The Rise of Global Corporate Power
By Sarah Anderson, Institute for Policy Studies (IPS) Fellow and John Cavanagh,
IPS Director.
There are 40,000 corporations in the world whose activities cross national
boundaries. These firms ply overseas markets through some 250,000 foreign
affiliates.1 Research by the IPS indicates that the top 200 global firms
account for an alarming and growing share of the world's economic activity.
Two hundred giant corporations, most of them larger than many national
economies, now control well over a quarter of the world's economic activity.
Philip Morris is larger than New Zealand, and it operates in 170 countries.2
Instead of creating an integrated global village, these firms are weaving webs
of production, consumption and finance that bring economic benefits to, at most,
a third of the world's people. Two-thirds of the world (the bottom 20% of
the rich countries and the bottom 80% of the poor countries) are left out,
marginal-ized or hurt by these webs of activity.
The IPS has conducted detailed analyses of the changing nature of global
corporate power for over a decade. This new report uncovers an alarming
acceleration in corporate concentration in individual sectors and in the overall
power of the largest corporations in the world, and new data on the
job-destroying activities of large firms.
The most alarming finding is that as corporate concentration has risen,
corporate profits have soared, yet workers and communities are getting a
shrinking piece of the growing pie. Figures from Business Week chronicle
the explosion of corporate profits and CEO pay between 1990 and 1995 in the face
of stagnating workers wages. The Economic Policy Institute's newest State
of Working America reinforces these findings: median family income fell over 1%
a year between 1989 and 1994 after four decades of expansion.3
Top 10 Findings
(1) Of the 100 largest economies in the world, 51 are corporations and only 49
are countries. Wal-Mart - the number 12 corporation - bigger than 161
countries, including Israel, Poland and Greece.4 Mitsubishi is larger than
the fourth most populous nation on earth: Indonesia. General Motors is
bigger than Denmark. Ford is bigger than South Africa. Toyota is
bigger than Norway.
(2) The combined sales of the world's Top 200 corporations are far greater than
a quarter of the world's economic activity. Our calculations indicate that the
Top 200's share of global economic activity has been growing rapidly over the
past decade. In 1982, the Top 200 firms had sales that were the equivalent
of 24.2% of the world's GDP. Today, that figure has grown to 28.3% of
world GDP.
(3) The Top 200 corporations' combined sales are bigger than the combined
economies of all countries except the biggest nine. That means, they
surpass the combined economies of 182 countries. If you subtract the GDP
of the big nine economies: the U.S., Japan, Germany, France, Italy, the UK,
Brazil, Canada and China, the combined GDPs of the other 182 countries is $6.9
trillion. The combined sales of the top 200 corporations is $7.1 trillion.
(4) The Top 200 have almost twice the economic clout of the poorest four-fifths
of humanity. The world's economic income and wealth remain highly
concentrated among the rich. Indeed, according to the United Nations, some
85% of the world's GDP is controlled by the richest fifth of humanity; only 15%
is controlled by the poorest four-fifths.5 Hence, the poorer 4.5 billion
people in the world account for only $3.9 trillion dollars of economic activity;
this is only a little over half the combined revenues of the Top 200's $7.1
trillion.
(5) The Top 200 corporations have been net job destroyers in recent years.
Their combined global employment is only 18.8 million, i.e., less than 0.033% of
the world's people. The world has just over 5.6 billion people.6 Of
these, around 2.6 billion are in the workforce.7 Hence, the Top 200 employ
less than 0.75% of the world's workers. Of the world's top five employers,
four are U.S. (General Motors, Wal-Mart, PepsiCo and Ford), and one is German (Siemens).
If one includes the public sector in these calculations, the U.S. Postal Service
is the world's biggest employer, at 870,160, roughly 160,000 more workers than
GM's 709,000 workers.8
(6) Not only are the world's largest corporations cutting workers, their CEOs
often benefit financially from the job cuts. A total of 59 of the Global
Top 200 are U.S. firms. Of these, nine laid off at least 3,000 workers in
1995 (AT&T, Boeing, Lockheed-Martin, BellSouth, Kmart, Chase Manhattan, GTE,
Mobil and Texaco). Even worse, the CEOs of these nine made millions of
dollars in the increased value of their stock options after announcing the
layoffs. Indeed, on the day that the CEOs of these nine firms announced
the layoffs, the value of the stock options of their nine CEOs rose
$25,218,819.9
(7) Japanese corporations have surpassed U.S. corporations in the ranking of the
Top 200. Six of the top 10 firms are Japanese; only three are from the
U.S. Of the Top 200, the 58 Japanese firms account for almost 39% of total
sales, while the U.S.'s 59 firms account for only 28% of total sales. The
vast majority (186) of the Top 200 are headquartered in just seven countries
(Japan, the U.S., Germany, France, the UK, the Netherlands and Switzerland).
