Chapter 4
The Industrial Corporation and Capitalism’s Time–Space Fix1
Introduction
From the late 1950s to the mid-1980s there was barely any change at the top of the Fortune 500 list of largest American corporations (Table 4.1). In these years the large oil companies, Exxon, Mobil, and Texaco were always towards the top of the list. Prominent too were the car producers, GM, Ford, and Chrysler, and the giant industrial corporations, US Steel, Bethlehem Steel, General Electric, Boeing, and Kraft. Only one entry could have been read as a harbinger of change, the listing in the top 20 in 1970 of IBM, the computer manufacturer.
Table 4.1 The largest US corporations 1960 to 2010.
Source: Fortune 500, at money.cnn.com, accessed July 22, 2010.
Yet, as we will see, major changes had taken place within firms over these three decades. The nature and location of their investments, production processes, and sales programs had been recast.
Then, between the 1980s and 2000, the top 20 list changed substantially. While GM, Exxon Mobil, Ford, and General Electric still held top positions, Wal-Mart burst dramatically into number two position, while other retailers Kroger and Sears Roebuck jumped into elevated slots. Equally significant was the rise of the big financial institutions: Bank of America, State Farm Insurance, and AIG.
By 2010 the dominance of the old industrial corporations had ended. Wal-Mart became America’s number one company, measured by trading revenue, with oil and gas companies, Exxon Mobil and Chevron, the next two on the list, while ConocoPhillips was 6th. General Electric, which is now more a financial than an industrial company, was 4th, while other financial companies, Bank of America, JPMorgan Chase, Berkshire Hathaway, Citigroup, AIG, and Wells Fargo, held key spots. Also prominent, though new to the list, were the health care services companies, McKesson, Cardinal Health, and CVS Caremark. The telecommunications companies AT&T and Verizon grabbed elevated positions as did digital products manufacturers and distributors, Hewlett Packard and IBM. Notably, only two old industrial manufacturers made the list, Ford in 8th position and General Motors in 15th.
On a global scale, there has been a similar rise of financial, telecommunications, retailing, and health services companies. In Table 4.2 we see that Wal-Mart was the world’s largest company in 2010, ahead of the international oil and gas producers, Shell and BP, and the US producer Exxon Mobil. Coming after is not a string of US companies, as would have been the case a quarter century ago. Rather we see the Japanese car manufacturer, Toyota; the Japanese posts and telecommunication company, Japan Post; the Chinese oil firms, Sinopec and China National Petroleum; and the Chinese electricity firm, State Grid. European financial companies like AXA, ING, BNP, Assicurazioni Generali, and Allianz are well in the top 20, as is the European car manufacturer, Volkswagen. Pressing for the top 20 are retailers, financiers, IT&T companies, food conglomerates, and health providers from all parts of the world – with the notable exception of Africa.
Table 4.2 The world’s largest world corporations (2010).
Source: Fortune 500, at money.cnn.com, accessed July 22, 2010.
| Rank | 2010 | Prime sector |
| 1 | Wal-Mart | Retailing |
| 2 | Shell | Oil and gas |
| 3 | Exxon Mobil | Oil and gas |
| 4 | BP | Oil and gas |
| 5 | Toyota | Motor vehicles |
| 6 | Japan Post Holdings | Finance and insurance |
| 7 | Sinopec | Oil and gas |
| 8 | State Grid | Electricity |
| 9 | AXA | Finance and insurance |
| 10 | China National Petroleum | Oil and gas |
| 11 | Chevron | Oil and gas |
| 12 | ING | Finance and insurance |
| 13 | General Electric | Finance and insurance |
| 14 | Total | Oil and gas |
| 15 | Bank of America | Finance and insurance |
| 16 | Volkswagen | Motor vehicles |
| 17 | ConocoPhillips | Oil and gas |
| 18 | BNP Paribas | Finance and insurance |
| 19 | Assicurazioni Generali | Finance and insurance |
| 20 | Allianz | Finance and insurance |
So there has been marked change in the lists of corporations and industries dominating US and world economies over the last 50 years. Further, the nature of that change is becoming more transformational and its pace is accelerating. These changes warrant close attention given their widespread impacts on workers and communities, on environments, and on the ways society is organized and governed.
