Multinational: Multinational Corporation and Big Multinationals Essay

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HOW BIG ARE THE BIG MULTINATIONAL COMPANIES?

Paul De Grauwe (University of Leuven and Belgian Senate) Filip Camerman (Belgian Senate)

Abstract: Multinational corporations are increasingly seen as excessively big and powerful, and as having dramatically increased in size and power. This perception has led to the view that the big corporations are threatening democratic institutions of the nation-states and that they pervert the cultural and social fabric of countries. In this paper we analyse the size of large corporations and the recent trends in this size. Using value-added data (instead of sales) we find that multinationals are surprisingly small compared to the GDP of many nation-states. In addition, if anything, the size of multinationals relative to the size of nations has tended to decline somewhat during the last 20 years. Finally, we argue that there is little evidence that the economic and political power of multinationals has increased in the last few decades.

January 2002

1. Introduction Multinationals are out of favour. This is not the first time. During the 1960s and the 1970s multinational companies, especially the American variety, were seen as institutions increasingly bent on dominating the world. It was the time of the best-selling “The American Challenge” of Jean-Jacques Servan-Schreiber, which became very influential in Europe, and which argued that thanks to sophisticated management methods, large American enterprises would take over Europe and the world. Being large and American was ugly in those days. Then came the 1980s. Perceptions shifted completely. Instead of being perceived as evil forces, large corporations suddenly became the symbols of progress in an increasingly integrating world. The generations of yuppies were impatient to be hired by the symbols of success of the day, the large corporations, preferably American. Since a few years the pendulum has swung again. Under the influence of the antiglobalist movement, big multinationals are out of favour. Like in the days of ServanSchreiber, today’s best-selling books on the subject argue that the multinationals have become so big that they threaten our democratic institutions and pervert our culture. In her book “The Silent Takeover” Hertz claims that the big multinationals have become so powerful that they destroy the very fabric of our democratic societies. In the same vein Naomi Klein argues that big corporations don’t sell physical but emotional products thereby changing and perverting our cultural landscape. The starting point of all these analyses is a double claim. First, multinational corporations are very big. The most popular way to express this is that among the 100 biggest “economies” in the world 51 are corporations and only 49 are countries, giving the impression that large corporations are now larger than the average nation-state (see Anderson and Cavanagh(2000) who were the first to use these numbers). The second claim is that the size of multinationals is greater than ever. It is not difficult to find statistics that will buttress this claim. Indeed, measured in the dollar value of their sales and assets, multinational companies are bigger than ever. These two empirical claims form the backbone of much of the analysis in the ant iglobalist literature surrounding the excessive and pernicious power of multinationals.

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In this paper we analyse these two claims. First we try to measure the size of the large corporations of the world. In order to make sense we need a benchmark. This will be the nation-state. We will analyse the question of how big the big multinationals are in relation to countries. Second, we will study how the size of multinationals has evolved relative to the size of the same nation-states. Nobody will question the fact that the big multinationals are bigger than ever, but so are the economies of countries. The relevant question here is how the size of the multinationals has evolved relative to…