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The terror and triumph of free markets

wsj-top-25-companies-700The Wall Street Journal featured this awesome chart yesterday. Only 8 of top global 25 companies in 1999 are still in top 25 in 2009, and some of them have shed a lot of market cap.

 One reaction is that free markets are very scary if you were an employee or shareholder of one of the 1999 companies that crashed. OK this kind of destruction scares ALL of us.

Another reaction is that creative destruction is one of the triumphs of the market. The consumer is king: in 2009, the consumer wants iPhones in their Xmas stocking and not whatever Worldcom had been pretending to be producing. The radical uncertainty of how to please consumers is an argument FOR free markets:

It is because every individual knows so little and… because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. (Friedrich Hayek)

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3 Comments

  1. Julia Schwenkenberg wrote:

    Bill, not sure whether finance and energy companies crowding out technology and other companies in global market cap is the best example of functioning capital markets…. (btw exxon mobile #1, is this due to bringing innovation to the market place and pleasing consumers???)

    Posted December 22, 2009 at 10:14 am | Permalink
  2. Zeynep wrote:

    And the fact that many companies (food – tyson, purdue, etc; media – Turner, NBC/Comcast, etc) continue to grow not necessarily organically but via acquisition is unsettling. There are simply too many conglomerates yearning to fulfill the ‘too big to fail’ mantra…

    Posted December 22, 2009 at 12:22 pm | Permalink
  3. Contrast this with the non-profits sector – here is an excerpt from a post I did a while back at http://tinyurl.com/y8wqvqe

    “Consider the following. Of the Fortune 500 companies that started among the top ten in 1990, only three remained in the top ten by the end of the decade. Open competition meant that successful newcomers displaced the rest.

    “But in the non-profit sector, the picture was reversed. Seven out of the top ten non-profits not only stayed in the top ten but increased their share of the market during the decade.”

    Posted December 22, 2009 at 5:18 pm | Permalink

6 Trackbacks

  1. By uberVU - social comments on December 22, 2009 at 3:36 am

    Social comments and analytics for this post…

    This post was mentioned on Twitter by timkastelle: Creative destruction at work – 25 biggest companies in 1999 v 2009 via @aidwatch http://bit.ly/6xOgGN...

  2. [...] Shared Only 8 of top global 25 companies in 1999 are still in top 25 in 2009. [...]

  3. [...] 22, 2009 Foreign aid critic William Easterly points to an interesting Wall Street Journal chart of the 25 largest capitalized corporations, in 1999 and [...]

  4. [...] only 8 of the top 25 global companies in 1999 were still in the top 25 in 2009. William Easterly says this creative destruction proves “the consumer is [...]

  5. By Daily Digest for December 24th | Reading Muzaki on December 24, 2009 at 4:39 am

    [...] Only 8 of top global 25 companies in 1999 are still in top 25 in 2009 [...]

  6. [...] professor William Easterly, in his article at the Aidwatch blog, writes that the changes between 1999 and 2009 suggest that this is more evidence of consumerization and [...]