In this chapter I review economic geography’s study of the modern corporation. There are two parts. In the first part I revisit the influence of analysis from political economy and the pioneering work of David Harvey and his exposition of capitalism’s geography. I then use Harvey’s work to track research into the changing nature of the organizational and investment behaviors of corporations. Here we encounter four themes: the post-war development of monopolies, the processes of industrial restructuring, the impacts of financialization processes, and the pursuit of globalization. In the second part, I present a case study of BHP Billiton, the world’s largest minerals company, and relive its development as a powerful capitalist entity. The chapter concludes with a discussion of what an economic geography of the corporation might look like in the years ahead.
A Political Economy of the Corporation
The corporation is one of the world’s most successful ideas (Frug 2001; Micklethwait and Wooldridge 2003). It is the vehicle that has enabled capitalism to traverse private and public domains around the world and maintain legitimacy and viability. No other entity has anywhere near the corporation’s legal, financial, organizational, and technological rights and powers.
Interest in the corporation by economic geographers paralleled the emergence of the corporation as a powerful international economic player from the 1960s and 1970s. Previously, economic geographers had focused on explaining variations in industrial, commercial, and agricultural land use patterns according to changing transportation costs, land rents, and the effects of proximity (Barnes 2003; O’Neill 2010). In a sense, economic geography set about adjusting microeconomic study of the firm to show the influence of spatial variables across various industrial settings. Not surprisingly, the dramatic restructuring of industrial landscapes around the world in the 1960s and 1970s captured and re-shaped the interest of economic geographers as they observed the ways newly powerful corporations shaped industry sectors and regions. Importantly, the Marxist-inspired field of political economy was looked to as a source of explanation.
Pre-eminent in the development of a politicized economic geography of the corporation was work on the US economy during the 1960s by Paul Baran and Paul Sweezy (1966). Baran and Sweezy explained the changes sweeping American manufacturing industry as a process of evolution of monopoly capitalism. According to Baran and Sweezy, the enduring logic of monopoly capitalism came from the ability of the large firm, having maximized its market share through competition, to grow further through takeover and merger. However, such predatory behavior required a sympathetic nation-state which protected the monopolist both from international competition through trade barriers and from the claims of organized, often militant, labor groups by the repressive use of laws, policing, and judicial powers. The state also assisted its domestic monopolies by subsiding labor supply through education and training programs, and by public health and social security programs. A further crucial contribution of the state was the maintenance of aggregate demand through deficit budgets, welfare payments, exchange rate manipulation, and military spending.
The monopoly capitalism period was unsustainable, however, as political economists recognized. Specifically, Mandel’s Late Capitalism (1975) exposed two powerful forces of change. One was the threat to the profitability of monopoly corporations as a result of economic internationalization. This started in the late 1960s and involved rapid growth in world trade, the emergence of East Asian manufacturing, erosion of sovereign control over the British pound and the US dollar, and a growing preparedness by corporations to invest outside their homelands. The second force of change was the nation-state’s unwillingness to continue to shore-up the profitability of its domestic firms. This reluctance was explored in O’Connor’s The Fiscal Crisis of the State (1973) which showed how Keynesian state capacity had been permanently undermined by economic stagnation. The 1970s saw nation-states faced with irreconcilable demands for more welfare assistance on the one hand but lower taxation revenues from stalling economies on the other. The mutually supportive relationship between the nation-state and the monopoly firm could no longer hold.
Monopoly capitalism’s response was documented by Barnet and Muller (1974). Their text chronicled the stampede of corporations across national borders. It showed how corporate managers made decisions that affected the lives of people on every continent by exploiting labor and environment unseen since the nineteenth century. Six years later Fröbel, Heinrichs, and Kreye wrote The New International Division of Labour (1980). “NIDL,” as it was called, showed both how manufacturing investment was no longer confined by national regulations and boundaries, and how corporations were increasingly constructing their own spaces of production and networks of global relations.
Many economic geographers embraced this grand narrative of economic change. It was a narrative that emphasized the fractured relation between labor and capital, and the necessity for monopoly capitalist firms to restructure. It was a new version of capitalism defined by global arrangements of manufacturing, new forms of production and divisions of labor, and the opening of protected markets in the developed world at a time when their industrial regions were undergoing massive disinvestment.
