AS PROTESTS against financial power sweep around the world this week, science confirmed the protesters reasons (our) about the financial system. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.
See also: Wall-Street Markets Matrix Secret Exposed
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| Sample of the international financial network, where the nodes represent major financial institutions belonging to the core and the links give the strongest existing relations among them; node colors indicate different geographical areas: EU (red), US (blue), other countries (green); the width and the darkness of the links show their weight; only the most prominent links are shown; the network shows a high connectivity, with many mutual cross-shareholdings as well as longer cycles; this indicates that the financial sector is strongly interdependent, which make the network vulnerable to instability, see [1] or [2]. |
The study's assumptions have attracted some criticism, but complex systems analysts contacted by New Scientist say it is a unique effort to untangle control in the global economy. Pushing the analysis further, they say, could help to identify ways of making global capitalism more stable.
The idea that a few bankers, less than 1%, control a large chunk of the global economy its the science confirmation of what we the Global World Revolution, May 15 International aka October 15, Democracy Now, Democracia Verdadeira Já, Democracia Real Ya, Uncut, Attack, Arab Spring, Icelandic Kitchnaware Revolution and New York's Occupy Wall Street movements and our brothers, the anticapitalist protesters elsewhere around advocates, that less than 1%, the greedy people, are the cause of the world problems.
The study, by a trio of complex systems theorists at the Swiss Federal Institute of Technology in Zurich, is the first to go beyond ideology to empirically identify such a network of power. It combines the mathematics long used to model natural systems with comprehensive corporate data to map ownership among the world's transnational corporations (TNCs).
The study, called "The Network of Global Corporate Control", published on Cornell University Library, doned by: Stefania Vitali, James B. Glattfelder, and Stefano Battiston, (all, Chair of Systems Design at ETH Zurich, Kreuzplatz 5, 8032 Zurich, Switzerland, corresponding author, email: sbattiston@ethz.ch), show us a big and so so complex web of financial control,that ends in a tremendous Octopus of few families that rules the world.
3d network layout
somehow this video got deleted at the beginning of 2011 :-( i had uploaded it in summer 2008. it had a bit over 7k views. http://www.youtube.com/watch?v=RLGtNPDflcw
original description:
3d visualization of an ownership network (see http://arxiv.org/abs/0902.0878 or http://bit.ly/ownersip-networks ). Using http://www.sg.ethz.ch/research/graphlayout and http://processing.org/.
soundtrack: dorant by mikkel metal (kompakt total 6)
Previous studies have found that a few TNCs own large chunks of the world's economy, but they included only a limited number of companies and omitted indirect ownerships, but we could see how this affected the global economy - whether it made it more or less stable, for instance.
The Zurich team can. From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 TNCs and the share ownerships linking them. Then they constructed a model of which companies controlled others through shareholding networks, coupled with each company's operating revenues, to map the structure of economic power.
The work, to be published in PLoS One, revealed a core of 1318 companies with interlocking ownerships (see image). Each of the 1318 had ties to two or more other companies, and on average they were connected to 20. What's more, although they represented 20 per cent of global operating revenues, the 1318 appeared to collectively own through their shares the majority of the world's large blue chip and manufacturing firms - the "real" economy - representing a further 60 per cent of global revenues.
When the team further untangled the web of ownership, it found much of it tracked back to a "super-entity" of 147 even more tightly knit companies - all of their ownership was held by other members of the super-entity - that controlled 40 per cent of the total wealth in the network. "In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network," says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.
John Driffill of the University of London, a macroeconomics expert, says the value of the analysis is not just to see if a small number of people controls the global economy, but rather its insights into economic stability.
Concentration of power is not good or bad in itself, says the Zurich team, but the core's tight interconnections could be. As the world learned in 2008, such networks are unstable. "If one [company] suffers distress," says Glattfelder, "this propagates."
"It's disconcerting to see how connected things really are," agrees George Sugihara of the Scripps Institution of Oceanography in La Jolla, California, a complex systems expert who has advised Deutsche Bank.
Yaneer Bar-Yam, head of the New England Complex Systems Institute (NECSI), warns that the analysis assumes ownership equates to control, which is not always true. Most company shares are held by fund managers who may or may not control what the companies they part-own actually do. The impact of this on the system's behaviour, he says, requires more analysis.
Crucially, by identifying the architecture of global economic power, the analysis could help make it more stable. By finding the vulnerable aspects of the system, economists can suggest measures to prevent future collapses spreading through the entire economy. Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Sugihara says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk.
One thing won't chime with some of the protesters' claims: the super-entity is the intentional result of a conspiracy to rule the world. "Such structures are common in nature," says Sugihara.
Newcomers to any network connect preferentially to highly connected members. TNCs buy shares in each other for business reasons, not for world domination. If connectedness clusters, so does wealth, says Dan Braha of NECSI: in similar models, money flows towards the most highly connected members. The Zurich study, says Sugihara, "is strong evidence that simple rules governing TNCs give rise spontaneously to highly connected groups". Or as Braha puts it: "The Occupy Wall Street claim that 1 per cent of people have most of the wealth reflects a logical phase of the self-organising economy."
So, the super-entity result from conspiracy. The real question, says the Zurich team, is whether it can exert concerted political power. Driffill feels 147 is too many to sustain collusion. Braha suspects they will compete in the market but act together on common interests. Resisting changes to the network structure may be one such common interest.
