The Role of Tourism Corporations: The Neoliberal Attack on Local and Global Democracy

As from the mid-80s, the boom in the global hotel industry has occurred in parallel with an unprecedented expansion of financial capitalism. The point of connection, or synergy, between the two has been the creation of a huge tourism offer in the form of business clusters which have added a wide range of incentives to the traditional hotel model (from condo hotels to golf courses, marinas and casinos).

For those controlling the speculative investment funds that characterised turbo-capitalism until the crisis of autumn 2008, the positive social image of tourism as an "industry without chimneys" and a "passport to development" – especially in the case of multipurpose resorts with a variety of residential options – has permitted the murky source of much of their capital to be laundered whilst at the same time yielding quick profits.

Black holes of the international economy

By participating in strategic alliances and employing all kinds of financial investment tactics, the less scrupulous hotel industry TNCs have acquired extraordinary investment liquidity which has helped to boost growth in the scale of their operations on a level that would have been unimaginable just a few years ago.

These mutual benefits, or "win-win strategies" in the neo-liberal jargon, have focused on routing much of the flow of capital and finance through a dense network of tax havens (from the City of London to the Cayman Islands via the New York Stock Exchange) which function as a slush fund for the world-domineering TNCs, over and above governments, laws and borders. In fact, there is no hotel industry TNC (or TNC in any other important economic sector) in existence that does not have multiple ghost societies domiciled in these black holes of the international economy, since they are beyond the reach of public control and transparency.

A further characteristic of tourism TNCs is their indifference to the democratic or dictatorial nature of political regimes when deciding their locations. As an extraordinarily unregulated industry, it can indulge its preference for investing in states which do not prompt "regime uncertainty", such as the Dominican Republic, Mexico, Indonesiaand Morocco, rather than in "classical" democratic systems.

As was the case with the Balearic Islands and Spain, which were used as a testing ground from 1955 to the late 70s, the modus operandi is to manipulate a powerful network of local "friends" in order to ensure a safe scenario for investment opportunities and the repatriation of profits abroad, a scenario which includes low wages in unskilled jobs and public sector support in order to obtain improved transport infrastructures (mainly airports, ports and motorways) and electricity, water and waste services.

The goal is to create large-scale business clusters aimed at constant quantitative growth. Partnerships with local elites generate corruption and enable the wealth generated by tourism to be diverted abroad unhindered.

Public money to benefit TNCs

TNCs want the state to act as the facilitator of their projects, allocating the maximum possible amount of public money to infrastructures in order to sustain constant expansion in terms of accommodation, and taking an active role in marketing their products through multi-million international publicity campaigns. Naturally, the use of staggering sums of public money to further the interests of TNCs is detrimental to investment in human development in the societies which theoretically benefit.

Wherever airports and motorways spring up, water treatment plants and incinerators appear and fabulous sums are squandered on promoting holidays organised by private companies, investment in basic and university education, health and social welfare usually decreases or simply disappears altogether, as is the case of social housing.

This lack of structural transparency is closely related to the acceptance of the so-called neoliberal "Washington Consensus" and, above all, to the use of tax havens to facilitate financial machinations. In January 2000, the 140 member states of the World Trade Organization produced the General Agreement on Trade in Services (GATS). This agreement created a new framework which supplants national economic, environmental or social laws and regulations and is entirely favourable to TNC investments of any kind in any country. The most striking aspect is that key concepts such as "environmental sustainability", "distribution of wealth", "fiscal transparency," "environmental conservation" or "participation of local communities" do not enter the agreement's lexicon at any point.

The impact of the GATS on such an internationalised sector as tourism has been devastating, as it converts the TNCs into competitors with the same rights as any local company or initiative. Consequently, these inequalities in power and resources have created the market conditions necessary for the rapid proliferation of tourism and property developments in extensive areas worldwide. All the major tourist development areas are located in states that have ratified the GATS, and those states which aspire to become promising new "destinations" are likewise rushing to ratify it.

