Multinational Corporations

An inaccurate claim is that out of the 100 largest economies in the world, 51 are multinational corporations. This claim is based on a miscalculation, where two numbers describing totally different things are compared: the GDP of nations to gross sales of corporations. The problem with the comparison is that GDP takes into account only the final value, whereas gross sales don't measure how much was produced outside the company. According to Swedish economist Johan Norberg, if we were to compare nations and corporations, we should be comparing GDP to goods only produced within the particular company (gross sales do not take into account goods purchased from 3rd party vendors and resold, just as GDP does not take into account imported goods). That correction would make only 37 of 100 largest economies corporations and all of them would be in bottom box: only 5 corporations would be in top 50. [1]
Because of their size, multinationals can have a significant impact on government policy, primarily through the threat of market withdrawal. For example, in an effort to reduce health care costs, some countries have tried to force pharmaceutical companies to license their patented drugs to local competitors for a very low fee, thereby artificially lowering the price. When faced with that threat, multinational pharmaceuticals firms have simply withdrawn from the market, which often leads to limited availability of advanced drugs. In those cases, governments have been forced to back down from their efforts. Similar corporate and government confrontations have occurred when governments tried to force companies to make their intellectual property public in an effort to gain technology for local entrepreneurs. When companies are faced with the option of losing their core competitive advantage (technology) and losing a national market, they may choose to withdraw from the national market. This withdrawal often causes governments to change policy. Countries that have been most successful in this type of confrontation with multinational corporations are large countries such as India and Brazil, which have viable indigenous market competitors. …