The geography of these events was compelling and work in economic geography exploded in response. Central was interest in geographical patterns of industrial restructuring, the changing roles of regions, and the logics of corporate behavior. Empirical studies explored the rise of branch plant economies especially in the United Kingdom and United States (MacLachlan 1992; Clark 1989a), the impacts of new investment patterns on regional economies (Massey and Meegan 1982; Bluestone and Harrison 1982; Massey 1985; Scott 1988; Storper and Walker 1989; Clark 1989b), the struggles for economic and social viability within old industrial cities and regions (Britton 1996; Hudson 2001), and changes in the nature of work and the worker (Hanson and Pratt 1995; McDowell 1991; 1997).
In aggregate, this research produced a remarkably unified account of Fordism in crisis and of subsequent post-Fordist transformations. Grounded studies of these transformations drew on Marxist concepts and terminology especially those connected to the idea of circuits of capital and to the theory of accumulation crisis (see Harvey 1982; Sheppard and Barnes 1990; Fagan and Le Heron 1994). A prevailing view in economic geography became that the capitalist mission involved not just the generation of value through the assembly of labor and resources in the production process but also the appropriation of value on unjust terms by the owners of capital. Fairness aside, this grab for value and its conversion back into financial capital, called realization, was posited as essential to the act of capital accumulation. But, as we will see, these were inherently unstable, producing what Storper and Walker (1989) called “the inconstant geography of capitalism.”
Economic geography thus aligned with heterodox economics in its view that capitalism was inevitably unstable. While capitalism depends on labor to undertake successful production, the owners of the means of production never pay its workers the full value of their work. Nor do capitalists pay the full costs of the reproduction of labor: the costs of replenishing workers’ energy on a daily basis and the costs of training replacements over time. Nor do they pay sufficient wages to ensure their product is sold. As labor and resources become exhausted, or when capitalists are faced with inadequate demand or the loss of subsidy or protection, their inclination is to relocate to new host communities to avoid crisis. Redundant industrial regions are created as a consequence (Massey 1985; Hudson 2004).
Spatial Fixes and Spatiotemporal Fixes: Harvey and his Structured Coherences
Documentation of capitalism’s spatial tensions and contradictions drew attention to capitalism’s need for a time–space fix; that is, for investments in fixed capital and ongoing production to be recoverable within a reasonable time frame. Harvey (1985) used the term “structured coherence,” borrowed from Philippe Aydalot (1976), as shorthand for the existence of these conditions. Successful accumulation, said Harvey, requires:
- … technologies of production, and quantities and qualities of consumption
- … labor supply and demand
- … physical and social infrastructures (Harvey 1985: 145).
A “structured coherence” is the spatial material form in which production and consumption, supply and demand, production and realization, class struggle and accumulation, and culture and lifestyle “hang together” (Harvey 1985: 146); that is, cohere as a stable, reproducible entity at least for a limited time period.
Harvey stresses that there are always forces at work undermining these more or less stable structured coherences. These forces take four forms. First, differential rates of accumulation upset the balance between movements of labor and capital, causing the dismantling of structured coherences. Technological changes can undermine production relations and market configurations, disrupting territorial compositions and boundaries, even at the level of the nation-state. Third, class struggles, which change distributive flows between capital and labor, entice capital or labor to go elsewhere. And, fourth, advances in organizational structures and operations can extend the geographical reach of corporate power beyond pre-existing territorial confines.
As Harvey summarizes
“Capitalist development must negotiate a knife-edge between preserving the values of past commitments made at a particular place and time, or devaluing them to open up fresh room for accumulation. Capitalism perpetually strives, therefore, to create a social and physical landscape in its own image and requisite to its own needs at a particular point in time, only just as certainly to undermine, disrupt and even destroy that landscape at a later point in time. The inner contradictions of capitalism are expressed through the restless formation and re-formation of geographical landscapes. This is the tune to which the historical geography of capitalism must dance without cease.”
