AS PROTESTS against financial power a relatively small group of companies, mainly banks, with disproportionate power over the global economy.
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 control a large chunk of the global economy might not seem like news to New York's see photo). But 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).
"Reality is so complex, we must move away from dogma, whether it's conspiracy theories or free-market," says 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. Bar-Yam 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 unlikely to be 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 may not 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
Graphic: The 1318 transnational corporations that form the core of the economy
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Thu Oct 20 00:21:45 BST 2011 by Lesq1
It's interesting that only ONE of the top 50 appears to have any connection with real production - China Petrochem. All the rest are, as far as one can tell, just a bunch of money launderers.
There may be a few issues with this analysis but it tends to confirm what most of the world thinks is wrong with unfettered global capitalism - the vast majority of people are working their fingers to the bone to vastly increase the wealth of a tiny minority.
Global capitalism, as it currently stands, does not work for the benefit of humanity as a whole - indeed, if one were to look at the record of this top 50 on the environment and climate change, it would rapidly become obvious that it actually works contrary to the interests of humanity.
Something need to change and, sadly, it will likely be the fall of democracy before the emergence of socially responsible form of global capitalism.
Money Launderers
Thu Oct 20 00:52:46 BST 2011 by Robert North
Contrary to the previous blogger I would argue that Capitalism functions exclusively for individuals. It is not an accident that the largest companies and most connected are banks and those that work to offset and move risk about. Basically we have created a world where the biggest activity is accumulating wealth and storing it or moving it into safer forms. The combined efforts of billions of individuals acting similarly produces the efficient provider sydrome. As the article suggests the only conspiracy is our collective human nature at work
Money Launderers
Thu Oct 20 00:54:39 BST 2011 by Robert North
The image reminds me of those which show the earth surrounded by space junk.
Money Launderers
Fri Oct 21 17:49:45 BST 2011 by TheLibrarianApe
"I would argue that Capitalism functions exclusively for individuals. "
The facts and economic theory show that those with capital will seek to acquire more capital, control the means of production and move from 'true competition' to 'monopolistic competition' or even 'monopoly' where competitors are eliminated from the market and demand ceases to determine the price for a commodity or service.
This is what we see with banking services, energy supply and other product markets. If one is interested in maximising the benefit from markets one would argue that the closer to true competition we can get, the more money will circulate and therefore generate future wealth.
The over-investment of the last two decades have resulted in high prices, money leaking out of circulation and accumulating with the few at the expense of the many. This describes what we see: economic slow down and market failure.
Money Launderers
Thu Oct 20 14:30:23 BST 2011 by Eric Kvaalen
Lesq1, you seem to forget that banks are institutions where ordinary people like you and me deposit our money in the hopes that they will make some profit from it and pay us some interest! If you don't like banks and pension funds, then take your money out of them and put it under the mattress or buy metals. Have you done that?
I'm afraid that the fall of democracy may be brought on by all these anti-capitalist protesters and their demonstrations and riots (as in Rome last Saturday).
Money Launderers
Fri Oct 21 13:17:54 BST 2011 by Sandy Henderson
Hi Eric - It would appear that pyramid schemes and Ponzi schemes come in many guises,and the laxity in the regulation of the markets of financial instruments has allowed people to leverage more money than they have to back their speculation. There does not have to be a conspiracy for groups with similar interests to act in concert. Britain, the USSR, and USA all fought against a common enemy, but had different ideologies. Whilst big supermarket chains compete, they do not take it to the level where it starts to hurt. Because national governments do not harmonise on tax, transnational companies can exploit the differences like the stairs in an Escher painting, and transfer their tax share onto somebody else. Once they ( the transnational company ) acheive a certain critical mass, this is the rational ( though not necessarily moral ) way to behave. It does not bode well for us all longer term, because it ignores longer term effects
Money Launderers
Sat Oct 22 07:24:03 BST 2011 by Eric Kvaalen
I wonder whether you aren't responding to Robert North's comment rather than mine?
Money Launderers
Fri Oct 21 16:11:56 BST 2011 by Matt
Perhaps our current form of representative democracy will eventually reorganize into a more direct form of political participation, but it's not going to happen as a result of a few months of protest. I think what people around the world are finally waking up to is the value of transparency and accountability, that we no longer should place our faith in long-established power structures that organize and function independently of the interests of humanity. This is an unsettling time, but rightfully so
Money Launderers
Sat Oct 22 07:35:58 BST 2011 by Eric Kvaalen
"...but it's not going to happen as a result of a few months of protest."
What about what happened in Tunisia and Egypt? Or France in 1968?
What I fear is that these anti-capitalists (and their anarchist "friends") will tear down our democratic structures without having a good alternative. The last couple times this happened, it led to the horrors of the Soviet Union and the "People's Republic of China".
