The 1 percent versus the 99 percent—the haves and the have-nots; the government or the people; China versus the United States. Our conversations today are framed by these splits, yet as compelling as these are, they are each secondary to the yawning gulf that has emerged between large, multinational companies and everything else.
The real 1 percent are the panoply of global corporations that are even now reporting astonishing profits for the first part of 2012, just as they have for nearly every quarter for the past decade—save for a brief blip at the end of 2008 and early 2009. The much-vaunted gap that has emerged in the United States and elsewhere in the world—income inequality is also increasing in countries such as Brazil and China—is a by-product of the much wider gap between companies and all the rest. So stark is the contrast between companies on the one hand and individuals, nations, and various groups on the other, that it would be better to speak of multinationals as inhabiting their own world, with their own rules, mores and rewards, and that world, call it Corporateland, is the undisputed victor in the global game of spoils.
It’s not just the behemoths like Exxon, Apple, Google, IBM, GE, Vale, Petrochina, Siemens, Wal-Mart, Samsung and Disney. It’s a host of smaller (though still quite large) companies that aren’t exactly household names but are still making billions upon billions in profits. Yes, the ones on the first list have market capitalizations in the hundreds of billions and generate revenues that would place each of them in the top 100 nations by GDP. And yes, Apple alone would crack the top 50.
But then there are companies such as Qualcomm, State Street, Blackrock, Schlumberger, Potash Corporation, all of which are worth tens of billions of dollars and have profit margins in the double digits. They are generating more cash each year than they can meaningfully and productively spend, and even as they increase the amount they return to shareholders, they are collectively sitting on trillions of dollars of unspent profits. And yes, that trillions is not a typo.
Large companies have always made large profits, but the divide in recent years is so stark because the efflorescence of Corporateland is in such contrast to the general stagnation of many of the countries where they do business. As a number of analysts—including most recently the consultant and former Commerce Department official David Rothkopf, the late Tony Judt, and the political philosopher Michael Sandel—have emphasized, the success of large companies today is more detached from the fortunes of most ordinary people than at any point in decades. It may be that for much of history, the pyramid was steep and stark, but today, the scale is global.
Wealthy individuals, paying taxes or not, generate political heat and headlines in part because it is easier to personalize wealth divides between real people than between nations and corporations.
And of course, banks in the past few years, and energy companies periodically, do serve as a lightning rod of popular discontent, as the Occupy Wall Street movement showed. But the issue is just as trenchant for technology companies such as Apple and Google and Microsoft and Oracle, each of which pays its senior executive tens of millions of dollars (at least) and each of which has thrived in a period of time when economic discontent and stagnation has been the rule in the United States, Europe, and Japan.
Of course, many of these companies have been exposed to fast-growing and dynamic economies such as China, India, Brazil, and the rest. But that alone cannot account for the gap.
What does is that, over the past decade-plus, companies have managed to shed costs and increase their sales and profits. Sounds benign and logical, and from the bird’s eye of an individual company operating globally, it is. The problem is that those costs didn’t disappear; they just went somewhere else, and mostly they went to governments.
There is a direct correlation between the increased debts of governments over the past decades and the increased profits of companies.
Correlation isn’t causation, and some of the reasons for higher government debt have nothing to do with the behavior of large companies. European governments accumulated a portion of their debts because of promises made to populations for education, health care, and retirement in an earlier demographic era. But as a result of various shifting of both rules and mores, companies have been able to divest themselves of their most significant costs: workers.