(FORTUNE Magazine) – It was a record year--for losses. Of the world's 500 largest companies, 297 saw profits fall. Total earnings in 2001 were less than half what they were the previous year, by far the largest one-year drop since FORTUNE first published a Global 500 list in 1995 that included both service and industrial companies.

Just about anything to do with phones was particularly hard hit. Nortel Networks (No. 263), the Canadian telecom-equipment maker, took the biggest plunge: It lost $24 billion more in 2001 than it had the year before. Britain's Vodafone (No. 123) saw its losses increase from $14.4 billion to $23 billion, and Nippon Telegraph & Telephone (No. 16), Japan's telecom mainstay, went from $4.2 billion in the black into deep red, with losses of $6.5 billion. All told, the 24 telecom companies in the Global 500 were $78 billion worse off this year than last.

But it wasn't a bad year for everyone. Old-economy stalwarts like chemicals giant DuPont (No. 172) saw profits surge by 88%, and Unilever (No. 68), which makes everything from diapers to ice cream, increased profits by 61%. Then there's Wal-Mart. The U.S. retailer, based in a modest town in one of America's poorest states, had revenues of $220 billion, the most of any company in history. In the process, Wal-Mart overtook Exxon Mobil as the world's biggest company, becoming the first service company to take the top spot. In Europe, BP invested heavily in retailing and added $26 billion in revenues, displacing Royal Dutch/Shell as the region's largest company. In Asia, slumping Mitsubishi lost the top spot to Toyota.

But then, change is a constant in the Global 500. In 1995 the four biggest companies on the list were Japanese--Mitsubishi, Mitsui, Itochu, and Sumitomo--as were six of the top ten. Exxon, GM, and GE from the U.S. and Royal Dutch/Shell from Europe filled out the rest of the top positions. This year only one Japanese company, Toyota, makes the cut. There are three European companies (BP, Royal Dutch/Shell, and DaimlerChrysler) and six from the U.S. In a reversal of fortune, the top three positions are held by American firms--Wal-Mart, Exxon Mobil, and General Motors.

The changes aren't only at the top. The Global 500 has proved a faithful mirror of broad economic trends. Take Japan, which has suffered several recessions since 1995, innumerable political changes, and the loss of some of its best baseball talent to the U.S. No wonder the number of Japanese companies on the list has fallen from 149 to 88. In 1995, Japanese firms accounted for more than a third of all Global 500 revenues; now it's about a fifth.

As Japan has declined, America has risen. The number of U.S. firms in the Global 500 increased from 151 in 1995 to 197 this year. In the same period, U.S. companies increased their share of total revenues from 29% to 42%. "By cutting costs and adapting rapidly to the changes in a very competitive business environment in the U.S., American companies also became more competitive abroad," says Stuart Schneider, a global strategist at J.P. Morgan Fleming. New entrants reflect this trend. Dell wasn't even on the list until 1997; now it is No. 131. Sun Microsystems, which first made the list in 1998, is No. 268.

Europe falls somewhere between the U.S. and Japan. The 15 countries that make up the EU have 143 companies on this year's list, down from 155 in 1995. But the EU's share of Global 500 revenues inched up from 28% to 30%. Again, the list reflects larger economic realities: Europe has grown faster than Japan over this period but not as fast as the U.S. With the advent of the euro, which is likely to reduce business costs, Europe should fare even better in coming years. "There is no inherent reason," says David Hale, chief economist at Zurich Financial Services in Chicago, "that Europe couldn't catch up with the U.S." Indeed, there are success stories in Europe. Nokia (No. 147), the Finnish mobile-phone manufacturer, first made the list in 1997. Now it's the standard-bearer of the cellphone industry.

One of the biggest changes since 1995 has been the emergence of China. Only three Chinese companies made the list that year. But as economic reform deepened and Chinese companies improved their accounting standards, their presence grew steadily. This year, 11 Chinese companies are on the list, in industries ranging from telecom to banking. But Chinese companies still account for less than 2% of Global 500 revenues. And some important things have yet to change in the Middle Kingdom. All 11 companies remain state-owned, and overmanning is still rife. Oil giant Sinopec (No. 86) needs 937,000 employees to generate $40 billion in revenues, while Exxon's 97,900 employees bring in $192 billion.

Canada has 16 companies on the list, up from five in 1995. Australia is represented by six firms, three more than in 1995. And South Korea has 12 companies in the Global 500, up from eight, including Samsung Electronics (No. 105), which has doubled revenues and profits since 1995 while keeping employment levels almost the same. As for the rest of the world, two Russian oil companies--Lukoil (No. 422) and Gazprom (No. 236)--joined the list in 1999 and 2000, respectively. Indian Oil (No. 226) remains the only Indian company on the list, and PDVSA (No. 66), the Venezuelan oil firm, is still the sole representative from that country. Not a single African company cracked the Global 500.

For now, at least, the lesson of the Global 500 is that what FORTUNE founder Henry Luce called "the American century" has lingered into the new millennium. Of course, as the past eight years demonstrate, things can change fast.

The FORTUNE Global 500 lists, including rankings by performance and within industries, as well as corporate addresses, phone numbers, and Web addresses, are available at www.fortune.com/global500.

The FORTUNE Global 500 can be downloaded at www.fortunedatastore.com.

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