Corporate Power Times They Are A-Changin' Watch

Foreign aid critic William Easterly points to an interesting Wall Street Journal chart of the 25 largest capitalized corporations, in 1999 and now.

Interesting data points: only 8 of the 25 hold this exalted position both a decade ago and now. China's looming world dominance is indicated by corporations under its banner holding four spots now vs. none then. And the total market cap of the top 25 shrank by 20 percent.

Easterly notes:

creative destruction is one of the triumphs of the market. The consumer is king: in 2009, the consumer wants iPhones in their Xmas stocking and not whatever Worldcom had been pretending to be producing. The radical uncertainty of how to please consumers is an argument FOR free markets.

Anti-corporate types might respond: 100 percent of the richest corporations are and remain rich corporations, and they'd be right, as far as it goes. But for students of the specific exercise of "corporate power" by specific corporations, this is interesting stuff.

Comments

[Dello]

So if I understand correctly: The rich will always be rich, but the rich won't always be rich.

Must be hell being a liberal...

[Nancy Pelosi]

Nothing wrong with being rich... as long as you're a liberal. My husband and I are worth millions of do- er, excuse me, I have to go yell at the non-union grape pickers here on our vineyard. SO hard to get good cheap labor these days...

[Barack Obama]

By the time I get done, there will only be one corporation:

The United States Government, LLC.

[Benito Mussolini]

Wish I was still alive, I'd give you a hand, but I'm with you in spirit.

[Vlad Lenin]

Da to that, comrade. I, too, am rooting for chocolate-covered fellow despot.

[MNG's Mom]

So THAT'S what kind of crap my boy goes on about. I knew something was wrong with him, probably that lead paint he gnawed off his crib as a baby.

[Mo]

What's interesting is that the Japanese have disappeared completely from the list.

Though the upheaval isn't as interesting as it first seems. 1999 was, essentially, the peak of a tech/telco bubble. Over half, 13, of the top 25 were tech/telco. Now we're in a time where energy prices are still significantly elevated over their historic values. This is especially true relative to the performance of the market as a whole since we're near the trough of a global recession. As such, energy companies are likely overrepresented in this list (7). It would be more interesting to see this list over more decades or during more discrete time periods. Instead it's more of a "What's Hot (or Not Cold)" plus standard bearers list.

P.S. WorldCom owned CompuServe (my first email account), phone lines (land and cell) and was a Tier I ISP before becoming part of Verizon. Lots of people couldn't get enough of their service and lots of people still do through their Droid phones or everyday web surfing.

[Mango Punch]

Good observations.

Another important point is that the chart shows market cap, not balance sheet capitalization. Therefore the chart says as much or more about market sentiment for various sectors as it does about the actual performance and health of the companies.

All said I don't think the chart supports Easterly's thesis/observation that much at all. There's just too many other variables going into how the market arrives at market cap, the level of percieved risk and outlook for future earnings to say simply that "the consumer is king". A more useful excersize for his idea would have been to look at gross revenues or some other such metric.

[Billy!]

Yes, market cap is a useless measure of such things. Yahoo back in the late 90's (if, as I recall with much less earnings than now) was semi-seriously discussed as a candidate to take over Disney. Market cap is bullshite. Now Yahoo is 1/3 Disney's market cap even though it's revenue has grown since then.

[R C Dean]

What's interesting is that the Japanese have disappeared completely from the list.

And we are pursuing essentially the same governmental economic policies that led to this result.

[Kris]

Yes.

[Ebeneezer Scrooge]

All of which goes to show, once again, that creative destruction is part of what happens under even semi-free market conditions.

What I don't understand is why the world hasn't yet seen the rise of The Great Capitalist Dictator. A modern day Alexander the Great who, wanting to command the greatest army in the world, ruthlessly imposes a free market on his nation, in order to generate the wealth to sustain his great army. Which he then proceeds to conquer the world with.

Maybe free markets haven't been around long enough for this to happen yet. Or maybe, it just takes too long for this approach to bear fruit, and the Great Capitalist Tyrant would be dead before he could pull it all off.

There really should be a science fiction novel like this.

[Jody]

Pinochet?

[Mango Punch]

China?

[LarryA]

Because when you're into free markets it's more profitable to trade with other countries than conquer them.

[Ebeneezer Scrooge]

You obviously don't understand the mindset of Alexander the Great. Or the fact that it could make for a great novel.

[R C Dean]

What I don't understand is why the world hasn't yet seen the rise of The Great Capitalist Dictator.

Because its very difficult to separate political and economic freedom. In order to support his military expansion, the GDC would need high taxes and an industrial policy directed at keeping the economy on a war, rather than a consumer, footing.

[Ebeneezer Scrooge]

Well, I'm not so sure about that. Look at all the years the Cold War went on with the USSR.

Taxes would be higher to support military expansion, but they wouldn't have to prohibitively high. And there's no reason the Dictator can't otherwise let the people do as they please. In fact if he's smart, he would -- because it would maximize economic growth, which would maximize his tax receipts.

Once he started his big war, of course things would be different. But in the lead-up to it? I don't see that there'd have to be any particular loss of freedoms.

Unless you consider "it's not a democracy" lack of freedom. But I for one do not hold the idea of a democratic elected government sacred. Look at what we're getting for it today.

[Mo]

What I don't understand is why the world hasn't yet seen the rise of The Great Capitalist Dictator

What do you think the Chinese economy is? All the Chinese companies on that chart are state-owned. Which is why trying to draw macro conclusions from that one chart with two data points is a fool's errand.

[Ebeneezer Scrooge]

No, China's not it. They may be trying to go in that direction, but they aren't smart enough to do what's needed to really let long term economic growth take off (think "largely state owned and controlled economy").

My hypothetical Dictator would know better than this, and in the long run he'd roll right over the Chinese.

[Mo]

Also, it should probably note, about half the companies removed from the S&P 500 are still in the S&P 500, but got acquired or merged with equals.

[Hilary]

Well, since consumers are workers, maybe we should think about bringing stability to workers. Don't expect us to start spending until we have more certainty in our economic future. Welfare states make for good consumer culture.