(Harvey 1985: 150)
Establishing a time–space fix, or an enduring capitalist dance, is a difficult task. Corporate geographers during the 1980s recorded and interpreted the production landscape that was being produced. This body of work included contributions by Taylor, Thrift, and Dicken (e.g. Taylor and Thrift 1986; Dicken and Thrift 1992, for the UK), Fagan (e.g. 1986, for Australia), and Britton (e.g. 1996, for Canada); while the specific ways corporate behaviors intersected with labor and its communities were charted by Hudson (e.g. 2001), Lovering (e.g. 1999), Webber and Weller (e.g. 2001), Peck (e.g. 1996), and Herod (e.g. 2001).
Of special significance was Peter Dicken’s evolving work on the multinational corporation captured in his text Global Shift (originally published in 1986 and now in its sixth edition). Global Shift charts how large corporations navigate the productive terrains of the world. Two themes underpin Dicken’s work. One is that the corporation is an evolving organizational entity, changing from its original form as a domestic enterprise with satellite operations in foreign lands, to an integrated transnational production and sales machine, increasingly part of an open-ended network of cross-border financial and legal contracts and transactions. The other theme in Dicken’s work is the evolution of the corporation’s internal structure: the logic, strategies, technologies, and divisions of labor that enable the corporation’s assets to be deployed and re-deployed in ways that grow shareholder wealth. No doubt, Dicken would see both the globalized spatial strategies of the firm and its internal organizational construction as central to the corporation’s search for a time–space fix.
New Views of the Corporation
More recently, economic geographers have sought to break the traditional confines of political economy and its focus on circuits of capital and accumulation crises. A number of new investigative pathways for corporate geography have emerged. One promulgates the importance of organizational culture. The leading text here is Erica Schoenberger’s (1997) The Cultural Crisis of the Firm which pioneered interest by economic geographers in corporate personalities, machinations, and struggles. Schoenberger explored the ways managers drew on a range of motivations and interests to drive and structure productive activities in particular ways. As Schoenberger explained in a later contribution:
… the corporation [is] both a site of capital accumulation and a stage for the playing out of powerful psychological and emotional processes. This suggests that we’re not going to understand what corporations do in the world and why without analyzing this turbulent mixture of passion, power and rationality.
(Schoenberger 2001: 296)
Likewise, close ethnographic study of workers inside corporations enabled Linda McDowell (1997, on banking in London) and Susan Hanson and Geraldine Pratt (1995, on firm-labor market relations in Massachusetts) to expose the key role played by gender in the ways production is organized and transacted and the way realization gains can be distributed. Like Schoenberger, these authors exposed the complex social and cultural relations that coexist with the mandate of corporate managers to maximize the returns to shareholders from the capitalist activities they control.
In a similar vein, with J.K. Gibson-Graham, I proposed that corporations were sites of complex, competing narratives and logics, not necessarily bound to profit maximization imperatives (O’Neill and Gibson-Graham 1999; O’Neill 2009). This work explored how production/engineering, financial accounting, legal and organizational narratives of the corporation could separately define and enact different practices within the corporation. The financial narratives and motivations of the corporation have also been advanced by Gordon Clark (e.g. Clark and Wójcik 2007), Andrew Leyshon (e.g. Leyshon and Thrift 2007), and Andy Pike and Jane Pollard (e.g. 2010), among others, as the twenty-first-century corporation shifted its logics, practices, structures, and outcomes to accord with the financialized directions of present-day capitalism. At the same time, awareness of the corporation as a social and cultural field has enabled the proliferation of work on corporate social responsibilities. This has coincided with activist measures to monitor the behaviors of global corporations, and there are encouraging signs of an increased awareness by corporations of their social and environmental responsibilities (see Hughes 2011; Crang, Dwyer, and Jackson 2003; Goodman, Maye, and Holloway 2010).
Which brings us to the case study of BHP Billiton. Here we explore the literatures and issues raised in the discussion so far by examining the time–space crises and fixes that one global corporation enacted and experienced in its search for successful accumulation strategies. We will also be concerned with how the corporation’s social and cultural complexities affected its operations and invited new types of interventions.
BHP Billiton Ltd.
BHP Billiton is the world’s largest minerals corporation. It employs 40 000 employees in over 100 operations in 25 countries (Figure 4.1). BHP Billiton is a major player in the production and supply of aluminum, coal, copper, manganese, iron ore, uranium, nickel, silver, and titanium, and has substantial interests in oil and gas and diamonds. BHP Billiton is a dual listed company, with registrations in London and Sydney. This structure followed the merger of BHP Ltd and Billiton Plc in June 2001.2
Figure 4.1 BHP Billiton’s global operations.
