I saw this link on del.icio.us a moment ago, and I nearly laughed out loud. Then I realized that many people are probably believing it, and may even be getting outraged about it, so I decided to make a post out of it.
Basically, the idea is that 51 of the world’s 100 largest “economies” are not nations, but corporations.
That statement is misleading at best, and taken at face value, completely untrue.
As I see it, the main problem is that a corporation’s gross revenues (not “sales,” as the site reports, which is not the same thing) are NOT analogous to a nations Gross Domestic Product (GDP). You simply cannot compare them. A company’s gross revenue does not qualify as an “economy” in the same sense as a nation’s does. If you don’t believe me, just show this list to an economics professor, and wait for the chuckling to begin.
Why does it not qualify? Economically speaking, the main one of them is this; each corporation’s gross revenues are actually being counted already as part of one of these country’s GDP. Every corporation exists as an entity within a nation (in the case of these mega-corporations, many, if not all, are global, and operate in many nations), and their revenues are already part of the GDP of the nation or nations in which they operate. Logically speaking, including both the nations and the corporations on one list means that the same money is being counted two times — once for a nation and another for the corporation.
A national economy and a corporation’s revenues are simply not analagous. I know I’ve said that already, but I’m just astounded that some one could create a list as misleading as this, and try to leave some impression of equivalence. They are not equivalent.
Now, yes: if you just want to make the point that a particular company’s gross revenues exceeds the GDP of many individual nations — yes. That’s true. But it doesn’t mean anything; at least, nothing like the creators of this site are attempting to imply. The list is intended to imply Terrible Ominous Things about the excess of “corporate power” and greed (see here, if you don’t realize this is what they’re trying to say.) Scroll further down that last page and you start seeing links to articles by Ralph Nader… oh yeah. So that’s where they’re coming from.
Do corporate criminals exist, and do abuses of power take place? Look, only a fool would argue otherwise — but these are the exception, not the rule, and that does not constitute a blanket condemnation of the corporation or of globalization, both of which have had positive consequences on the economic situation of the whole world, in the aggregate . Yes, even the third world — as much as these alarmists love to point out the “inequity” between rich and poor, the poor of the world are better off today than they were 20, 30, 40 years ago. You can complain that the wealth doesn’t “trickle down” enough (I disagree, but you could make that case), but not that it doesn’t “trickle down” at all.
Rant done.
Would love to hear more. You’re getting good placement on search engines for “worlds largest economies,” appearing right nearby the article you’re criticizing. I came here quite open to seeing that article eviscerated, but you haven’t offered a whole lot here. The double-counting point is the only substantive thing you mention, and that argument doesn’t diminish the prominence of corporations on the world stage. “show this list to an economics professor, and wait for the chuckling to begin” doesn’t help me a whole lot. I’d love to see you explain in more detail WHY the two are not analogous. Like I said, I’m willing to be convinced, but I wanted more from this post. Cheers -
Thanks for the reply.
I’m not an economist, just some guy writing on the internet. So the preceding should probably be seen more as my personal reaction to the article, rather than an attempt at an air-tight intellectual rebuttal. So I think if you’re looking to be “convinced,” you’re probably in the wrong place. ;-)
Now, if you don’t see how a corporation and a national economy aren’t analogous, I’m not exactly sure what to say. A corporation is a business which exists to make a profit, has employees who work to further this effort. Employees are not “citizens” — while a nation could have varying rates of unemployed citizens, a corporation has no “unemployed” employees — such people would simply no longer be there. A corporation does not have an internal economy — a nation does. A nation has a currency, varying levels of government and infrastructure, laws, police, prisons, programs, universities, and host of things that are simply not found in a corporation. The very idea of a corporation that had a prison in which it put people who broke it’s “laws” is antithetical to the way we think of corporations. In a company if you “break the law” (are not doing what you’re supposed to) — you lose your job. That’s an oversimplification, but more or less accurate.
Even when countries have explicitly tried to model their structure after that of a corporation — Mussolini’s Italy might be a reasonable example — the differences seem pretty clear to me. The sort of policies which seem reasonable and commonplace in a company, when applied to a state, create a dictatorship. (That has nothing to do with the economics of the article except possibly to point out the huge gulf between a company and a nation: when your company tells you what to do while you’re at work, that is normal (they pay you to do it) — when your nation dictates what you do (with all your time, all the time), we generally call that totalitarianism.)
From an economic standpoint, as I see it, the bottom line is that corporations exist within national and multi-national economies. Without corporations, the GDP of most (almost all?) of these nations would shrink to close to zero — whether people think it’s good or bad, business and capitalism still drive and create nearly all the wealth that the world uses. A corporations revenue is part of a nations GDP — you just can’t take it and sit it on its own next to a countries GDP and compare the two.
Of course, you could compare them in a purely monetary sense. You could say that XYZ corporation had more revenue last year than the GDP of Norway, but… so what? What exactly does that prove? XYZ corporation is not sitting on that money. They payed a substantial portion of that revenue to their employees, who went on to spend that money within whatever nation they reside, adding to the economic activity of that nation. They pay a substantial amount in taxes. Corporations generally have huge operating expenses, which again usually goes to some other business within the nations where they operate, contributing to the GDP of that nation or nations.
There’s just too much interdependence between corporations, other corporations, and the nations within which they operate, to make a one-for-one comparison of corporate revenues to national GDPs.
Again, all the above is just thoughts off the top of my head; I’m not an economist, and these aren’t intended to be bulletproof arguments. Just one geek’s perspective.
Thanks again for stopping by, and forgive my wordiness — I do tend to ramble on at times. ;-)