The top 50 of the 147 superconnected companies
1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
4. AXA
5. State Street Corporation
6. JP Morgan Chase & Co
7. Legal & General Group plc
8. Vanguard Group Inc
9. UBS AG
10. Merrill Lynch & Co Inc
11. Wellington Management Co LLP
12. Deutsche Bank AG
13. Franklin Resources Inc
14. Credit Suisse Group
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp
17. Natixis
18. Goldman Sachs Group Inc
19. T Rowe Price Group Inc
20. Legg Mason Inc
21. Morgan Stanley
22. Mitsubishi UFJ Financial Group Inc
23. Northern Trust Corporation
24. Société Générale
25. Bank of America Corporation
26. Lloyds TSB Group plc
27. Invesco plc
28. Allianz SE 29. TIAA
30. Old Mutual Public Limited Company
31. Aviva plc
32. Schroders plc
33. Dodge & Cox
34. Lehman Brothers Holdings Inc*
35. Sun Life Financial Inc
36. Standard Life plc
37. CNCE
38. Nomura Holdings Inc
39. The Depository Trust Company
40. Massachusetts Mutual Life Insurance
41. ING Groep NV
42. Brandes Investment Partners LP
43. Unicredito Italiano SPA
44. Deposit Insurance Corporation of Japan
45. Vereniging Aegon
46. BNP Paribas
47. Affiliated Managers Group Inc
48. Resona Holdings Inc
49. Capital Group International Inc
50. China Petrochemical Group Company
* Lehman still existed in the 2007 dataset used
See also: Wall-Street Markets Matrix Secret Exposed
Download: Who Rules The World: The Network of Global Corporate Control Download - Swiss Federal Institute of Technology in Zurich
From autors
complex systems, vast amounts of data and self-organization...
We spend billions of dollars trying to understand the origins of the universe, while we still don't understand the conditions for a stable society, a functioning economy, or peace.
(D. Helbing quoted from here)
The upcoming publication The Network of Global Corporate Control has gained some attention in the news (sciencenews.org, newscientist.com) and the blogosphere (for instance, planetsave.com, physorg.com and johncarlosbaez.wordpress.com). Because some reactions have been particularly hostile, for instance Ms. Yves Smith from Naked Capitalism (see also our responses here and in their comment section), or have inspired the conspiracy theory camp, please let me recapitulate what our paper is and isn't and address some of the voiced concerns, in order to avoid misconceptions. (If you are only interested in our responses to critiques - for instance, computing control from ownership and the notion of control in the financial sector
References & Citations
http://arxiv.org/pdf/1107.5728v2Delivered as a gzipped tar (.tar.gz) file if there are multiple files
http://pt.scribd.com/doc/66067325/The-network-of-global-corporate-control
http://www.bing.com/search?FORM=WINFLA&q=file+extension+5728v2
Links
http://www.sg.ethz.ch/people/formercoll/jglattfelder
Web Presence
•Homepage: j-node.homeip.net
•Blogs: techBlog,
http://j-node.blogspot.com/
•Follow Dr. James B. Glattfelder on twitter
• Summary
Projects
•Charity: noon.ch
•Community portal: jth.ch
Glattfelder, James B., Dr.
ETH Zürich
Dr. James B. Glattfelder
Systemgestaltung
Kreuzplatz 5
8032 Zurich
SWITZERLAND
E-Mail: jbg@jth.ch
From November 1, 2006, to May 31, 2010 I worked on my PhD (Thesis) at the Chair of Systems design. My publications can be found here (http://arxiv.org/a/glattfelder_j_1)
Research
•Empirical analysis of ownership relations of a large database of international companies
•Development and empirical validation of an agent-based model describing some of the observed properties of the ownership network
•Testing of economic hypothesis pertaining to issues such as ownership vs. control, or the structural impact of forces driven by policy decisions and globalization trends
Topics
•Complexity; complex systems
•Networks and their evolution
•Agent-based simulations
Publications
•Backbone of complex networks of corporations: The flow of control; J.B. Glattfelder, S. Battiston; Phys. Rev. E 80, 1 (2009); arXiv preprint
•An extensive set of scaling laws and the FX coastline; J.B. Glattfelder, A. Dupuis, R.B. Olsen; 2008; arXiv preprint
Presentations
•The Backbone of Control, Annual Meeting of the German Physical Society, Working Group Physics of Socio-Economic Systems (AKSOE): Social, Information- and Production Networks, 27th of February, 2008, Berlin, Germany, PDF
•Global Ownership: Unveiling the Structures of Real-World Complex Networks, Annual Meeting of the German Physical Society, Section Dynamics and Statistical Physics (DY): Statistical Physics of Complex Networks, 25th of February, 2008, Berlin, Germany, PDF
•The Network of Global Corporate Control, CCSS International Workshop, 9th of June, 2009, Zurich, Switzerland (photos)
Media
•livescience.com: World's Stocks Controlled by Select Few
•sciencenews.org: Networks Reveal Concentrated Ownership of Corporations - Analysis of stock markets in 48 countries finds backbones of control
•arxivblog.com: Econophysicists identify world’s top 10 most powerful companies
Curriculum Vitae
Education
•From the end of 2006, Ph.D. studies, Chair of Systems Design, ETH, Zurich
.1992 – 1999, MSc. in Physics, ETH, Zurich: High energy particle physics (Masters Thesis)
•1992, Economics Matura, Lyceum Alpinum, Zuoz
Work Experience
•2002 - present, Researcher/Programmer, Olsen Ltd., Zurich: R&D of quantitative trading strategies; R&D graphical tools identifying statistical properties and patterns in the FX markets; agent-based algorithms; OO-design implementation using C++/Java in a Unix/Linux environment
Miscellanea
•2000 - 2001: Trip around the world
Interests
•Linux systems administration
•Webtechnologies
•A little philosophy
•Environmental issues
•Society and subculture
Hobbies
•Snowboarding, rock climbing, surfing, travel
