American Businesses - Big Business: Fueling The American And Global Economies

While small businesses have a significant impact on the U.S. economy and represent more than 99% of U.S.

TABLE 5.5

Small business indicators, 2001–03
Year	Quarter	Self-employment (thousands)	Business bankruptcies	NFIB optimism index (1986=100)
Note: Self-employment figures are based on seasonally adjusted monthly average of primary self-employed non-incorporated. NFIB is National Federation of Independent Business.
SOURCE: "Table II. Small Business Indicators, 2001–2003," in Small Business Economic Indicators for 2003, U.S. Small Business Administration, August 2004, http://www.sba.gov/advo/stats/sbei03.pdf (accessed January 4, 2005)
2003	4	10,485	8,294	104.0
	3	10,312	8,446	100.6
	2	10,185	9,331	100.0
	1	10,009	8,814	99.2
2002	4	10,256	9,500	100.4
	3	10,114	9,433	99.5
	2	9,858	9,695	102.2
	1	9,477	9,775	100.8
2001	4	9,954	10,013	96.3
	3	10,243	9,537	98.5
	2	10,250	10,330	98.4
	1	9,988	10,005	96.5

employers, large corporations still dominate the business world. According to the Census Bureau, in 2002, 56 million people were employed by the 16,845 U.S. companies with more than 500 employees, with 30.5 million of them working at companies with more than 10,000 employees. The total payroll for these large businesses was over $2.16 trillion, compared to $1.77 trillion for all U.S. small businesses. In 2004 the two largest companies in the world, by revenue, were American-owned Exxon Mobil Corp., which employs 88,300 people and generates $298 billion in annual revenues, and Wal-Mart, with 1,500,000 employees and annual revenues of $288 billion. Together,

TABLE 5.6

Opening and closing establishments, 1999–2003
(In thousands, seasonally adjusted)
		Opening establishment		Closing establishments		Net
Year	Quarter	Number	Employment	Number	Employment	Number	Employment
Note: Establishments could be new ventures or new affiliates of existing ventures.
SOURCE: Adapted from "Table 13. Opening and Closing Establishments, 1992–2003," in Small Business Economic Indicators for 2003, U.S. Small Business Administration, August 2004, http://www.sba.gov/advo/stats/sbei03.pdf (accessed January 4, 2005)
2003	3	328	1,499	318	1,431	10	68
	2	331	1,527	328	1,564	3	(37)
	1	332	1,540	334	1,555	(2)	(15)
2002	4	349	1,643	329	1,610	20	33
	3	341	1,680	325	1,629	16	51
	2	348	1,804	334	1,719	14	85
	1	338	1,804	331	1,729	7	75
2001	4	352	1,838	335	1,769	17	69
	3	335	1,759	367	1,955	(32)	(196)
	2	339	1,815	333	1,876	6	(61)
	1	343	1,787	337	1,900	6	(113)
2000	4	353	1,828	336	1,772	17	56
	3	355	1,890	348	1,859	7	31
	2	354	1,789	325	1,714	29	75
	1	357	1,918	328	1,727	29	191
1999	4	365	2,032	326	1,775	39	257
	3	346	1,946	339	1,872	7	74
	2	338	2,012	337	1,812	1	200
	1	335	2,011	318	1,898	17	113

the ten top-grossing companies in the world in 2004 employed 3.3 million people (about the population of Connecticut) and had sales of approximately $2 trillion.

Multinational Corporations

Many large businesses operate in more than one country, through subsidiaries or part ownership of foreign companies. These companies are called multinational or transnational corporations. Generally through mergers and acquisitions, a large company can grow beyond the boundaries of a single nation, buying and taking over companies in other countries to form a global network of subsidiaries. For example, Exxon Mobil, which was formed in 1999 by the merger of the two oil companies Exxon and Mobil, is headquartered in Irving, Texas, but it operates affiliated companies in at least forty countries on six continents. Detroit's General Motors—the world's largest automobile manufacturer and the fourth-largest company in 2004, with annual sales of $195.6 billion and at least 323,000 employees—also operates worldwide, having acquired such brands as the UK's Vauxhall, Sweden's Saab, and South Korea's Daewoo auto companies, as well as owning stakes in companies such as Isuzu, Subaru, and Suzuki in Japan; AutoVaz in Russia; and Delta in South Africa. DaimlerChrysler—with 362,063 employees and $185 billion in annual sales in 2004—is one of the best-known multinationals. Formed in 1998 by a buyout of American-owned Chrysler by German-owned Daimler-Benz, the company also owns stakes in Mitsubishi (Japan) and Hyundai (South Korea). More multinational firms are headquartered in the United States than in any other country.

Mergers and Acquisitions

In 2003 there were 2,070 instances of U.S. companies acquiring other U.S. companies, with a monetary value of approximately $462.8 billion. Acquisitions of American companies by foreign companies numbered 321, with a value of about $58.4 billion. And acquisitions of foreign companies by American firms numbered 398, with a value of $106.4 billion. In all three categories companies in business services were the most commonly acquired: 209 were U.S.-to-U.S. transactions, 33 were U.S.-to-foreign, and 56 were foreign-to-U.S. The monetary values, however, differed. The value of acquisitions of U.S.-owned companies by other U.S.-owned companies was highest in the commercial banking and bank holding industry, at about $66 billion. Acquisitions of U.S. insurance companies by foreign companies were valued at $13.4 billion. And those in the foreign real estate and mortgage broker and banker industry were valued at $16.4 billion.

