Yesterday's tools and tomorrow's needs

Imtiaz A. Hussain | Published: August 02, 2018 21:43:08 | Updated: August 31, 2018 21:35:28

Nowhere else must one look to understand the causes of structural change than economic dynamics. Endogenous technological developments affect more people a lot faster than anywhere else; democratic elections used to be more influenced by market performances than elsewhere; students flock to majoring in economics-related fields in search of a supposedly 'secure' future job; and individual freedom fetches more rewards here faster than anywhere else.

If, for example, we profile Fortune 500 lists over time, we can get a sense not only of the nature of that change, but also future directions from the country most associated with corporations historically. That the corporate survival-of-the-fittest behaviour accents the bigger over the smaller is well captured in the monthly. Gleanings from such a list, nevertheless, help us deduce more than just US trends and corporate dynamics. From a country as far remote to technological progress and a corporate culture as Bangladesh, much can be learned if consumed information is properly digested to synchronise with individual personal hopes.

In the June 2018 Fortune 500 issue, finance emerged as the biggest sector, accounting for 88 of the 500 companies, raking in $2.23 trillion in revenue and registering a net of $228 billion in profits. Here the big corporations, in rank order, happen to be Berkshire Hathaway (with revenues of $242.1 billion), J.P. Morgan ($113.9 billion), Fannie Mae ($112.3 billion), and Bank of America ($100.3 billion), four companies representing four very different, but blooming professions/ industries: Berkshire Hathaway, ranked 3rd in the Fortune 500, tops insurance companies (followed by 60th ranked American International Group, 68th ranked Liberty Mutual, and 79th ranked Liberty Mutual); J.P. Morgan and Bank of America lead commercial banks, being ranked 20th and 24th in Fortune 500 (but followed by 26th ranked Wells Fargo, 32nd ranked Citigroup, and 67th ranked Morgan Stanley); and 21st ranked Fannie Mae heads the Diversified Financial group (followed by 38th ranked Freddie Mae, and 96th ranked American Express).

Students in developed countries (DCs) may find future mileage in choosing a career from this, though their LDC (less developed countries) must go out of the box to carve theirs (given the typically small size of the financial sector, against their primary-product/low-waged exports).

Behind finances came retailing ($1.584 trillion in total revenues, with 48 companies on Fortune 500), healthcare ($1.413 trillion, representing 46 companies), energy ($1.39 trillion, with 59 companies), and technology ($1.174 trillion, with 38 companies), respectively. Walmart, which tops the 2018 Fortune 500-list, leads retailing (with $500.3 billion revenues), followed by Amazon ($177.8 billion), Costco ($129.6 billion), and Home Depot ($100.9 billion). Here, too, one can distinguish between Walmart, the retailer, and Costco as general merchandisers, Amazon as an Internet service retailer, and Home Depot, a specialty retailer.

Likewise for the 40 corporations in Fortune 500 in the healthcare cluster, led by UnitedHealth ($201.2 billion), CVS ($184.8), and Express Scripts ($100.1 billion), with 5th ranked UnitedHealth belonging to the health insurance sub-division, 7th ranked CVS and 25th ranked Express Scripts as pharmacies; with 2nd ranked Exxon and 13th ranked Chevron leading 59 energy companies (together raking in $244.4 and $134.5 billion, respectively); while 39 technology corporations, led by 4th ranked Apple ($229.2 billion), and 22nd ranked Alphabet ($110.9 billion), representing computer and Internet services, respectively.

Comparing 2017's Top-500 companies with previous years carries a fundamental problem: no single year can be chosen, since explaining why itself demand reaps of explanatory pages. The year 2000 is nevertheless selected for comparisons, not just because it is a threshold year, given the change of centuries, but also distant enough to 2017 to expose long-term changes.

In that year, the Top-10 included, in rank order: General Motors (GM, with $189 billion in revenues, and $6 billion in profit); Walmart ($166.8 billion; $5.3 billion); ExxonMobil ($163.8 billion; $7.9 billion); Ford Motor ($162.6 billion; $7.2 billion); General Electric (GE: $111.6 billion; $10.1 billion); International Business Machines (IBM: $87.5billion ; $3.42 billion); Citigroup ($82 billion; $9.8 billion); AT&T ($62.3 billion; $3.4 billion); Altria Group ($61.75 billion; $3.42 billion); and Boeing ($57.9 billion; $2.3 billion).

In 2017, they were ranked as follows: GM 8th, Walmart 1st; ExxonMobil 2nd; Ford Motor 10th; GE 18th; IBM 34th; Citigroup 32nd; AT&T 9th; Altria 154th; Boeing 27th. With Walmart  and AT&T very highly ranked in both lists, we are clearly in an age of high consumption and communications, making retailing the second largest 2018 sector behind financial. Both sectors go together: high credit-card spending (finance) boost consumption (retailing); and high DC usage contrasting with low or mediocre LDC usage. The downward slide of GM and Ford fits the growth of off-shore production rather than the eclipse of two hallowed US trademarks; and intensifies both US and global competition. Similarly, the drastic declines of IBM in the computer world, Citigroup among commercial banks, and Boeing and GE among electrical industrials in aerospace/defence sectors, also can be attributed to global competition. Altria remains one of only two tobacco companies today in the Top-500 list, ranked 154th (Philip Morris 108th), indicating another evaporating DC industry.

Behind that listing lie some key messages for today's economy and student futures. First, manufacturing is declining as income-generator in developed countries, where the higher the educational skills, the better today's student will be, but increasingly showing a widening gap. This is clearly an area of LDC advantage, although it also lowers the educational expectations in general, for example, if the country's literacy rate is low, any education will reap benefits, but the higher the literacy rate, the less likely education will convert into appropriate career choices.

Second, non-renewable energy remains the planet's king, but its diminishing dominance suggests growing technologically-driven renewable energy investments/production: no DC-LDC distinction can be made here, but the more the non-renewable popularity gets, LDCs must begin institutionalising renewable energy usages, itself generating other economic spillovers.

Third, key innovations will remain a DC monopoly, but become more transient, even fickle, therefore posing more DC threats. Pioneering LDC innovation goes farther than in the DC bloc, thus giving countries like China and India, but also Malaysia, Mexico, and South Africa-type of countries, some residual advantage.

For LDC countries, particularly Bangladesh, three implications follow. First, diversifying from a low-wage industry is as important as expanding it (to build the monetary-base of middle-income infrastructure building). Second, shifting from non-renewable to renewable energy makes more long-term sense: externality costs of the former far outweigh the benefits of the latter. Third, without changing education curricula, the growing job-market demands for multi-skilled workers over discipline-base graduates will not be met in our own lifetime, making education itself unrewarding and the job-market a false future barometer.

Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance at Independent University, Bangladesh.






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