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My company or my country?

Created:
27 August 2008
Written by:
Alistair Blair

Companies naturally grow bigger, without end. Companies also decline. But the healthy just get bigger and bigger, by acquiring those on the ebb, or simply those in their grasp. Twenty-five years ago, IBM's sales were £29bn. Since then it has shed huge elements of its activities, including its once mighty PC operation. Yet this year, its sales will exceed $100bn. Sure, today's dollars are worth less than 1982's, and the world is a lot wealthier too - to a significant extent, IBM has simply ridden that wave. But still, IBM is a much bigger entity than it was a generation ago, its progress only masked by the equal or faster progress of other successful corporate behemoths.

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Twenty five years ago, Exxon's sales had just nudged past $100bn. It topped the Fortune 500. The number two was Mobil. Long ago, Exxon grasped Mobil. This year, ExxonMobil's sales will shoot past $400bn. Yes, it is riding the oil price surge. But Exxon too has shed big lumps of its business in the last quarter century (including a computer division which briefly - and disastrously - attempted to grab a piece of the emerging PC phenomenon in the early 1980s).

I don't have a handy ranking of economic entities covering both countries and companies, but if I did, it would surely show companies are steadily gaining ground against countries. Few countries have achieved growth in GDP to match the corresponding growth of companies. Twenty five years ago, the Fortune 500's gross sales were $1.8 trillion. Now the figure is touching $10 trillion. The earlier figure represented about 56 per cent of US GDP. The current figure exceeds 75 per cent of US GDP.

Is it fanciful to suggest that in a hundred years, companies will have taken over from countries as the sovereign entities on this planet? Surely not, because having no national frontiers, their growth is bounded neither by territory nor by birth rates. Countries can of course group together: witness the European Union. But when countries try to get together, they bicker. When companies get together, they simply get on with the job (for better or worse).

On holiday this month, I took in two recent excellent books which look at aspects of the current stages of this grand theme. Who Runs Britain?, by the BBC's business editor, Robert Peston, is subtitled How the Super-Rich are Changing Our Lives. It gives an up-close picture of the super rich, several of whom, including Philip Green, Stuart Rose and Allan Leighton, have been exceptionally frank with the author. This big pudding of a book comprises 10 immensely readable chapters mixing a gripping account of Philip Green's rise (including his setbacks) with an analysis of 'Who Stole Our Pensions?' and reminiscences about Peston's personal background. (His father, an academic economist, became 'Lord Peston of Mile End' - now there's a contradiction if ever there was one.) He has a soft spot for many of the super rich, but he deplores them as a class: 'the argument that the activities of hedge funds and private equity are somehow greatly to the benefit of the vast majority of us is for the birds'. Who Runs Britain? does not answer that question, but it sketches out the key corporate architecture of the last 20 years and paints vivid pictures of some main players.

Supercapitalism by Robert Reich is less concerned with personalities. Reich is a left-leaning American academic who took time out to be President Clinton's Secretary of Labor (according to his website, he was independently judged to be 'the most effective cabinet secretary' in the Clinton administration). He deals with economic and political trends, teasing out an analysis that a "Not Quite Golden Age" between 1945 and the 1970s, in which capitalism and democracy coexisted successfully, has given way to the supremacy of capitalism and the erosion of values society once held dear, such as greater equality.

Wal-Mart's ascendancy gets a lot of attention. As the poster boy of the integrated global economy, it is a conundrum, giving everyone the low prices they seek, whilst simultaneously impoverishing them (those in the West, at any rate) and reducing their choices.

Reich is much less down on corporate behemoths than you might expect. Companies are only doing, he argues, what companies are supposed to do. And do not be deceived by their embrace of corporate governance: it's just a cynical ploy to promote their profit objective. Reich thinks we should be capable of reinvigorating democracy with bridling the best of capitalism. I regret that I doubt that.

Buy 'Who runs Britain?' at a 20% discount in the IC bookstore....

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Alistair Blair is a past winner of the Business Writer of the Year Award, and has worked in investment banking and fund management.

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