Global economy: shifting the balance of power

Wednesday, January 31, 2001
By Suzanne Elston

See the 17 page Report, in PDF format

The balance of global economic power has shifted from governments to corporate boardrooms. According to a new study by the Institute for Policy Studies, 51 of the largest 100 economies in the world are corporations, not countries.

This conclusion is based on a comparison of corporate sales and gross domestic product. Put in economic terms, this means that General Motors Corp. is now bigger than Denmark, IBM is bigger than Singapore and Sony is bigger than Pakistan.

The report, entitled "Top 200: The Rise of Corporate Global Power," cautions that growing corporate power has enormous economic and political consequences. This echoes concerns expressed by protesters at the World Trade Organization's conference in Seattle in 1999 and at the World Bank meeting in Washington, D.C., in April 2000.

As companies transform economic clout into political power, democracy is undermined, the report warns.

The report showed that 44 of the U.S. corporations in the top 200 list failed to pay the full 35 percent standard corporate tax rate from 1996 to 1998. In 1998, seven companies - General Motors, Texaco, Chevron, Pepsi, Enron, Worldcom and McKesson - actually received rebates instead of taxes paid.

The corporations in the top 200 list reflect current global economic trends. Reforms made by the World Bank and the International Monetary Fund have eroded the dominance of manufacturing and natural resource-based companies.

Between 1983 and 1999, the share of total sales made up by service companies has increased from 33.8% to 46.7%. Gains were particularly evident in financial services and telecommunications sectors, thanks to a global trend toward deregulation. In 1999, more than half of the sales of the Top 200 corporations were in one of four economic sectors: financial services (14.5 percent), motor vehicles and parts (12.7 percent), insurance (12.4 percent) and retail (11.3 percent).

Overall, sales for the top 200 corporations are growing faster than overall economic activity. Between 1983 and 1999, combined corporate sales grew from 25 percent to 27.5 percent of the world's GDP. One corporation, Wal-Mart, experienced meteoric growth. Sales went from $4.7 billion in 1983 to $166.8 billion in 1999, making it the second largest corporation in the world. Wal-Mart's work force of 1,140,000 employees makes it the world's largest private employer.

Despite their market share and continuing growth, the top 200 companies employ only a fraction of the world's workers. In 1999, they employed 0.78 percent of the world's work force, compared with their 27 percent share of world economic activity. And while corporate profits grew 362.4 percent between 1983 and 1999, the number of people employed by these same companies only increased by 14.4 percent.

The IPS study concludes that the threat posed by the top 200 corporations should become a major political issue in the United States and for other countries throughout the world.

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