Money Launderers
Sun Oct 23 09:59:10 BST 2011 by Tilly
What! Wake up out of the past!
It's democracy - and civilisation - that is now threatened by capitalism and the corruption of politics that naturally goes with it. Protest is an expression of a still hopefully free and democratic society.
Whilst capitalism might have fuctioned OK in the past. the world has changed and it's capitalism that threatens to destroy society - capitalists see a sinking ship and wonder whether to help fix it or whether to plunder it for their own short term profit - at the expense of everyone else and their own future.
Money Launderers
Sun Oct 23 14:00:13 BST 2011 by Eric Kvaalen
Peaceful protest is one thing -- as a way of influencing public opinion and thereby affecting the results of elections, not as a way of forcing the government to make concessions in order to get the protesters off the streets. The kind of riots that have been seen in Rome and in Greece (or in France in 2005) are something else.
Money Launderers
Sun Oct 23 12:51:29 BST 2011 by Jean Clelland-Morin
Where we have arrived with our convoluted, corrupt tax-economic system may not be a cospiracy, but it may as well be.
Money Launderers
Sun Oct 23 17:23:51 BST 2011 by Jim R
Yes, it is interesting that one of the top 50 is a production company from China, but not in the way you think. The 49 banks and investment groups (or money launderers as you called them) is the norm, that's how the system is supposed to work, the one production company is the strange exception.
How it works is this, you earn some money and would like to save it for education or retirement or whatever (at least I hope you're doing this), you don't put the money under your bed, you save it to a bank or mutual fund, who may invest your money in production company and thus earn you some returns and collect some fee themselves.
I didn't read the paper, but I bet in this case the researcher assigned the ownership of the investment to the bank instead of to you, and this is the problem with their analysis. Since banks and investment groups manage a huge pile of money (which is not theirs, but belongs to their clients), it's quite normal for them to "own" a large part of the economy.
Now what's interesting is a Chinese petro company ends up also owning a large part of the economy, they're not a bank or mutual fund, so where did their money comes from and who is the real owner of their money?
Didn't Need Analysis
Thu Oct 20 01:19:23 BST 2011 by polistra
report this commentCatchy Title, But . . .
Thu Oct 20 03:48:53 BST 2011 by Jeff Corkern
report this commentCatchy Title, But . . .
Thu Oct 20 08:24:41 BST 2011 by kevin
The trouble isn't the network. It is that sociopathic monsters are drawn to power(in a human sense) and this will determine whether the system lands safely on a airfield or crashes directly into a wall, throwing its passengers into a new dark age. New Scientist appears to be looking at the pretty buildings not the people inside them here? We can all predict 9/11 nowadays...
Catchy Title, But . . .
Fri Oct 21 00:12:22 BST 2011 by Jeff Corkern
view threadCatchy Title, But . . .
Fri Oct 21 20:44:25 BST 2011 by Himagain
While obviously the poster Corken is a troll by design or accident, this harmless listing doesn't even touch the actual core of the matter.
NewScientist is an excellent resource as a starting point for anyone to gain a synopsis of always interesting subjects - especially "officially unacceptable " views.
Those who do actually own us are certainly not visible to any casual investigation, but the extraordinary activities in the recent pillaging of the U.S. economy by just 5 (count 'em) organisations in such a blatant manner do tend to indicate that something critical has changed.
Our Owners no longer seem to care what we know/see taking place at all.
THAT is a worry.
Even the blinkered people like poster Corken can easily very publicly now see that the "conspiracy-theorists" were really conspiracy scientists all along.
There is a trio of ancient folk wisdoms that summarise everything social simply:
1. "There are none so blind as those who will not see", Mr Corken.
2. "You can lead a donkey to water, but you cannot make it drink."
3. Most valuable of all:
"Power corrupts and absolute power corrupts absolutely".
Catchy Title, But . . .
Sat Oct 22 23:45:07 BST 2011 by mark
power is energy and energy creates power now how the power is used is as in nature it is natural like the sun shining a simple realisation think simple do not get confused with confusion as adding or applying something to lets say a word becomes another word to explain this it can quite easily become confusing science is based on formula and manipulated same way this system or capitalism socialism whatever ism has right from beginning just simply tricked us with a complex system when in reality is very simple the solution to a problem can only be a problem when there is deception hiding something from us so they keep for themselves we can not solve anothers problem if we dont see the problem we think spend all time energy philosophying a continuation of the problem part of problem is statistatical anaysis law of probability and the precautionary principle bigger part than you think as that is all our belief system is based on
Catchy Title, But . . .
Sun Oct 23 07:00:29 BST 2011 by Eric Kvaalen
you need to replace your keyboard
Fascinating new study.
by Glen C. Strathy