South Korea and Brazil are the only developing countries to break into the Top
200.
(8) Half of the total sales of the Top 200 are in trading, automobiles, banking,
retailing and electronics. The concentrated economic power in these and
other sectors is enormous.10 In autos, the top five firms account for
almost 60% of global sales. In electronics, the top five firms have
garnered over half of global sales. And, the top five firms have over 30%
of global sales in airlines, aerospace, steel, oil, personal computers, chemical
and the media.11
(9) When General Motors trades with itself, is that free trade? One-third
of world trade is simply transactions among various units of the same
corporation.12 This figure has remained steady for the past few years, and
is higher in certain countries.13 Two-fifths of Japanese exports, for
example, are intra-firm.14 For manufacturing exports from Brazil, the
figure is 44%.15
(10) The Top 200 are creating a global economic apartheid, not a global
village. The top eight telecommunications firms, for example, have been
expanding global sales rapidly, yet over nine-tenths of humanity remains without
phones. Television ads for AT&T and GTE give the impression that the
telecommunications giants are bringing the world closer together. And yet
while the top eight firms in this sector enjoyed sales of $290 million in 1995,
90.1% of all people live in a household that is not connected to a telephone
line.16 Likewise in the financial sector, when banks boast of the new ease
of global banking, they fail to mention the difficulties most of the world's
people face in obtaining even a tiny loan. Close to 4.8 billion of the
world's 5.6 billion people still live in countries where the average per capita
gross national product is less than $1,000 a year. Only a handful of these
people have access to credit from transnational banks.17 This is despite
the fact that the 31 banks in the Top 200 have combined assets of $10.4 trillion
and sales of more than $800 billion.18
Conclusion
These findings offer a clear picture of the rising inequalities in the U.S. and
the world between those who benefit from expanding corporate activity and those
who are being left behind. This inequality, fueled by accelerated
corporate concentration, deserves to be a central issue in the political debates
of this period. This report stands as a challenge to both major political
parties to address growing inequalities and the economic forces behind them.
Notes:
1. UN Conference on Trade and Development, World Investment Report 1995 (Geneva:
UNCTAD, 1996).
2. See Richard Barnet and John Cavanagh, Global Dreams: Imperial Corporations
and the New World Order, 1994.
3. Lawrence Mishel, Jared Bernstein, and John Schmitt, The State of Working
America, 1996.
4. Of the world's 191 countries, there are 30 whose GDP is greater than
Wal-Mart, and 161 whose GDP is smaller.
5. From an interview with UN Development Program (UNDP) statistician.
6. According to the World Bank, the world had 5.601 billion people in 1994.
World Bank, World Development Report 1996.
7. The UN estimates that 47% of the world's population is in the workforce.
See UNDP, Human Development Report, 1996, p. 194.
8. See Fortune, August 5, 1996, p. F-1.
9. See Institute for Policy Studies, "CEOs Win, Workers Lose: How Wall
Street Rewards Job Destroyers," April 24, 1996.
10. These figures are from Morgan Stanley Capital International and the
International Data Corporation, quoted in The Economist, March 27, 1993, p.
Survey 17.
11. "A Game of Global Monopoly," The Economist, ibid.
12. UN Conference on Trade and Development, World Investment Report 1995, 1996.
13. In 1993, the UN calculated that of the $3.3 trillion in exports of goods and
services in 1990, roughly $1.1 trillion was intra-firm trade (from UNCTC,
E/C.10/1993/2, March 3, 1993, p. 8).
14. Dennis Encarnation, "A common evolution? A comparison of U.S. and
Japanese transnational corporations," Transnational Corporations, UNCTC,
February 1993.
15. Karl Sauvant, et. al, "Foreign direct investment and international
migration," Transnational Corporations, UNCTC, February 1993, p. 43.
16. UNDP, Human Development Report 1996, p. 167.
17. World Bank, World Development Report 1996, p. 189; and UNDP, Human
Development Report 1996, p. 145.
18. Bank sales are from Table 4; assets are calculated by the authors from
Forbes, April 22, 1996 and July 15, 1996.
Source: Institute for Policy Studies, 733 15th Street NW, Ste 1020, Washington,
DC 20005 USA. Tel: 202/234-9382. Web site: <www.igc.org/trac/corner/glob/ips/top200.html>