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Study Finds Rise in Corporate Power

An alarming new study shows that General Motors, Wal-Mart and Exxon Mobil have greater economic power than a majority of the world's countries.
 
 
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Not since the Gilded Age when John D. Rockefeller dominated the oil industry and J. P. Morgan served as America's unofficial central banker has there been so much talk about how big corporations threaten democracy. Al Gore got on the bandwagon this summer; wherever the vice president went he talked about the powerful -- "big tobacco, big oil, big polluters" -- versus the powerless of the people. And of course corporate power and its discontents were at the center of Ralph Nader's run for the presidency.

A critic of corporate power will probably not occupy the White House in January. But whoever the 43rd president of the United States is, it is doubtful he will see the issue go away. According to a September 2000 Business Week/Harris Poll, between 72 and 82 percent of Americans believe that "business has gained too much power over too many aspects of American life" and 74 to 82 percent believe that big companies have too much influence over "government policy, politicians, and policy-makers in Washington."

Now, to add to this growing consensus is a new study, published by the Institute for Policy Studies, a think tank in Washington, DC. "Top 200: The Rise of Corporate Global Power" argues that the leading economic story of the last five years is one of rapid growth of the world's top 200 corporations and diminishment of government and citizen control.

Perhaps the most important finding of IPS's study is that of the 100 largest economies in the world, 51 are corporations, whereas 49 are countries. In other words, General Motors has greater economic power than the majority of the world's nation-states, as does Wal-Mart and Exxon Mobil.

The report also provides statistical evidence that combined sales of the top 200 corporations are bigger than the combined economies of all countries minus the biggest 10, and that such sales are 18 times the size of the combined annual income of the 1.2 billion people (or 24 percent of the world population) living in "severe" poverty.

"Growing private power has enormous economic consequences," concludes the study. "However, the greatest impact may be political, as corporations transform economic clout into political power."

To learn more about IPS' study, AlterNet spoke with Sarah Anderson, co-author of "Top 200" and director of the Global Economy Project of Institute for Policy Studies.

AlterNet: How does the 2000 report on global corporate power differ from the one IPS published in 1996?

Anderson: One disturbing change is evident in the largest employers on the top 200 list. In 1995, General Motors was the biggest, with 709,000 workers. By 1999, GM's employment had dropped to only 388,000, largely because of outsourcing. The firm that took GM's place as the No. 1 employer is Wal-Mart, with a staggering 1,140,000 employees, up from 648,500 in 1995. Whereas a good share of GM's jobs were unionized and decently paid, Wal-Mart is a notorious union-buster that employs armies of workers on a part-time basis to avoid paying benefits. These changes reflect the overall trend towards fewer and fewer union manufacturing jobs and the rise in poorly paid, non-union service-sector work.

Another dramatic development over the past five years is the surge in economic power of U.S. firms over those in other countries. Largely because of economic stagnation in Japan and mega-mergers among U.S. firms, the United States dominates the top 200. U.S. corporations hold 82 slots, followed by Japan, with only 41. In 1995, these countries were virtually tied, with 59 and 58 firms in the top 200, respectively.

AlterNet: What do you consider to be the most surprising results of your research?

Anderson: What surprises most people is not that these firms have tremendous power, but that their power is so out of whack with the contributions they make in terms of jobs and taxes. When I tell people that their sales are the equivalent of more than a quarter of world economic activity, they assume that they must provide somewhere near an equal amount of the world's jobs or taxes. The reality is that they employ less than 1 percent of the world's workforce and many of the top corporations don't pay any U.S. federal taxes at all.

Many people also ask whether the clout of global corporations is really new. How is this different from the power of the Rockefellers and the Rothschilds in the last century? What the report shows is that the concentration of power among the top 200 firms has been steadily increasing in relation to world economic activity in general. Between 1983 and 1999, the top 200s' sales grew from the equivalent of 25 percent to 27.5 percent of world GDP. Yes, we've had mammoth firms for a long time, but we haven't had this level of concentration of economic clout on a global scale.

AlterNet: What has the feedback on the report been so far? Have conservative think tanks, for example, contested your research?

Anderson: USA Today quoted two people who were critical of the study. The first was Murray Weidenbaum, former economic adviser to President Reagan, who pointed out that a large share of corporate revenue goes to pay for worker compensation. My response to that is yes, many workers do depend on wages from these firms, but they are hardly getting their fair share of the dramatic profit growth we've seen over the past decade. In the United States alone, CEO pay grew 535 percent during the past decade while average worker pay grew only 32.3 percent. And of course many of these firms are shifting production to low-wage countries, making the global gap even wider.

The other person they quoted was Michael Santoro, of the Rutgers Business School. He stated that these corporations create products that consumers want and that they are "in general using the resources of the world in a positive way." Our study doesn't deny that these firms influence our lives in ways other than by providing jobs and taxes. Nevertheless, I thought Santoro's statement was a rather sweeping one to make about a group that includes tobacco-peddler Philip Morris, major polluters like Exxon Mobil, companies with questionable environmental and human rights records like Royal Dutch/Shell and Chevron, and controversial genetic engineer Novartis.

AlterNet: Given that 51 of the largest 100 economies in the world are corporations, what conclusions can be drawn about the state of economic democracy?

Anderson: I think once you understand the extent of their economic power, it should be no surprise that most governments in the world have been pursuing policies that are in the interest of these large corporations. Through the World Trade Organization, the World Bank, the International Monetary Fund and also regional trade agreements, large corporations are getting more and more powers and privileges to operate as they like around the world.

Meanwhile, workers and communities are not getting any new powers to fight for their fair share of the benefits of the globalized economy or to prevent these corporations from destroying the environment to make a profit. It's a dismal scenario, but what I always try to remember is that while they might have the economic power, we have the people. And as we've seen in Seattle and Prague and many other places around the world, a new peoples' movement against corporate globalization is beginning to take off.

AlterNet: In your opinion, what can be done to restore greater economic egalitarianism?

Anderson: One reason corporations have so much power around the world is because so many countries are so desperate for foreign investment and export revenues to pay off their external debts that they are willing to look the other way when global corporations behave in socially irresponsible ways. So full debt relief for the poorest countries is a first step.

The bigger challenge, though, is to rewrite the rules of the road to globalization. Right now, the rules set by the WTO, World Bank, IMF and other trade and investment agreements are designed to benefit large corporations. We need new rules that will put the goals of environmental sustainability, reduced inequality and human rights at the forefront. To create a political climate in which these types of radical changes would be possible, we also need to get big money out of politics and to regain the spirit of monopoly-busting that has been subverted by the goal of global competitiveness.

"Top 200: The Rise of Corporate Global Power" can be found at: www.ips-dc.org/top200.htm.