Looking Abroad for Revenue

Justin Lahart offers a striking thesis accompanied by a baffling graphic: “While global players like industrial conglomerate 3M Co. and burger giant McDonald’s Corp. are getting ever-bigger boosts from their operations in fast-growing economies like China and Brazil, companies dependent on the U.S. market are hemmed in by recession-scarred consumers who are hesitant to spend.”

Felix Salmon responds with a much clearer image:

Still, the message of this chart is much clearer, I think, than that of the one in the WSJ. It does show a clear correlation between revenue growth and foreign sales, but I can’t see much of a case that American businesses have diverged onto one of two tracks. […] So, what really happened here? Did Lahart know that a clear chart would somewhat undercut his headline talking about a “two-track economy”, and therefore contrive something messier instead? Or was there just an overenthusiastic new kid at the WSJ who hasn’t read his Tufte?

I’m not sure I see much of a correlation here at all. Or, rather, the correlation seems driven by Chevron and ExxonMobil. So we’re looking at a story about the bright prospects for oil companies.


But what I think is interesting here is how domestically oriented Home Depot and Wal-Mart are. I was talking to some snooty German businessmen once and they were asking me what is America really good at? What are our benchmark products? Well we seem pretty dominant in software. But the other thing is that we’re the world leaders in retail sector organizational innovations, as witnessed by McDonald’s semi-hegemonic global position and the fact that in a place like China where it’s not number one, the company it lags behind is another American firm. But here in the U.S., we’ve long since pushed beyond mere fast food into the realm of big box retailing, with Wal-Mart leading the way. But thought both these firms have some international operations, they’re evidently not that big and in the case of Home Depot seem largely limited to Canada and Mexico and Wal-Mart doesn’t operate in continental Europe at all.

That kind of thing will probably change over time, to the benefit of European consumers, and I guess make the Walton family even richer. Or more generally, as the world economy continues to integrate and developed countries get richer (equals more retail sales) this will be one of the main ways in which Americans benefit. But it’s likely to be a pretty severe case of superstar effect with a huge share of the benefits accruing to a very small number of people.