The Good, The Bad, The Assemblage:
ITT, IBM and Chile
by André Dao
Published on 21 December 2023
I
On 4th December 1972, less than a year before his death during the military coup, Salvador Allende addressed a plaintive (and prophetic) plea to the UN General Assembly: ‘Distinguished representatives, before the conscience of the world, I accuse ITT of trying to provoke a civil war in my country, the supreme state of disintegration for a country. This is what we call imperialist intervention.’
Allende was referring to the International Telephone & Telegraph (ITT), the transnational conglomerate that, amongst a myriad of interests, controlled Chile’s telecommunications network. Given the political importance of that network, Allende’s socialist government had, from its inauguration, earmarked ITT’s 70 per cent stake in the Chilean Telephone Company for nationalisation. And until March of that year, the Chileans had been in negotiations with ITT over the amount of compensation to be paid. But internal ITT memos, leaked by the journalist Jack Anderson, confirmed what had long been suspected: ITT had actively plotted against Allende and his government.
In one memo, ITT set out an 18 point-plan to bring down the government, concluding that ‘everything should be done quietly but effectively to see that Allende does not get through the crucial next six months’.[1] In response to the leaked memos, Allende called off the negotiations. The nationalisation would go ahead without compensation at all.
In his speech to the UN, Allende drew a wider lesson for the international community from the ITT affair. ITT’s attempts to prevent Allende from taking office, and subsequent attempts to destabilise his government, were representative, he said, ‘of a direct confrontation between the large transnational corporations and the states.’ Those corporations, said Allende, ‘are global organisations [that] do not depend on any state and whose activities are not controlled by, nor are they accountable to any parliament or any other institution representative of the collective interest. In short, all the world political structure is being undermined.’
Indeed, the revelations about ITT spurred on the UN Economic and Social Council to call for a study group of ‘eminent persons’ to ‘study the role of multinational corporations and their impact on the process of development’. The study group would go on to recommend the creation of the UN Commission on Transnational Corporations, a key battle site between the Third and First Worlds over the international law of corporations (see here).[2] But all that would come too late for Allende and his government: the civil disintegration Allende warned of came to pass in the form of the military coup of September 1973.
II
Such are the bare bones of the story of ITT in Chile. And like any good story, there are innumerable directions in which one might take it. One direction—perhaps the most obvious one—is to take it as an archetype of what we might call the ‘bad corporation’. The bad corporation is the one that has to be disciplined by law.
But what exactly made ITT a bad corporation? In his speech, Allende emphasised ITT’s size and financial power (‘a huge corporation whose capital is greater than the budget of several Latin American nations put together’), its transcendence of jurisdiction (‘the power of these corporations is so great that it goes beyond all borders’), and its non-accountability to any state. One could say, then, that the bad corporation is the one that emerges as a rival to the state, that is capable, through its size and power and transnational location, of interfering with state sovereignty. It is through such interference, after all, that the corporation undermines, in Allende’s words, the world political system.
ITT, undoubtedly, fit the bill in this respect. As Jack Anderson put it, ‘ITT operates its own worldwide foreign policy unit, foreign intelligence machinery, counterintelligence apparatus, communications network, classification system and air-liner fleet.’ (see here and here). It even counted a former CIA director, John McCone, as one of its board members.
But while the simplicity of the image of the ‘bad corporation’ has political and narrative attraction, it leaves something to be desired in terms of a legal analysis. Because in this version of the story the corporation appears to grow and travel exogenously to the state, its immense economic power is developed somewhere out there, beyond law. The bad corporation only becomes a problem for the state when that power begins to rival the state; only then does the state try to bring law to bear on it.
III
The image of the ‘bad corporation’ can be complicated by thinking of its corollary, the ‘good corporation’. In the case of ITT and Chile, this mirror image is provided by another US-based, high technology transnational corporation: International Business Machines, well known by its acronym IBM. In contrast to the exogenous development of the ‘bad corporation’, IBM’s history in Chile is intertwined with the state (see here).
That history begins in the 1920s, when IBM began exporting punched-card tabulating machines to government entities wishing to mechanise the calculation of statistics, including the Chilean State Railroad Company, Customs Office and the State Budget Office. As historian of computing Eden Medina put it, ‘the adoption of IBM tabulating machines was part of a larger shift toward greater state bureaucracy and the increased collection of statistical data by the state using Western scientific methods.’ This dynamic was most pronounced in the Chilean Statistics Bureau, whose 1930 population census was tabulated using IBM machinery.
