Economy & Business

Big, New, Shiny

Apple CEO Tim Cook stands in front of a depiction of the new Apple headquarters building in Cupertino, Calif., in 2016. (Stephen Lam/Reuters)
Big Business is the future of the U.S. economy.

Our politicians reliably fetishize two constituents of American life: the middle class and small business. The Democrats used to talk a bit more about the poor before they became the Harvard party — poor people are lousy donors, as it turns out — and the Republicans used to be a lot warmer toward Big Business before the GOP became a right-wing farmer-labor party and Big Business came to mean Howard Schultz, Mark Zuckerberg, and Lloyd Blankfein.

But the fact is, America needs Big Business — maybe more than Big Business needs America. There are lots of markets out there.

The relationship between Big Business and small business is complicated. Big Business now employs the majority of American workers, and a lot of small-business employees are Big Business employees at one degree of separation, working for smaller firms that get most — or all — of their sales from a single client, usually a much larger firm. The textbook example is the automotive industry, in which smaller companies provide specialized components and services to the big marques. Which is to say, Big Business relies on smaller businesses for inputs — about 25 percent of the inputs for big U.S. businesses are supplied by small U.S. businesses, according to a Business Roundtable study.

It is a delicate ecosystem, and the political desire to lean toward one group of businesses at the expense of others — for reasons that have a lot more to do with rhetoric than with economics — helps no one.

“Job creation” is a questionable metric — abolishing high-tech agricultural equipment would create a lot of jobs but leave us no better off — but the numbers are worth appreciating: The biggest 1 percent of U.S. companies create about a third of the new long-term jobs. Big is beautiful, and so is new: Successful startups have for years made the difference between positive and negative net job growth in the United States. Big businesses pay better, offer better benefits, and offer more-stable long-term employment than their smaller cousins. And the small businesses that have the biggest impact on wealth, wages, and employment are the little ones that end up being big ones: Apple, Google, Microsoft, Facebook, Amazon.

Big has its advantages.

The good news is: We’re really good at making Big Business work, and making it work for us. Just how good we are at that is something few Americans appreciate.

Of the world’s 100 most valuable companies, the majority — 54 — are domiciled in the United States, according to a PwC report. Nobody else is even close: No. 2 is China, with a bare dozen. The United Kingdom boasts five. In 2009, Japan was home to six of the world’s 100 largest companies. Today, it is home to one. Continental Europe combined has only 16 of the largest 100: four in Germany, four in France, three in Switzerland, two in Spain, and one each for Belgium, the Netherlands, and Denmark.

Most of those big European companies have something in common: They are elderly. The biggest U.S. firms are relatively new high-tech companies: Apple, Facebook, Alphabet, Microsoft, with only a few old-school companies such as Johnson & Johnson and JPMorgan near the top of the list. Europe’s biggest companies are corporate geezers such as Unilever, Nestlé, and Roche. Quick: What’s the most important German technology startup from a global point of view? Daimler? Bosch? Some other 19th-century company?

There are no European companies — zero — in the top ten worldwide, eight of which are U.S. firms.

The United States is home to the biggest, most valuable companies, which are getting bigger and more valuable faster than those in any other country. The market-valuation gains for those U.S. companies amounted to $1.3 trillion in just one year, from 2017 to 2018. Of the 20 companies worldwide that saw the largest market-cap gains from 2017 to 2018, 13 were U.S. companies. Zero were European companies. Zero were Latin American companies. Zero were Canadian companies. Zero were Middle Eastern, Japanese, Indian, or South Korean companies.

From the 2008–09 financial crisis to 2018, the U.S. firms in the top 100 worldwide added about $8.6 trillion in value — nearly five times what their Chinese counterparts did and 28 times what those of Europe’s best performer, Switzerland, added in the same period. The big U.S. firms added 41 times as much value as those of the vaunted economic powerhouse of Germany. Of the 20 firms worldwide that added the most value in those years, 15 were U.S. firms. One — Anheuser-Busch InBev of Belgium — was in Europe. Only two were in China.

European firms show up on the list of companies that lost the most value in that period: Roche, Sanofi, Siemens. So do a bunch of rickety old American companies: General Electric, AT&T, Procter & Gamble, Walt Disney, IBM, Philip Morris, and PepsiCo.

Robert D. Atkinson and Michael Lind make the case for bigness in Big Is Beautiful: Debunking the Myth of Small Business, reviewed in these pages in May by Cato’s Ike Brannon, who notes the authors find that Big Business has “proven to be better at achieving all that both the Left and the Right deem important to the U.S. economy: Big businesses pay higher wages, provide better benefits, have higher worker productivity and more innovation, do more research and development, export more, and achieve more in terms of environmental protection, worker safety, training, tenure, and diversity. In short, if the Left and the Right were to examine business solely by outcomes, both would more forcefully advocate that the government do more for big business.”

But Big Business doesn’t so need a positive advocate in government — the absence of outright active hostility toward big, globe-bestriding firms probably would do. The members of the 2020 Democratic field are at the moment feverishly trying to out-radical one another when it comes to class warfare: Senator Warren proposes gradually expropriating the assets of wealthy Americans, Senator Harris talks about raising corporate taxes, and Senator Sanders — well, Comrade Muppet, the reddest Brooklyn socialist ever to represent Vermont, will never change. (Except on immigration. Don’t ask him about those 2016 union-hall meetings!) Newbies such as Representative Alexandria Ocasio-Cortez and Representative Ilhan Omar debate among themselves whether taxes should be jacked up to 70 percent or 90 percent and about exactly how the U.S. energy and manufacturing sectors should be put out of business. (Green New Deal, indeed.) Poor old Howard Schultz (I., Frappuccino) is a candidate for crucifixion. The Democrats positively bristle with resentment.

Big Business is not without its sins. But between Big Business and Big Envy, the choice is not difficult. Envy never put any bread on the table. Capital just wants to be loved, and it will go where it is loved. The blessings of Big Business are invisible to Americans for the same reason water is invisible to fish — but we’ll miss them when they’re gone.

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