Many people interpret the Iraq war as part of a US plot to dominate the world through multinational corporations, some of whom are getting huge contracts to rebuild Iraqi infrastructure. The military industrial complex, it is said, has benefited enormously since George Bush declared the US was at war with terror, and his beloved oil companies will now feed at the trough. The Iraq war, say critics, has little to do with democracy, it is a part of an imperial plot for US multinationals to take over and exploit the whole world.
The best way to expose this as a fantasy is to quote hard data from Fortune magazine’s recent issue on how the Fortune 500, the biggest American MNCs, fared in 2002. This was a year of economic recovery from the recession of 2001. Yet the 500 biggest MNCs collectively suffered a revenue fall of 6.3 per cent to $7 trillion.
Now, $7 trillion is still an enormous figure, over 14 times of the GDP of India. So you might think that such economic muscle must translate into obscene profits. In fact the collective profits of the Fortune 500 plummeted by 66.3 per cent, to just $69.6 billion. This was just under one per cent of sales! Does that sound like extortionate imperialist loot, or like a world where the consumer is king?
AOL Time Warner, once regarded a media-internet juggernaut that would dominate the world, created a world record in 2002 with a loss of $98.7 billion, more than the GDP of most developing countries. Qwest lost $35.9 billion, Clear Channel $16.1 billion, AT and T $13.1 billion. Of the 500 biggest MNCs, 120 lost a collective $295.7 billion. That is a mind-boggling figure.
Is there a catch in the data? Well, yes. In past years, many companies (exemplified by Enron) used fancy accounting tricks to exaggerate their revenues and profits. This has now led to a big backlash. MNC chiefs know they can lose their jobs and go to jail if they are found cooking the books. So many are re-stating their accounts, and making provisions for the huge loss in stock market value of companies they acquired in the boom of 1995-2000. This has dragged down profitability in 2002, and represents a fall in wealth rather than income.
How profitable would the Fortune 500 be without such heavy rectification of accounts? In the preceding year (2001), 97 of the Fortune 500 companies reported losses totalling $148.5 billion. And in 2000, the biggest boom year of all when MNCs were inflating revenues and profits like mad, as many as 53 Fortune 500 companies reported losses totalling $18.1 billion. So, even in the best of times and with creative accounting, more than one-tenth of the supposed imperialist looters of the world suffered losses. In that best-ever year, the net profit of the Fortune 500 was 6 per cent of sales. Does that sound like exploitation of the toiling masses?
Conspiracy theories are immune to facts. Yet for those with an open mind, let me tell you about the fate of the military industrial complex in 2002. The eight biggest US defence contractors have sales of over $10 billion apiece. Critics say they have been minting money ever since defence spending shot up following 9/11. Really? Take a look at the accompanying table.
Three of the big eight defence contractors (Honeywell, Raytheon and Textron) actually lost money in 2002. The collective net profit of the eight companies was $3.29 billion on revenues of $191 billion, a profit margin of just 1.78 per cent.
What will happen to the profitability of US oil companies after the Iraq victory? Look at the stock market price of Exxon-Mobil, the biggest oil MNC, over the last year. The peak price was $42 in April 2001. Since October 2002, when it became increasingly clear that there was going to be an invasion of Iraq, the share price has stagnated around $35.
Not even the rapid victory in Iraq has led to any spurt. So, the savviest investors on Wall Street, supposedly part of the imperialist conspiracy, expect no oil bonanza at all. I, let me confess, am surprised. Believers in imperialist conspiracy should be devastated.