# Scientific analysis reveals companies in control of global economy ;)



## Luke (Oct 17, 2010)

AS PROTESTS against financial power sweep the world this week, science may have confirmed the protesters' worst fears. 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.

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 Occupy Wall Street movement and protesters elsewhere. 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 James Glattfelder. "Our analysis is reality-based."

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, so could not say 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. 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

(Data: PLoS One)******

Source: Revealed


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## sly (Oct 8, 2011)




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## RobynC (Jun 10, 2011)

A Slogan to Remember: Power to some extent is a necessary evil; when possessed to a sufficiently extreme extent is just a disaster waiting to happen.


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## Runvardh (May 17, 2011)

RobynC said:


> A Slogan to Remember: Power to some extent is a necessary evil; when possessed to a sufficiently extreme extent is just a disaster waiting to happen.


The part that makes me smile is that an ENTJ is saying this. ^_^


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## RobynC (Jun 10, 2011)

@Runvardh



> The part that makes me smile is that an ENTJ is saying this. ^_^


Regardless of MBTI, it should be common sense.


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## Arclight (Feb 10, 2010)

Does anybody find it disturbing that a scientific study was needed to determine this? 
I though this was obvious. I figured this out when I was 8 and realized that Coke and Pepsi were playing a nasty game of "you only have two choices" when clearly there were many other options being left off the list. 
From there it was easy to understand that all you have to do is follow the money trail.


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## RobynC (Jun 10, 2011)

@Arclight

Well, it's pretty obvious, but the scientific study was extremely valuable for one reason only. It took things from "conspiracy theory nonsense" to objectively verifiable facts.


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## Taikand (Oct 20, 2011)

<grabs a red flag with a hammer and sickle on it>Told them I was not crazy.


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## RobynC (Jun 10, 2011)

@Arclight

Follow the money trail behind these Occupy protests. If it's nothing you won't find anything useful, if it is being fomented -- you'll find who's behind it.


_As always... my tagline_


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## Runvardh (May 17, 2011)

RobynC said:


> @Runvardh
> 
> 
> 
> Regardless of MBTI, it *should* be common sense.


Skuld likes to tease people often and I find myself to be one of her favourite targets. Minus the sarcasm, I see it the same way, it just doesn't happen that way. Something to do with humans being involved...


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## wuliheron (Sep 5, 2011)

Current economic theories are about as accurate and useful as a pot belly stove when what we need is a heat pump with a digital thermostat. Its not a coincidence that Marx invented his theory just as the steam engine was perfected and that we're still stuck with such primitive mechanical models, conspiracy theories, and political dogma to this day. This kind of research should have been started 30 years ago instead of after the economic collapse. The more these institutions are allowed to work in the dark and the less anyone even bothers to keep track of them the more likely we'll just face another catastrophe in the near future.


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## Luke (Oct 17, 2010)

I think this kind of research could be particularly valuable in increasing our knowledge of how the economy works. By having more in-depth understanding of how the companies are functioning as part of a larger system, we can identify weaknesses in the system and work to reduce them.


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## wuliheron (Sep 5, 2011)

Luke said:


> I think this kind of research could be particularly valuable in increasing our knowledge of how the economy works. By having more in-depth understanding of how the companies are functioning as part of a larger system, we can identify weaknesses in the system and work to reduce them.


I don't think we're anywhere near that kind of analysis yet, but we can't even tell when the pot belly stove needs more wood or to be shut down when have no clue what is going on. Some people actually did have a clue what was going on and warned people in advance, but we need a reliable thermometer everyone can trust at the very least. Forget the digital thermometer for now, I'll take an old fashioned mercury one over nothing at all.


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## sprinkles (Feb 7, 2010)

Arclight said:


> Does anybody find it disturbing that a scientific study was needed to determine this?
> I though this was obvious. I figured this out when I was 8 and realized that Coke and Pepsi were playing a nasty game of "you only have two choices" when clearly there were many other options being left off the list.
> From there it was easy to understand that all you have to do is follow the money trail.


It really is two choices (Coke or Pepsi) XD

The other 'options' that are left off the list are pretty much owned by one of the two companies. 

Coke has about 3,000 beverage brands (inc. A&W, Dr. Pepper, Dasani, Fanta, Minute Maid, Mello Yello, Squirt, etc. etc.)

Pepsi has like a bajillion different products (Sierra Mist, Ocean Spray, Mountain Dew, AMP, SoBe, Aquafina, Frappuccino, Lipton) not to mention a crapton of food brands. 

I remember the wars between the two, and how some fast food places only had Coke or Pepsi products but not both (and I think some even still do that)


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## Bote (Jun 16, 2010)

sprinkles said:


> I remember the wars between the two, and how some fast food places only had Coke or Pepsi products but not both (and I think some even still do that)


Yeh I am not American, but it was pretty funny stopping by at KFC to eat and arguing with the clerk to give me a fcking Coke instead of Pepsi (since in my country you have both everywhere except in American franchises xD). Alternative:

Cockta - Wikipedia, the free encyclopedia


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## sprinkles (Feb 7, 2010)

Bote said:


> Yeh I am not American, but it was pretty funny stopping by at KFC to eat and arguing with the clerk to give me a fcking Coke instead of Pepsi (since in my country you have both everywhere except in American franchises xD). Alternative:
> 
> Cockta - Wikipedia, the free encyclopedia


Yeah, just so happens that the company KFC is under is a company which Pepsi split out from itself also. Pepsi also has Taco Bell so you probably won't find Coke there, either. I also think they might set up deals for product placement where the franchise can use Pepsi or Coke in their ads.


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## Voodo Chile (Jul 6, 2011)

Yea here in New Zealand the fast food stores has their allegiances. It is
*Coca Cola *
Mcdonalds
Wendy's (i believe)

*Pepsi*
KFC
Burger King
Pizza Hut

Yea you get the story...I dont eat fast food much anyway.



The sad thing about it is that, i''ve never heard of any of those companies . Except maybe one of two..Mitsubishi.
I watch the news and go "who the hell do this JP Morgan and Merril Lynch think they are, crashing the economy n shit A man cant be god. See i dont even know what i'm talking about. I dont know what is actually going wrong. Its no use saying "o the economy crashed and the recession" like everyone does. I best response to that i can come up with is "i hope they installed air bags because those seatbelts don't cover your head".

Or the merchant bankers. Wtf is merchant bankers. You bank and trade goods at the same time? dam i wish i could be on the dole and be a minor party politician at the same time. I get to wear a suit and do shit at home.


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