The intertwined development of IBM’s business, technological innovation, and Chilean politics continued through the middle of the 20th century. For instance, IBM’s development of mainframe computers coincided with the election of Christian Democrat Eduardo Frei Montalva as Chile’s President on a platform of, amongst other things, increased public spending on education, housing and health care. With the increased importance of centralised economic planning, IBM’s mainframe computer systems were in high demand. A prime example is the establishment in 1968 of the State Computer Service Enterprise, a new national data processing centre, whose first machine was an IBM 360/40.
Throughout this period of mutual growth for IBM Chile and the state bureaucracy, IBM assiduously maintained its image as the ‘good corporation’. One way it did so was to provide a great deal of training and benefits for its employees, so much so that those workers often affectionately referred to the company as ‘La Mamá IBM’. Another way IBM cultivated its ‘goodness’ was through its avowedly ‘apolitical’ stance, which meant that, in sharp contrast to ITT, the company never publicly aligned itself with a particular political ideology.
Of course, on closer inspection, the ‘good corporation’ turns out to be a rather ambiguous image. IBM’s ‘apolitical’ stance meant, in practice, that it was one of the few companies in Chile at that time that avoided dealing with a unionised work force. To counter the rise of organised labour in Chile in the 1960s, IBM management took care to refer to themselves as ‘La Mamá’, emphasising their so-called ‘open door policy’ which meant, so they said, ‘that employees therefore did not need to unionise to be heard.’
The idea of an IBM ‘family’ was ambiguous too, in that the bonds of loyalty that constituted the ‘family’ were trans or multinational. That is, IBM employers were encouraged to think of themselves as ‘IBMers’ first, and Chileans (or Brazilians, or Americans) second. This sense of the global corporation as one’s primary site of belonging was cultivated by a global corporate culture, such that when ‘IBMers’ from different countries gathered at conferences, they found that they spoke the same language. As one former employee from Chile told Medina,
‘There was no difference. The culture of the country was different, but the culture of IBM was the same. IBM was like a family or a separate country. We were a country within other countries.’
This separateness culminated in IBM’s soft exit from Chile after Allende’s election in 1970. Again, in contrast to ITT, there was no covert operation to topple the government. But, concerned about the prospect of nationalisation, IBM reduced its operations in Chile to a bare minimum, hoping thereby to present a smaller target. In doing so, IBM drew on its image as ‘La Mamá’ to encourage Chilean IBMers to relocate, showing the strength of those ‘familial’ bonds of loyalty.
On its face, this soft exit – which was also a response to the US economic blockade of Allende’s Chile, highlighting yet another vector of the complex relations between companies and states – seems a world away from the ‘imperialist intervention’ decried by Allende in his speech against ITT. Yet it had just as serious consequences for Allende’s socialist vision. This effect was most apparent in the trajectory of the Cybersyn project, the attempt, by Allende’s government, to create a kind of socialist internet that would, amongst other things, provide greater autonomy for factory floor workers to decide on the pace and conditions of production. A full discussion of Cybersyn is beyond the scope of this blog post, but I do note here that the system was arguably a crucial tool for Allende’s government to manage–and ultimately survive–the 1973 strike that threatened to paralyse the country’s economy (see here, here and here).
Though the ultimate failure of Cybersyn cannot be narrowed to a single factor, a significant contributor was the severe lack of computing machinery in the country. Indeed, what Cybersyn did manage to achieve it did with an IBM System 360 mainframe that had arrived prior to 1970. But this single mainframe was in such high demand across government agencies that the Cybersyn project was unable to process indicators collected from factories for 24 or even 48 hours, undermining the primary purpose of the cybernetic system, which was to provide near real-time economic statistics to both central government and to factory floors. The stakes of IBM’s soft exit can begin to be understood through a counterfactual: what if, rather than all but leaving Chile during Allende’s presidency, IBM had lived up to its apolitical ideal, and stayed? What if it had provided the necessary computing power for Cybersyn to have worked, if not perfectly, then at least enough to have mitigated the economic trouble caused by ITT and the CIA?
