integrity but not enough to be called core states. Usually these states come from ex-peripheral areas which have started do develop.

The best example of a core state is the U.S.A. And its influence around the world, especially in undeveloped countries is widely known. Stuart a. Wright, in his book, "Armageddon in Waco" talks about how seventy-four people were killed in an explosion due to U.S. negligence. Moreover, while U.S. try to interfere in Columbia's drugs problem, more people die in that country due to cigarettes than they do as a result of drugs. And these are just mere examples. The truth is that core states use all their influence, reaching as far as the case of Neo-Liberalist Trade Policies in order to manipulate the World-System to best fit their interests.

Neo-colonialism is the 21st century form of colonialism, one even more frightening due to its ability to control everything without any direct involvement in a country's state apparatus. That is, international financial organizations, such as the World Bank and the International Monetary Fund and which controlled by core states, decide that, in order to grant financial aid to undeveloped countries, these states should comply with some rules that are, in the end, in the detriment of their own economy. For example, Africa pays more to the IMF and World Bank, than it collects in credit from them, and this leads to low living standards, poor education and health systems and undeveloped infrastructure.

Besides financial institutions, transnational corporations have a saying in the economic development of a country. Although one might be tempted to say that a corporation, by creating a branch in an undeveloped country gives that economy a boom, it is actually all about personal gain.