A Tightly Knit Network of Companies Runs the World Economy, Says Network Analysis
By Rebecca BoylePosted 10.20.2011 at 1:38 pm15 Comments



The Global Super-Entity Ownership ties among transnational corporations show a cluster of 147 companies can exert enormous power over global corporate networks. Most are financial institutions. S. Vitali, J.B. Glattfelder, and S. Battiston
A small, tightly woven network of companies, mostly banks, wields disproportionate control over the global economy, according to a new study. To the thousands of protesters swept up in the global Occupy movement, it may seem like a case of science confirming the obvious. It’s based on a few extrapolations and assumptions that are open to debate, but the overall findings shed some light on the intimate ways 21st century capitalism works — and how those functions can undermine the entire system.

A trio of systems theorists at ETH Zurich examined the world’s 43,060 transnational corporations and studied their share ownerships, searching for commonalities that tie the companies together. They worked with techniques used to study complex systems in nature to construct a model of which companies controlled which other companies, and through which networks.
Ultimately, Stefania Vitali, James Glattfelder and Stefano Battiston identified a core of 1,318 companies with interwoven ownerships, each with ties to two or more other companies. They were connected to an average of 20 each, the researchers found. The network forms a “giant bow-tie structure,” with a small, tight knot in the middle and connections spanning outward in an increasingly nebulous pattern. The knot is very small and dense compared to the other sections, and the researchers dubbed it an economic “super-entity.” It is also very closely held — about three-quarters of the ownership remains in the hands of the core itself.
“Nearly [40 percent] of the control over the economic value of TNCs in the world is held, via a complicated web of ownership relations, by a group of 147 TNCs in the core, which has almost full control over itself,” the authors explain. Unsurprisingly, three-quarters of these companies are banks.

While the authors note that there’s no example of this core intentionally acting as a bloc — in other words, there’s no vast economic conspiracy — that doesn’t mean it can’t act that way. “Globally, top holders are at least in the position to exert considerable control, either formally (e.g., voting in shareholder and board meetings) or via informal negotiations,” they write.
They add that domestic anti-trade strictures prevent the core from acting as some kind of cash cartel.
Concentrated power in the hands of a few has clear implications for global financial stability — which everyone already knows, given what the world went through starting in 2008. But this study puts it in empirical terms. Further studies that build upon the assumptions made in this paper could potentially help policymakers and economists studying ways to stabilize financial markets.

A Tightly Knit Network of Companies Runs the World Economy, Says Network Analysis | Popular Science

Crowd-pleasing study in capitalism conspiracy controversy ? The Register

Quote:

In what many took to be fodder for the capitalism-is-a-conspiracy theorists, boffins have claimed that about 150 companies, mostly banks, are controlling the majority of the economic power. It's the sort of statement that many have made in the wake of the global financial crisis and during the ongoing anti-capitalist protests in cities around the world. However this is first time that someone has actually tried to probe it with scientific methods. Three complex systems theorists at the Swiss Federal Institute of Technology in Zurich used the maths traditionally associated with modelling natural systems and applied it to comprehensive corporate data to map ownership among the world's transnational corporations (TNCs). The study, which will be published in the journal PLoS One, found that 40 per cent of the global operating revenues of 43,060 TNCs were ultimately in the control of just 147 companies, many of which were financial institutions. The researchers sourced their list of TNCs from Orbis 2007, a database listing 37 million companies and investors worldwide. Using this data, the theorists constructed a model of which companies controlled others through shareholding networks, coupled with company's operating revenues, to map economic power. Barclays, UBS, AXA and JP Morgan Chase were in the top 10 of those 147, and most of the top 50 were banks, insurance firms or other financial firms, apart from number 50 – which was China Petrochemical Group. The study has attracted a lot of interest and a number of vitriolic critiques, particularly over its correlation of ownership with power and the age of the data used. A lot of people would dispute the premise that ownership is the same thing as power. A recent obvious example of the influence one company can have without owning lots of others is Apple. When Steve Jobs died, people from all over the world – including world leaders, politicians, celebs and the media, as well as the fans – reacted strongly, simply on the basis of the products his company made. But one of the theorists, James Glattfelder, has answered critics on his blog, pointing out that the notion of 'control' should be taken with a grain of salt: The study also mentions.. "In this sense, our notion of control can be related to Max Weber’s definition of 'power', ie, the probability of an individual to be able to impose its will despite the opposition of the others." It is up for question, if economic agents, having large potential control, would in fact choose not to exert it. The blog also addresses concerns that the Orbis 2007 database included individuals and governments, but didn't really mention the fact that the database was from 2007, and the economic world has changed somewhat since 2007, which was around the time it was in a meltdown. For example, Lehman Brothers was number 34 on the list and Merrill Lynch and Bank of America were listed separately at numbers 10 and 25, which dates the research somewhat. One wonders if a more up-to-date model would show that economic control is now in the hands of our governments, seeing as they own large chunks of the banks. Glattfelder also says he thinks the conspiracy theory 'spin' given to the study is unnecessary, to which the only reply seems to be: stop studying the domination of the world by banks and financial institutions. ®

I'd be interested to know what should be considered an acceptable figure. 200? 381? 5429?