Source: Vanselow, A. (2010) BHP Billiton Retail Briefing, Slide 2. Used by permission of BHP Billiton.
BHP Billiton has three substantial competitive advantages. One is that it holds the extraction rights to the world’s best mineral deposits. These include vast reserves of iron ore and coal in Australia, copper ores in Chile, bauxite in Brazil, petroleum in the Gulf of Mexico, diamonds in Canada, and manganese in South Africa. Its second is its diversification. This is demonstrated by an extraordinary graph used in company briefings to investors around the world (Figure 4.2) which shows the way BHP Billiton hedges commodity price fluctuations by the simple act of owning so much across many subsectors. The third competitive advantage is its commitment to its customer base rather than solely to its pursuit of mining productivity.
Figure 4.2 BHP Billiton’s diversified portfolio performance.
Source: Vanselow, A. (2010) BHP Billiton Retail Briefing, Slide 4. Used by permission of BHP Billiton.
BHP Billiton’s profile reflects its development as an advanced global corporation. Its history provides an excellent opportunity to track the changing story of corporate geography. So in this section we trace BHP Billiton’s corporate history through its key stages, each of which parallels distinct types of corporate research in geography. These stages are:
1. The development of BHP as Australia’s standout monopoly firm.
2. Its restructuring and the shedding of its steel investments.
3. Its financialization.
4. The creation and globalization of BHP Billiton.
BHP was founded in 1885 as a silver, lead, and zinc mine at Broken Hill in the arid western region of New South Wales. The venture was another example of British capital seeking new ways to create wealth from the vast territories of the nineteenth-century British Empire. The Broken Hill lode proved enormously profitable as mineral prices surged on the back of rising demand from manufacturers in the rapidly industrializing northern hemisphere economies. Then, in 1915, BHP established an integrated iron and steel works at the estuarine mouth of the Hunter River in Newcastle, 160 kilometers north of Sydney, Australia’s largest state capital city. Both the New South Wales and federal governments were overjoyed at the decision, providing every possible assistance to make the venture successful, nation builders that they were.
The rationale for the Newcastle works was simple. BHP would harvest a local supply chain for coal and national supply chains for iron ore and limestone. It would build a shipping company to move raw materials and export finished products. Initially, its steel would be rolled into wire for the fencing of a vast continent. It was a simple, massively profitable, spatial and temporal fix, or structured coherence, that ensured successful accumulation. Guarantees for the realization of BHP-driven circuits of capital came equally from Australian governments, from hefty tariff walls, and from a tyranny of distance (Blayney 1966), a protection package unmatched elsewhere on the globe.
By the early 1960s BHP was marketing itself as The Big Australian, boasting its nationally integrated, diversified, protected production ensembles. It operated steel plants in Newcastle and Port Kembla in New South Wales and Whyalla in South Australia. It controlled coal leases across Queensland, New South Wales, and Western Australia. It pioneered vast iron ore leases in South Australia and Western Australia. It operated a substantial coastal shipping fleet hauling minerals and steel east to west and west to east. It rolled steel into tying rods, wire, nails, and rope. It cast steel into girders and rails. It pressed steel into sheets and panels. So as Australia fenced its rural lands, crossed the continent with roads and railways, expanded its protected manufacturing sector, built its CBDs and suburbs, filled its houses with white goods and steel appliances, and invited American and British motor vehicle builders to set up locally to satisfy the demands of a motorizing society, BHP supplied steel at every possible point. Its shareholders were hugely rewarded. Its managing directors were feted like prime ministers. Its unions were tamed by extraordinary industrial powers and privileges. Even its needs for a growing workforce were satisfied by strategic European recruitment by the Australian immigration service. In Baran and Sweezy’s terms, this was a blueprint monopoly capitalist with a textbook relationship with its host government and captured consumer base (Baran and Sweezy 1966).
