Wednesday, July 12, 2017

Comparing Companies to Nations

Asher Schechter raises a good point in How Market Power Leads to Corporate Political Influence but this comparison is troublesome:
In 2016, the advocacy group Global Justice Now published a report showing that 69 of the world’s largest 100 economic entities are now corporations, not governments. With annual revenues of $485.9 billion, Walmart topped all but nine countries.
GDP is a value-added concept – revenue is not. So what is the right metric? Walmart may have had this much revenue but its pretax income was only $20.5 billion and its operating income was $22.8 billion. Profits understate value-added and since Walmart has over $100 billion in operating expenses (think all those workers surviving on $9 an hour), Walmart’s gross profit is likely the right metric to compare to the GDP of nations and this figure in 2016 was $124.6 billion. So yea – it is a mega corporation but its value-added does not put it in the top 10 of governments.


Peter T said...

David Davies wrote something useful on this. Yes corporations funnel lots of cash but in terms of economic worth or even capacity to mobilise and direct economic resources, they do not compare to any but the very smallest states. D squared's comparison was with Wales, which on these measures came out well ahead of Walmart.

ProGrowthLiberal said...

Peter T - where can we find what David Davies wrote? What you say is especially true for a distributor which of course what Walmart is.

Peter T said...

Sorry, meant Daniel Davies

post here:

ProGrowthLiberal said...

Thanks. An interesting discussion.

Glenn Cassidy said...

The article compares Walmart's revenue to the REVENUES of governments, not GDP.

ProGrowthLiberal said...

Glenn let's take Canada as as example. Its GDP (value-added) is $1600 billion. Let's assume tax revenues are 30% of GDP. Its tax revenues would be $480 billion. A subset of its GDP or value-added.

Walmart's "revenue" are the same or higher but its value-added is only $124 billion.

My point here is that "revenues" mean two very different things in the two different contexts. Which only reinforces how silly this comparison really is.