__________________
Standard disclaimer: the disgusting statements contained in this post are the views of the poster, and unless specified do not represent the views of the moderators or the site's owners.

I have no doubt people will use this for Gnomes of Zurich type arguments but I agree that this is neither necessary nor helpful. It;s a pretty good demonstration of the way capitalism tends toward monopoly, which is of course counter to the agreement that capitalism encourages competition and a healthy dispersion of rival interests.

Did anyone actually argue that? AFAIK even hardcore libertarians agree that the state should step in when monopolies begin to act as a barrier to free trade...

__________________
Standard disclaimer: the disgusting statements contained in this post are the views of the poster, and unless specified do not represent the views of the moderators or the site's owners.

Well, no they don't:

Quote:

1.2 Myth: Government as the Warrant against Monopolies Another false preconception about libertarianism is to misunderstand it as an economic doctrine opposed to monopolies, one that would recommend ``pure and perfect competition´´ as an economic model to seek and enforce. This is notably the gross misrepresentation of classical liberalism under which the statists from the european political institutions and other national parliaments claim that they act as libertarians when they enact a variety of laws and bills to ``regulate´´ the market. However, libertarianism is not an economic doctrine, and it doesn't aim at promoting any kind of economic model [2]. It is a theory of Law, and seeks to promote a juridic model for the relationships between individuals, based on mutual consent, respect for each other's liberty, and individual responsibility. It rejects the very principle of coercion by a monopolist authority that underlies any kind of government intervention and regulation. As applied to ``regulating monopolies´´, the authentic libertarian stance is that if a monopoly is evil in itself, how much greater an evil is the monopoly of force that the government constitutes when it has enough power to be capable of keeping the former in check! Government intervention and regulation is not and cannot be a way to deal with evil. The proper way to deal with evil is first to identify its very principle; only then can this evil be abolished. Intervention and regulation, instead of banishing evil, only institutionalize it, and use public coercion to promote and continue this evil in official ways, instead of dispelling it. If government somehow monopolized the efforts to keep other monopolies in check, the urgent thing to do is not to use this government monopoly, but to abolish it [3]. Identifying the evil behind the Microsoft monopoly will be the topic of the next part of this article (see section Monopolies). As it will turn out, government is the one and only source for evil monopolies, either by its action or its inaction, by its very own monopoly on the use of public force.

Quote:

ook. Question: How would you answer on the issue of antitrust? How could a libertarian government control monopolies? Answer: Monopolies are very rare in the free market, contrary to popular dogma. For example, Rockefeller’s Standard Oil gained 85% of the market for a couple of years, but found that the only way he could keep competitors from gaining ground was keeping his prices low. AT&T, on the other hand, asked the government to give them a monopoly to put their many competitors out of business. For all his greed, Rockefeller could only dominate the marketplace by giving the customer a good deal. Until the government reversed its policy on long distance service in 1984, AT&T was able to charge monopoly prices. Government intervention is usually necessary to make monopolies possible.

So no, they do indeed take the position that the market is automatically self-regulating, and that monopolies are the consequence of interference, for which the remedy is the complete elimination of government .

I do not see how you can infer that from the post you made. Libertarians may be in a bit of a philosophical bind over monopolies but the various governments that have run this show, have always been quite flexible and dominated by practical realities: Creating monopolies when they thought it was a good idea (national champions, AT&T etc) or fighting them when they thought it wasn't (Microsoft, any anti-trust decision ever taken).

My personal feeling is that competition has been going way down in the last decades. But various studies on market concentration seem to suggest that this is purely an impression. I still have a nagging suspicion they're wrong but I can't demonstrate it...

Herfindahl index - Wikipedia, the free encyclopedia

Market concentration - Wikipedia, the free encyclopedia

__________________
Unless otherwise specified, I am posting as a regular poster. When I will act as a mod, I'll make sure you're in no doubt.