By the 1960s, however, as in Baran and Sweezy’s United States, BHP’s protected growth was stalling. Lured by government subsidies designed to encourage the discovery and development of Australian petroleum reserves, BHP engaged US petroleum expert L.G. Weekes to assay its continental minerals leases. But Weekes advised BHP to explore offshore in the vast Bass Strait area between the Australian mainland and Tasmania. As chance would have it, the very first drilling, in 1965, uncovered the massively profitable and enduring Barracouta oil and gas field, with US oil company Esso (now Exxon) supplying know-how through a 50:50 partnership. BHP shareholders were astonished that their wealth could grow so readily. BHP’s appetite for minerals exploration and investment was refreshed, over half a century on from its original Broken Hill ventures, and the seeds of a global minerals corporation were sown.
BHP realized that its conversion into a diversified minerals company depended on having long term rights over giant, enduring, high quality, low cost minerals and energy leases. Its Bass Strait lesson was reinforced by its experience of the acquisition of US firm Utah Coal in 1983. This delivered not just coal and copper assets in the US but rights over the prime Chilean Escondida copper fields. BHP learned that access to giant ore bodies involved deals with sovereign governments, a game which BHP always played well, and which, as BHP Billiton, it continues to excel in.
BHP’s newly successful minerals and energy investments contrasted with stagnating returns in its ageing and investment-starved steel interests. But BHP’s exit from steel was to be contested, painful, and costly. Internal BHP and union contestation aside, stagnation in the Australian economy in the 1980s embroiled BHP in the politics of national economic restructuring. In 1983, the company suffered the ignominy of being tied into a national steel industry plan, set in place by the newly elected Hawke Labor government in the context of a social contract between the Labor party and the Australian trade union movement. The steel plan required BHP’s commitment to ongoing industry investments, job guarantees, and community assistance schemes in return for the privileged mineral rights and market protections that it previously assumed as available without strings.
The 1980s also saw the rise of the arbitrage investor (Clark 1989b). A loyal stable shareholder base for BHP could no longer be guaranteed. BHP’s substantial cash flows and rapidly appreciating asset values in its new ventures offered enticing opportunities to corporate raiders for re-engineering and for leveraging BHP’s financial assets. Not surprisingly, BHP management spent much of the mid-1980s protecting its share register from speculative raids, especially by local corporate raider Robert Holmes à Court and his takeover vehicle Industrial Equity Ltd (IEL). The protective maneuvers revealed that BHP’s management skills were heavily biased towards the engineering, production, and supply concerns of a protected manufacturer but were underweight on the skills required for managing of finances, customer contracts, and shareholder value.
This experience drove a number of key changes to BHP operations during the mid-1990s. One was the recruitment of international consultancy firm McKinsey and Co. to restructure BHP’s core steel businesses, inculcating the old industrial giant with new accounting methods and strategies. An important consequence was the introduction of financial performance metrics that gave unfavorable assessments to many long standing BHP assets, most notably the Newcastle steelworks complex, and plans for its closure and the aggressive disinvestment of other steel assets and many marginal minerals operations.
During this time, however, BHP managers encountered events that it knew little about handling. As Erica Schoenberger (1997) revealed, a firm is unable to be understood without close study of its managers and their backgrounds, proclivities, and styles. The traditional career path of a BHP manager began in the firm’s graduate engineering program, before a stint in a steel plant, then to a job in divisional management, before a head office appointment in 600 Bourke St, Melbourne. BHP’s managers, toughened by struggles with organized labor in the industrial regions it dominated, and used to minimally regulated use of Australian air, land, and waterways, failed to notice the new environmental standards and human ethics being adopted in boardrooms elsewhere. Two events took BHP completely by surprise.
The first started in July 1986 with an explosion at BHP’s underground black coal mine at Moura in Central Queensland which killed 12 workers. Then a second explosion at Moura in August 1994 killed 11 more workers. The repetition exposed BHP management to the accusation of being insufficiently concerned about workers and their communities. A frustrated Warden’s Inquiry expressed bewilderment at the recurrence, and called for “fundamental and permanent change” (Queensland Warden’s Court 1996: 60) in BHP’s mine management practices.
