Big Businesses Outpace US Economy : How Come?

Still, even after this article has pointed out some good reasons for the exceptional expansion of our biggest businesses, there still seems to be one item missing in this phenomenon, and that is, many people and organizations are a little frightened of just where our country is going under the leadership of socialists.

Maybe people believe it is the safest place to put their money in an economy that is destined to be controlled by government and not market forces. And when the economy crashes, as it must, history has a track record of socialist failures, the losses will less then if they invested in small businesses that will surely be completely destroyed.

U.S. Big Business Outpacing U.S. Economy
Source: Andrew Flowers, "Big Business Is Getting Bigger," FiveThirtyEight, May 18, 2015.

May 22, 2015

Over the last two decades, the largest U.S. companies have grown faster than the economy as a whole. And it's the biggest of big businesses that are making up a larger and larger share of the growth.

The best list of "big" businesses is the Fortune 500, which ranks the 500 largest U.S. companies by how much money they take in. The overall revenues of Fortune 500 companies have risen from 58 percent of nominal GDP in 1994 to 73 percent in 2013. While that ratio of big business revenue to GDP has ticked down over the last two years, the upward trend over two decades is clear.

As big business gets bigger, the biggest businesses are growing even faster. The Fortune 100, or the 100 companies with the highest revenue, have seen their proportion of nominal GDP rise from about 33 percent in 1994 to 46 percent in 2013. As a share of all Fortune 500 revenues, revenues for these top 100 companies were up to 63 percent in 2013 from 57 percent in 1994.
It is not clear exactly what is fueling the overall growth of top Fortune companies, but there are a number of popular views.

• With a slew of mergers and acquisitions, big businesses might be snapping up or joining with rivals, and that corporate consolidation may have led to a concentration of market power. That is the skeptical-of-business view.
• Alternatively, big U.S. companies might just be riding a streak of legitimate success. That is the pro-business view.
• And there is a third explanation, which does not point to growing monopoly power nor to pure excellence: globalization. Global trade has exploded in the last two decades. And these giant U.S. businesses might just be leveraging their already large scale to grow further in overseas markets.