The Economic State of the Union 1960-2022

In light of the upcoming Presidential address, It is interesting to look back at the Fortune 100 list published in 1960 versus that of 2022 to see what insights into our society we can draw.

Only 15 of the Fortune 100 entries in 1960 show up in 2022 list unscathed; many on the 1960 list were merged into those remaining, while one additional entry, AT&T, is split into two entires for 2022; but neither of its descendants have manufacturing capacity or the advanced R&D facility the 1960 version had.??

Number one on the list in 1960, GM, only grew its top line a paltry 13.5% in real terms during the entire period, while #3 Ford grew 260% in real terms.?Ford came it at #22 in 2022 and GM at #25.?Of the Top 20 in 2022, 7 are in healthcare and 5 are in retail.?Only 40% of the top 20 actually create tangible products and even those often outsource the manufacturing to other nations.

The total revenues of the top 100 in 1960 were $128 Billion with combined profits at $8.2B and with the top top 20 in profitability totaling $5.2 Billion.?Multiply these dollar values by 10 for the cumulative inflation effect over the last 62 years to bring to today’s dollars.?Meanwhile in 2022 the list entries’ combined total revenues equaled $10.4 Trillion (800% real growth) with $735 Billion in combined profits of the top 20 in profitability (1450% real growth).?We should be a lot richer today, yet are we really much better off, where is this bounty?

The biggest change of all is the mix of business.?In 1960, with exception of CBS (a media company), all the entries produced tangible manufactured products, from steel, autos, rubber products, to aircraft, chemicals, glass, textiles, food, etc.?There were no entires from the financial industry, healthcare products and services, or retail.?

In 2022, 51 of the 100 entries are categoried as healthcare (17), financial industry (23) and retail (11).?We are sicker therefore in many respects.?Healthcare entries combined for $2.3 Trillion in revenues (and we wonder why medical bills are so high?), $1.9 Trillion for retail, including the top two companies, Walmart and Amazon totaling over $1 Trillion in revenues combined, (and to that I would add 10% more for two additional entries in logistics, FedX and UPS,?getting products delivered either to company or consumer).?Financial industry entries constitute another $1.75 Trillion as well.?Ultimately all of this is strictly overhead costs to an economy, greasing the wheels so speak.?This amounts to just overt $6 Trillion in revenues of the top 100’s $10.4 Trillion.?All for products and services that didn’t even rate back in 1960 and which do not build or produce anything to feed us, clothe us, transport or house us or even enhance our capacities to earn more as individuals.?

So in effect, the ‘real' economy of 1960 grew just 330% to $4.3 Trillion over the intervening 62 years; that’s a 2% compounded rate of return.?But given we have almost doubled our population during that period, a 1% compounded rate of growth, our net real economy’s growth is about 1% / year compounded.?Not really all that exciting after all, hard to figure why the market value of all our equities has risen to the extent it has when the underlying reality is far more sobering.?We have been living off the forward momentum of the post WWII period when we were the world’s economic engine, producing perhaps 1/2 the world GDP, the world’s industrial giant.??While that percentage was bound to shrink, how it shrank is the more problematic issue.

We have dis-intermediated our economy’s capacity to produce tangible value and replaced it with ancillary and ameliorative offerings.?The ‘value’ of such work (and thus the of workers so employed) is far less on a per capita basis, with resulting lower earnings potential of most employees, while profits and asset appreciation go only to the highest levels of management and to the owners, the ultimate pyramid scheme.?The optimization of individual company results with respect to shareholders has led to sub-optimization at the level of the economy as a whole and to the populace as a whole.?The concept that 'what is good for those at the top of the food chain is good for all' was debunked with the 1929 - 1939 depression.?It didn’t work in the preceding Gilded Age even while America became the industrial giant (1866 - 1929) and it doesn’t work now as we’ve devolved into a nation of bankers, shopkeepers and caregivers.?Not that these roles have no value, but they should not dominate an economy.?For any company, these items are ordinarily considered overhead, a cost of doing business to be minimized?as much as possible.

Interestingly the US Government budget for 1961 was the first cross $100 Billion mark; about the total revenues of the top manufacturing companies in 1960; now the federal budget of the US in 2022 is in excess of $4 Trillion, again about the same as our 2022?‘real’ production capacity.?I will note however, that ‘manufacturers’ such as Apple in fact build much of their tangible products overseas and that true U.S. based manufacturing represented by this group is perhaps overstated; although to compensate, a number of foreign companies do manufacture locally, BMW, Volkswagen, Toyota, Bridgestone, etc.?In some cases like Chrysler and Amoco, former entries fell off the list as non-US owned but still producing locally.?So at best, the foreign owned manufacturing replaces the outsourced amount but even so, the profits go elsewhere and do not necessarily recycle.

Net - net, we have evolved, but not necessarily improved.?If the business of America is business ( so spoked Calvin Coolidge), then what business are we really in??What will the next 60 years look like, who will be on the list in 2080??What is our contribution to the survival of the species??We do blindly on, quarter by quarter looking for ‘growth’ while losing sight of the bigger picture.?The US economy is like a ship at sea that doesn’t know its position or where it is going, but just keeps pushing forward in a fog.?While the Soviets demonstrated the impracticability of micromanaging an economy, we do need strategic planning to chart a proper path.?All companies need that to survive, so does an economy as a whole.?China’s rise demonstrates the wisdom of this, as well as the successfully planned reconstruction of the Japanese and German economies.?The existing macroeconomic ‘science’ however is a dismally poor tool and we need to a build better one that will be a viable tool for navigating our path forward.