The second event also occurred in the mid-1990s. In May 1994, a small group of villagers from the Ok Tedi region in west Papua New Guinea appeared in the supreme court of Victoria, where BHP is incorporated. They claimed that BHP’s gold and copper mining activities at the headwaters of the Ok Tedi River were causing sickness to the Ok Tedi people and were permanently harming the environment that underpinned their livelihoods. What was seen by BHP as a quirky and inconsequential claim became news around the world. Powerful TV images showed villagers in traditional garb confronting the best of Victorian England’s imperial legal architecture and practice, and putrid waste spilling from a BHP tailings dam into the Ok Tedi River. Amazingly, BHP management struggled for an appropriate public response to either the Moura or the Ok Tedi disasters. It lacked an ethics framework or worker health and safety guidelines. It had no independent bodies or training departments to call on outside its narrow engineering-focused dominions (Malam 1998).
Again, with significant outside help and some headhunting of government lawmakers, BHP learned quickly. The firm shifted power away from its production and engineering entities towards its financial management and consumer divisions. It established a comprehensive, best-practice corporate and management behavior policy supervised by an independent senior ethics division. Strengthened environmental, community, and worker health and safety policies followed soon after, and the company moved rapidly to overhaul its internal governance systems. BHP Billiton thus joined what was being observed by economic geographers as a growing trend in corporate social responsibility (Hamilton 2009; Sadler 2004; Hughes 2007; 2011).
A legacy too of the Moura and Ok Tedi experiences was the attitude of BHP Billiton to the closure of the Newcastle steelworks. The lead-up to the closure in September 1999 saw extraordinary generosity and public emotion by many in senior management towards Newcastle workers and their community. These managers were from BHP’s engineering corps which was being replaced by internationally recruited executives from business and financial management backgrounds. The BHP Billiton departure package for Newcastle steelworkers featured an expensive training and re-employment program, an industrial park for the city, the handover of steelworks land to the New South Wales government along with a handsome donation towards its rehabilitation, and a handout to local unions for cultural and historical celebrations.
The departure package was developed by BHP old timer, John Prescott, the CEO who had been forced to rebuild BHP values following the Moura and Ok Tedi disasters. Prescott had stepped aside as CEO in 1999 prior to the Newcastle closure in favor of star American recruit Paul Anderson. Tellingly, Anderson downplayed the Newcastle closure adding only from afar that never again would BHP Billiton act so generously when exiting an investment (NSW Legislative Assembly 1999). It was a clear marker of BHP’s transformation into a global financialized minerals company under the control of managers and a board with distinctively different logics and aspirations.
Paul Anderson’s prime task was to drive the financialization of BHP Billiton (O’Neill 2001). The merger of the Australian BHP Ltd and the Londoner Billiton Plc put the world’s best mining assets inside a single corporation. Anderson’s task was to ensure their exploitation in ways that yielded competitive returns. Importantly, where once the shareholder lists of BHP and Billiton were dominated by interlocking corporate interests based around established British mining and manufacturing capital, BHP Billiton’s leading shareholders became global financial institutions (Table 4.3) charged with maximizing the returns of pension and private equity funds, with detached third party positions allowing them to be unconcerned by notions of shared responsibility for communities and environments.
Table 4.3 BHP Billiton’s largest ten shareholders (August 2010).
Source: Reuters at uk.reuters.com, accessed 22 August 2010.
| Shareholder | Proportion total ownership (%) | Number of shares |
| Blackrock Institutional Trust Co | 4.6 | 153,418,865 |
| AMP Capital Investors Ltd | 2.4 | 81,289,310 |
| QIC Ltd | 0.9 | 30,132,488 |
| CI Investments Inc | 0.5 | 16,340,110 |
| Australian Foundation Investment | 0.4 | 14,256,934 |
| Ausbil Dexia Ltd | 0.4 | 12,897,341 |
| BlackRock Investment Management | 0.4 | 12,544,538 |
| Capital World Investors | 0.4 | 12,111,548 |
| Vanguard Group Inc | 0.3 | 10,131,639 |
| Perpetual Investments Ltd | 0.3 | 9,171,215 |
Transforming BHP Billiton into an enterprise driven by maximizing shareholder value also meant paying attention to BHP Billiton’s physical organization. Getting administration and location structures right – the organizational fix – means negotiating a vast and complex set of spatial domains. The task of maximizing the value generated from production and then steering this value across the world without erosion by currency transfers, dealer commissions, successful trade union claims, “excessive” taxation payments or depressed consumer prices requires coordinated local knowledge across a network of production sites, management offices, and customer service locations. Assembling such a network is a core feature of the successful merger between BHP and Billiton and the creation of the world’s leading minerals corporation.
