"Are Giant Companies Taking Over the U.S. Economy?" by Lawrence J. White, in The Milken Institute Review (Second Quarter 2002), 1250 Fourth St., 2nd fl., Santa Monica, Calif. 90401–1353.

The American merger and acquisition binge ing giantism is continuing. of the 1990s revived the old specter of an econ-Not to worry, says White, an economist at omy dominated by a relative handful of titanic New York University’s Stern School of Business. corporations. Last year, the $181.6 billion AOL-Whether you look at the biggest 100, 500, or 1,000 Time Warner merger suggested that the creep-U.S. corporations, the result is the same: They have been growing "a bit more slowly" than the economy as a whole since the 1980s.

It is surprisingly difficult to get a true picture of what is going on. Data are fragmentary, and it is not at all clear how to measure corporate "bigness": sales? profits? payroll? Two key sources diverge markedly even on the number of mergers in recent decades, though both show that the number roughly quadrupled, to about eight million, during the 1990s.

White relies on two seldom-used indicators that he says have fewer flaws than others. Forbes’s surveys show that the 500 largest corporations measured in terms of profits and in terms of employment claimed a shrinking share of the total in each area between 1980 and 2000. Their share of profits, for example, decreased from more than 70 percent to less than 60 percent.

U.S. Census Bureau data confirm this trend. They show, for example, that the 1,000 biggest employers claimed virtually the same share of total employment (about 27 percent) in 1998 as they had 10 years earlier. (Firms with fewer than 500 employees saw their share shrink, which means that those in the middle recorded gains.)

The explanation? As fast as big corporations grow, White argues, the U.S. economy grows even faster. The 10 years covered by the Census Bureau study brought a net gain of a half-million new companies.