IV
Allende was not entirely unaware of the dangers of the ‘good corporation’. In an earlier speech to the UN, he had warned of corporations ‘which arrogate to themselves the role of agents promoting the progress of the poorer countries’. That is, while ITT’s outrages dominated the headlines of the day, another kind of threat lurked in the background. After all, it was IBM—the good corporation—that did as much as ITT to help scupper Allende’s legacy on fighting back against corporate ‘imperial intervention’. It did so by returning to Chile after the coup and flourishing under Pinochet’s dictatorship. In fact, IBM was a prime beneficiary of the shock doctrine economics brought in by the ‘Chicago Boys’, specifically, after the passing of Law 1130, which lowered tariffs for imported goods, IBM Chile tripled its computing capacity in the country. At the same time, senior IBM figures such as Jacques Maisonrouge, chairman of IBM’s global subsidiary—World Trade Corporation— became an active antagonist of the Third World’s push for regulation of transnational corporations. In particular, Maisonrouge became, as president of the International Chamber of Commerce’s commission on multinationals, a vocal opponent of the United Nations Centre on Transnational Corporations (UNCTC)’s attempt to negotiate a binding Code of Conduct on Transnational Corporations. Using IBM as an example, and drawing on Ronald Coase’s transaction theory of the firm, he argued that multinational corporations were a natural development in response to the internationalisation of trade, production and labour. After more than a decade of tense negotiations, the Code of Conduct was eventually abandoned.
Clearly, neither image of the corporation—whether ‘good’ or ‘bad’ —is adequate to the task. If nothing else, these images fail to capture the complexities of the relations between corporation and state (and state law). In the brief history sketched here, we have seen how corporations such as ITT and IBM grow with and shape the administrative state, act as instruments of state power (as when ITT and the CIA worked together), and lobby for and help making laws (as when IBM participated in the negotiations over the Code of Conduct). At the same time, these corporations asserted their separateness from state law as ‘natural’ (i.e. economic) entities, such that when they break or ignore such law they are really laying claim to a distinct, corporate form of authority. In the defiant words of Ned Gerrity, a senior vice president of ITT appearing before a US Senate Committee hearing on the corporation’s interference in Chilean politics: ‘What’s wrong with taking care of Number One?’
Beyond the analytical reductiveness of these images of the corporation, there is also the risk of naturalising the expansion of these multinationals as something occurring prior and exogenously to juridical struggles. For instance, there is a risk that when one asks how ‘IBM’ or ‘ITT’ travel to Chile, that the question presupposes the prior existence of something called IBM or ITT (and for that matter, something called Chile) which moves from one place to another as a matter of social fact, through technological and managerial innovation or a changing global economy (see here and also here, here and here). Such accounts have a teleological bent: innovation and progress emanate from Endicott (or Silicon Valley, or Seattle, in the US) and spread, inevitably, to more backwards parts of the world.
This problem is particularly acute in relation to global, high-technology corporations that have been at the heart of recent debates. International lawyers can readily give examples of such corporations, like Google, Microsoft, or Amazon. The question, for most international legal scholars, is how international law should treat these already existing entities: should international law regulate hi-tech corporations (when they appear as the ‘bad corporation’), or should it facilitate hi-tech corporations to do their positive, socially beneficial work (when they appear as the ‘good corporation’)?
These difficulties in pinning down the good and bad corporation are symptomatic of a more fundamental question for international law: what exactly is a corporation? As Fleur Johns has noted, in ‘international legal writing, it is more or less taken for granted that everyone knows what we are talking about when we invoke “the corporation”’. Yet there is little explicit theorisation of the corporation by international lawyers.
Perhaps one way forward is to recall that what we label a corporation is no more than a shorthand for an assemblage of heterogenous actors: a board of directors, a dispersed body of shareholders, a head office, a ‘parent’ corporation, direct subsidiaries, holding companies, business partners, branch offices around the world and the managers and workers in them, investment holdings, research laboratories and designers and scientists, factories and the equipment installed and produced there, a whole supply chain, community and consumer and government ‘stakeholders’, lawyers and accountants and consultants, and so on. It is, as Bruno Latour says, rather convenient to use such shorthand rather than the ‘painful and costly longhand’, but only if one remembers that it is, in the end, shorthand. What remains to be done today, for international lawyers, is to understand and map the assemblages that continue to arrogate to themselves the responsibility—and privileges—of progress.
[1] United States Congress, Senate Committee on Foreign Relations (Subcommittee on Multinational Corporations), ‘The International Telephone and Telegraph Company and Chile, 1970-1971’, 43.
[2] See also André Dao, Caitlin Murphy and Sundhya Pahuja, ‘Bad states, good corporations? The intersecting histories of business and human rights and international investment law’, in a forthcoming edited volume which continues the story told in The Battle for International Law.