BHP Billiton’s success can thus be represented as a set of structured coherences, solutions to capitalism’s time–space dilemmas, responses to the need not just to generate value from the production process, but to realize these gains by effective sales strategies and then re-investing to continue the accumulation process. BHP Billiton can trace its success in capital accumulation across numerous economic cycles since the late nineteenth century and across six continents, each iteration involving successful time–space management strategies. But along the way, those strategies have exploited and often devastated workers, environments, and communities. At other times the corporation has acted with praiseworthy concern and generosity, learning from mistakes, and convincing governments of its expressed good intentions. BHP Billiton’s history shows the enduring power and cleverness of a large corporation, and the extraordinary difficulty that trade unions, communities, and governments have in dealing with it.
Conclusions
Corporations shape high streets, suburbs and fields, workplaces, bodies, incomes, wealth, supermarket shelves, modes of transport, energy, media and telecommunications systems, even governments, wars, and outer space. Yet, despite the power of corporations, no corporation has a guaranteed right of existence. A corporation must provide shareholders with a competitive annual return, eat away stored value, or close down. A critical first input into the success of a corporation – the spatial fix – is its relationship with workers, their communities, and the local environment. Then there is the need to secure buyers who are willing to take the corporation’s products at a price high enough to deliver the necessary rate of return. There is also the need to have all these relationships legitimized and stabilized by governments and regulatory processes. Securing these requirements requires a comprehensive time–space fix. Sometimes this fix is enduring while at other times it is short lived, often dramatically so, and often there are unpleasant outcomes for workers, communities, and environments, and even for the corporation itself.
Of course, there are corporations that fudge their way through value generation and realization by corruption. There are corporations that fail because of malpractice or bad management or by inattention to appropriate risk containment. But most corporations dissolve because they can no longer devise a time–space fix. They cannot create sufficient value because of the technology they are using, or because their labor ceases to be competitive, or a local resource runs dry. They might lose access to markets or competitors might gain access to theirs. Governments might regulate them out of existence because they are too destructive of the environment, or they make harmful things like cigarettes or asbestos or DDT. Or, simply, they might lose the organizational knack of being able to make products capable of competing in volatile markets. One thing we know is that achieving an enduring fix, like BHP Billiton’s, is very difficult. Only one company, General Electric, survives from the first Dow Jones list in the United States in 1896; only 18 companies survived from the original Forbes 100 list in the United States in 1917 onto the 1987 list, 70 years later; and of rating agency Standard and Poor’s first list of the largest 500 US public companies in 1957, only 74 were on the list in 1997 (Stern, White, and Eadie 2002).
This is the dilemma for the social scientist, then. On the one hand there is concern for the consequences of corporations growing large and powerful, wielding so much economic power over communities and environments that national governments and regulators are reluctant to intervene. On the other hand, a large corporation can be a stable employer, offering worthwhile career opportunities, training, and quality working conditions, be caring of the environment, produce and sell innovative, worthwhile products, pay taxes fairly, and generously support the community. A good corporation is beneficial for the neighborhood. So what does the social scientist do? Attack the large corporation or help it improve and survive?
The story of economic geography’s engagement with the corporation is as much an exposé of favorable, successful behaviors as it is of evil ways, especially in recent years. Where once Baran and Sweezy identified, probably very accurately, the corporation as self-serving, an oppressive national monopolist, the teasing apart of the modern corporation by contemporary social scientists to reveal its complex structures, motivations, and cultures opens the corporation as a space for different types of engagement, hopefully improving social and environmental outcomes. There is merit, I think, in seeing this changing subjectivity as a work in progress, one that has positive growth potential.
Notes
1 Phillip O’Neill would like to thank Dr Alexandra Wong for research assistance and the editor Trevor Barnes for his encouragement and expert advice.
2 BHP Billiton’s annual reports are a major source of evidence for this case study, with BHP Billiton Ltd (2009) the most common reference.
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