Moreover, as has been the case in Spain, the official loans for foreign aid and development are in fact used by the TNCs themselves to "open markets" in new tourist "destinations", with the enthusiastic collaboration of the supposedly "donor" states. As a result, local economies are obliged to participate in downward competition in terms of taxation, social and labour rights and environmental protection in order to attract the attention of TNCs. The first victims include small and medium local businesses, whose income statements are immediately affected by their exclusion from the all inclusive business clusters gathered around the resorts and fuelled almost exclusively by imported materials and services.

The poorer the country, the more drastic the dismantling of all planning regulations and democratic administration of the territory, economy and environment, and the more far-reaching the subsequent privatisation of common goods such as water or land.

Beyond the reach of public control

This ultra-liberal framework reaches fever pitch with the tourism TNC practice of routing finances through tax havens. There is no Spanish-owned transnational tourism corporation in existence that does not route a large part of its accounts through this staggeringly unregulated network of black holes that conceal massive flows of capital beyond the reach of international public control. Thus, with their impunity protected by the neoliberal order, TNCs manage to shield their true profit and income statements from the scrutiny of the communities where they operate as hotel and property businesses. Failure to declare this money particularly affects countries in the South. According to Oxfam, global tax fraud by individuals who should pay taxes in the South amounts to 124 billion dollars a year. If the proportional part of the more than additional 200 billion that the TNCs hide from the attention of the tax authorities in the South were to be added to this sum, poor countries would have access to at least twice the money they receive in development aid (some 103 billion dollars per year).

With the eruption of the current global financial crisis, the need to eliminate or at least limit the scope for action of these tax havens has become the official priority, from the G20 itself at the summit in London to the President of the USA. Obviously, achieving any real progress towards the end or limitation of these offshore centres would entail significant changes in the business model of TNCs. As with the rest of the economy, the weight of financial speculation must be drastically reduced in favour of productive investments. Nevertheless, the truth is that three years after the fall of Lehman Brothers, this laudable and necessary goal remains mere wishful thinking and has not yet produced any practical result.

Blackmail to obtain advantageous conditions

Lastly, it should be highlighted that to date, the relationship between TNCs and the countries that could host their projects has been based on blackmail. The large Spanish transnationals have not wasted any time in establishing a lobby through the platform provided by Inverotel (the Spanish association of investors in the international hotel industry) in order to obtain even more advantageous conditions for their increasingly larger-scale projects from the governments of countries such as Costa Rica, Jamaica, the Dominican Republic and Mexico. In Jamaica, for example, when faced with the first signs of public and governmental pressure to comply with the law, they opted to withdraw from new developments or put them on hold as a means of applying counter-pressure, rather than respecting the decisions made by the institutions of the republic.

The most serious aspect however, is the strategic direction taken to accomplish the tourism TNC mission: their aim is to conduct business in safe places and the best means to achieve this is to create opportunities for crises which can be exploited to force the hand of the communities they wish to host their projects. Viewed thus, "touristification" reveals itself as a radical mutation of the societies concerned, which enter into the logic of neo-liberalism, consumerism and "modernisation" without achieving any significant improvements in well-being or human development in the process.

Tourism's huge direct and indirect influence on the global economy, the expectations of indefinite growth on an environmentally precarious planet, the hegemony of the TNCs and their synergy with a financial capitalism blinded by quick private profits, together with a failure to improve human development in the countries concerned, all contribute to making the mass tourism industry a serious obstacle in the task of creating an ecological world with a future, where communities count and democracy is a daily reality.

Joan Buades is a critical researcher in tourism, environment and globalisation and member of the ALBA SUD research team. He also works with the Research Group on Sustainability and Territory (GIST) at the University of the Balearic Islands(UIB) and with other social organisations.

This article is an excerpt from "Turismo y bien común: De la Irresponsabilidad Corporativa a la Responsabilidad Comunitaria", by Joan Buades. Alba Sud, September 2010.

English translation: Centro Superior de Idiomas de la Universidad de Alicante, S.A.U.