[Insight & Opinion] The Era of Mega-Corporations Bigger Than Nations

The East India Company is often regarded as the most powerful corporation in history. The British East India Company effectively ruled most of the Indian subcontinent for nearly a century. Its military force numbered around 300,000, exceeding that of the British mainland army, and although it was a corporation, it exercised not only administrative power but also legislative and judicial authority, functioning as a de facto state.

However, even at its peak in the mid-18th century, the British East India Company’s market capitalization was only about 30 million to 40 million pounds, which accounted for just 0.4% of the world’s total gross domestic product (GDP) at the time. The Dutch East India Company (VOC), which dominated trade with India before the British, had a peak market capitalization of about 80 million guilders in the mid-17th century, but this did not exceed 0.1% of the world’s total GDP at that time.

Nvidia’s stock market capitalization has reportedly surpassed 4 trillion dollars. The current total global GDP is about 100 trillion dollars. While it is not a direct comparison, Nvidia’s market capitalization is greater than Japan’s GDP. We are now entering a true golden age of giant corporations. The concentration of economic power is unprecedented in both scale and scope worldwide.

There are fewer than 20 countries with a GDP exceeding 1 trillion dollars, yet there are as many as 11 companies with a market capitalization over 1 trillion dollars, each representing more than 1% of the world’s total GDP. Last year, there were six companies whose market capitalization exceeded South Korea’s nominal GDP of 1.7 trillion dollars: Nvidia, Microsoft, Apple, Alphabet, Amazon, and Meta. All of these are large IT companies headquartered in the United States. This is the result of rapid and powerful technological innovation never before experienced in human history.

The emergence of this era of extreme economic concentration is rooted in the simultaneous advancement of globalization and informatization. While the East India Company was a pre-globalization enterprise, today’s giant corporations operate on a global stage. The core asset unique to technology companies, as opposed to traditional corporations, is data from vast user bases, and their dominance is reinforced by the network effect.

Apple has built a massive user-based platform through its smartphone ecosystem, Amazon through e-commerce and cloud (AWS), Google in the search market, and Microsoft through software and cloud (Azure). Competitors face significant barriers to entry due to economies of scale and technological gaps. The global increase in liquidity after COVID-19 and the recent explosive development of artificial intelligence (AI) have been decisive factors in driving these companies’ values to astronomical levels. Nvidia, the leader in market capitalization, is the dominant force in AI semiconductors, while Microsoft, ranked second, is the biggest beneficiary of ChatGPT. The concentration of market capitalization among these companies is likely to continue for the foreseeable future.

AI technology is where the effects of economies of scale are most pronounced, making it inevitable that companies with more data and computing resources will develop superior AI. However, this is a risky situation. If these major technology companies encounter problems, the entire market could collapse together. Of course, the monopolistic scale of large IT companies will inevitably lead to friction with governments and regulatory authorities around the world.

However, rather than simply regulating these companies, governments are more likely to maintain relationships of control and cooperation. These corporations have become the core of national competitiveness, and national administration is becoming increasingly difficult without their support. It is not desirable for the benefits of innovation to be concentrated in the hands of a few. There are concerns that without proper regulation, the free flow of information and fair competition-the foundations of democracy-could be threatened. The cloud, AI, and platform services provided by these companies have become not just products, but a new form of public good. The influence of giant corporations will only grow stronger in the future. We face the difficult challenge of finding a balance between the technological benefits they provide and the asymmetric power they wield.

Kim Sangcheol, Economic Commentator