By Patric Hale
This week’s Global Guru guest columnist is my friend Patric Hale, who has put together a compelling and original list of economic entities from across the world as a measure of global economic power and influence. I believe it offers some fascinating and unexpected results.
In my book, “It’s the Economy! (Stupid)” (2008), I introduced a new index, immodestly called “The Hale Index of Top 500 Global Economic Entities.” Its purpose is to give an entirely new and different perspective on the global economy moving into the 21st century. You will see below a summary of the overall economic power based just on nation-states’ gross domestic product (GDP) along with the Top 30 Global Economic Entities.
The Index is meant to present a comparison of one thing: Economic Power! It balances countries by GDP, compared to the largest companies and organizations, based on their economic power. Obviously, economic power is not always comparable in a direct way, but all are “entities” that are organized for economic activities for gains or losses. For instance, a country’s GDP is roughly comparable to its annual “revenue,” much like a company, and, indeed, in this Index you will see how countries and companies rank side-by-side on this basis to give them comparative perspective.
But, of course, current income is only one way to measure and compare economic power. The other major yardstick is what I call “gross accumulated institutional savings.” These comprise the “assets under management” (AUM) of global money managers and the assets on the balance sheets of the major banks in the world. These gross institutional savings are now being accumulated on a truly global basis and — more importantly — allocated in pursuit of the best and/or safest returns anywhere in the world, too.
Consequently, the Index combines the top entities from four basic lists:
- The largest countries in the world ranked by GDP, as determined by the IMF/World Bank’s “World Economic Outlook,” April 2015;
- The P&I/Towers Watson list of the Top 500 Global Money Managers ranked by assets under management (AUM);
- The Fortune Global 500© list of the top public companies in the world, ranked by revenues of the companies (2015);
- And the Top 100 Global Banks ranked by assets by SNL.com.
So here is the top-line summary of this list: The top 20 countries alone account for over 80% of the global GDP. Consequently, as they go, so goes the rest of the planet — like it or not! Below is the top line of the structure of the global economy based only on nation-states:
So what would the global economy look like if we merged the list of the world’s top 20 economies with those of the top global money managers, ranked by AUM, and the major banks? Below is the Top 30 Global Economic Entities ranked in this way. (No companies are represented in the top 30 because the largest company in the world is Walmart, with annual sales of $486 billion. While this dollar amount certainly seems “large,” this sum nonetheless would make it only the 118th largest global economic entity in the world. Contact me for the full Top 500 list — see below.)
Patric Hale is President of Capital Markets LLC, a macroeconomic consulting firm he founded for high-net-worth individuals and companies. To obtain the full 2015 Hale Index of the Top 500 Global Economic Entities, contact him at firstname.lastname@example.org and reference “Global Guru Capital.”
In case you missed it, I encourage you to read my e-letter column from last week about the global stock market washout. I also invite you to comment in the space provided below my commentary.