Drawbacks to Economic Dependence on Big Business

While large businesses do a great deal to support the economy in the United States and abroad, instances of internal corruption and scandals, environmental degradation, political maneuvering, and mass downsizing have led many people to think of them as cold and ruthless, and some large corporations have in fact done a great deal of harm, both economically and socially. One of the most notorious instances of a local economy depending too heavily on a single large company happened when General Motors, the primary employer in Flint, Michigan, closed eleven plants in 1986 and laid off approximately 40,000 people throughout the 1970s and 1980s, resulting in a 25% unemployment rate and massive poverty by the late 1980s; in addition, Flint's rates of suicide, murder, alcoholism, and domestic violence reached unprecedented highs. While the case of Flint and General Motors is extreme, it does illustrate the widespread economic and social problems that can come with a high degree of dependence on a single large corporation or industry.

Big Business, the Environment, and Human Rights

Leaders in the U.S. government are often split between their loyalty to environmental and business interests. For example, public controversy erupted in the 1980s and 1990s over the protected species status of the northern spotted owl, whose sole habitat is the ancient forests of the Pacific Northwest, because of its negative impact on the region's logging industry. With the nation fiercely divided over the question of whether environmental protection superseded economic needs, logging companies repeatedly challenged federal rulings in court over decisions to cut back or block logging altogether on both public and private land, arguing that the rulings posed irreparable harm to the economy of the region. In 2005 the debate was still active, with the George W. Bush administration weakening environmental protection laws and the U.S. Forest Service reopening Pacific Northwest forests to logging.

A similar controversy arose when the Senate voted in March 2005 to open Alaska's Arctic National Wildlife Refuge—a federally protected area since 1960—to commercial oil drilling when oil prices reached a record $56 a barrel and gasoline prices across the country averaged more than $2.50 a gallon. The oil industry had been lobbying unsuccessfully for such a move for twenty-five years, but in 2005 pro-business congressional representatives bypassed widespread objections by writing the drilling provision into its fiscal year 2006 budget proposal.

The Alaskan refuge's 1.5 million-acre coastal plain is believed to contain up to 16 billion barrels of crude oil, according to the U.S. Geological Survey. Supporters of drilling argued that it would reduce U.S. dependence on foreign oil and boost Alaska's economy, especially in the remote villages surrounding the refuge. But opponents noted that the region—which contains forty-five different species of mammals, thirty-six species of fish, and 180 species of birds—is a fragile ecosystem in need of protection and that refined oil from the area for widespread use wouldn't be available for at least ten years and therefore would not impact the immediate needs of Americans. Alaska state politicians were pleased with the drilling proposal (the state and federal governments were to split $5 billion in drilling fees over a ten-year period), but people living in the area expressed concern for the continuation of their traditional way of life once industry moved in. Tribal leaders of the Inupiat village of Kaktovik were concerned that their native hunting, fishing, and camping areas be maintained and their burial grounds protected (Associated Press, "Alaskans Wary of Vote on Oil Drilling," March 18, 2005, http://www.nytimes.com/aponline/national/AP-Arctic-Drilling-Alaska.html). For drilling to begin in late 2005, both the Senate and House of Representatives were required to pass resolutions specifically opening the refuge.

The presence of multinational corporations in developing countries can lead to environmental damage and tragic human rights abuses. For example, when oil companies such as Royal Dutch/Shell, Exxon Mobil, and Chevron began locating facilities in the Niger Delta in the 1960s, Nigeria's government promised an improvement in the economy and the standard of living of the local people. At the time, Nigeria's constitution stated that the country's federal government has partial rights to all Nigerian oil deposits and receives a share of the revenue from all sales (Human Rights Watch, "The Price of Oil: Corporate Responsibility and Human Rights Violations in Nigeria's Oil-Producing Communities," January 1999, http://hrw.org/reports/1999/nigeria/index.html). A joint report from the environmental and human rights groups Essential Action and Global Exchange ("Oil for Nothing: Multinational Corporations, Environmental Destruction, Death, and Impunity in the Niger Delta," January 25, 2000, http://www.essentialaction.org/shell/report/index.html) found that sales of oil accounted for 40% of Nigeria's Gross Domestic Product (GDP) and 95% of its exports, with 80% of the government's budget revenue coming from oil sales.

However, according to studies by watchdog groups, Nigeria's native people rarely are hired to work for the oil companies, and many have lost their livelihoods as farmers and fisherman because of environmental damage caused by the refineries. Essential Action cites persistent acid rain, carbon dioxide and methane release from gas flaring, and oil spills (2,976 major oil spills were reported in the region from 1976 to 1991), resulting in a substantial loss of biodiversity in the region. A 1996 study by the World Bank found that the levels of hydrocarbon pollution in the waters used by the Ogoni people were sixty times greater than levels permitted in the United States.