Study Reveals Concentrated Corporate Control
Findings from the Swiss Federal Institute of Technology
A study conducted by the Swiss Federal Institute of Technology in Zurich has uncovered that a small group of 147 corporations holds significant influence over global affairs and governance. This research delved into the connections among 43,000 transnational corporations (TNCs).
The investigation revealed a highly concentrated network of power among predominantly banking and financial institutions. These corporations wield substantial control over global events and have an outsized influence on the economy.
As reported by researcher James Glattfelder emphasizes the need to move beyond traditional beliefs, including both conspiracy theories and free-market doctrines. He insists that their analysis is firmly rooted in reality.
Methodology and Broader Implications
Previous research into corporate control included only a limited range of companies and overlooked indirect ownership. This limited their ability to assess the overall impact on the global economy. The Zurich team’s approach was more comprehensive. They utilized Orbis 2007, a database of 37 million companies and investors, to extract data on all 43,060 TNCs and their ownership links.
Their model, which considered shareholding networks and each company’s operating revenues, provided a detailed map of economic power. The findings, set to be published in PLoS One, identified a core group of 1,318 companies with extensive interconnections. On average, each was linked to 20 others. Though they accounted for 20% of global operating revenues, these companies collectively seemed to own the majority of the world's major blue-chip and manufacturing firms, which constitute an additional 60% of global revenues.
Deeper Analysis of Corporate Control Network
Discovery of a "Super-Entity"
Further analysis by the Swiss Federal Institute of Technology team revealed that a significant portion of corporate control traces back to a "super-entity" consisting of 147 highly interconnected companies. These entities, primarily financial institutions including Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group, have interlocking ownerships and control 40% of the total wealth within the network. As James Glattfelder points out, less than 1% of the companies are exerting control over a substantial portion of the network.
Broader Implications and Economic Stability
John Driffill, a macroeconomics specialist from the University of London, highlights the study's value in understanding economic stability. The Zurich team notes that while the concentration of power isn't inherently negative, the dense interconnections within the core could pose risks, as demonstrated in the 2008 financial crisis.
Concerns and Counterarguments
George Sugihara from the Scripps Institution of Oceanography and Yaneer Bar-Yam, head of the New England Complex Systems Institute, raise concerns. Sugihara notes the startling extent of connectivity, while Bar-Yam cautions that equating ownership with control might be oversimplified, as many shares are managed by fund managers whose influence on company operations varies.
Potential Solutions and Future Stability
Identifying the structure of global economic power could aid in enhancing stability. The team suggests that understanding vulnerable aspects of the economic system could lead to measures that prevent future widespread economic collapses. Glattfelder advocates for global anti-trust regulations, which are currently limited to national levels, to reduce excessive connections among TNCs. Sugihara proposes a tax on firms for excess interconnectivity to mitigate associated risks.
Natural Structures, Not Conspiracies
Contrary to some beliefs, the super-entity's existence is more a characteristic of complex systems in nature than a deliberate conspiracy. As Sugihara notes, such structures are commonly observed in natural settings.
Dynamics of Network Connectivity and Wealth in TNCs
Networking Tendencies in TNCs
New members within any network tend to connect more frequently with those that are already highly connected. Trans-National Corporations (TNCs) often acquire shares in each other for business motives rather than aiming for global dominance. Dan Braha from the New England Complex Systems Institute (NECSI) notes that in such network models, wealth tends to flow towards the most connected members. This phenomenon suggests that money concentration among highly interconnected entities is a natural outcome of network dynamics.
Study Insights and Economic Implications
The Zurich study, as George Sugihara points out, provides strong evidence that the basic rules governing TNCs naturally lead to the formation of highly connected groups. Braha interprets the Occupy Wall Street movement's observation that 1% of people hold most of the wealth as a logical stage in the self-organizing economy.
Beyond Conspiracy: The Power of the Super-Entity
The existence of the super-entity of 147 corporations is more likely a result of natural economic processes than a deliberate conspiracy. The crucial question posed by the Zurich team is whether this group can wield concerted political power. John Driffill, an economics expert, doubts the feasibility of collusion among such a large group. Braha, on the other hand, suggests that while these entities might compete in the marketplace, they could unite over shared interests, such as maintaining the current network structure.
The Influence of the Top 50 Companies
The influence and interconnectedness of the top 50 companies within the group of 147 superconnected entities highlight the complexity and potential power dynamics within the global economic network.
1. Barclays plc
2. Capital Group Companies Inc
3. FMR Corporation
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
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
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
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