[P2P-F] scientific study : "a few bankers control a large chunk ofthe global economy"

Thu Oct 20 10:26:14 CEST 2011

I wonder which data sets they used and how I can get them.

Interesting.

2011/10/20 Natalie Golovin <10natalie at cox.net>

>   Wow-Thanks!
>
>  *From:* Dante-Gabryell Monson <dante.monson at gmail.com>
> *Sent:* Wednesday, October 19, 2011 3:37 PM
> *To:* econowmix at googlegroups.com ; p2p-foundation<p2p-foundation at lists.ourproject.org>;
> gtmonnaie at gtmonnaie.be
> *Subject:* [P2P-F] scientific study : "a few bankers control a large chunk
> ofthe global economy"
>
>
> http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html
>
> ( found via "The Next Edge" http://www.facebook.com/groups/120497731371323- thanks ! )
>
>
> AS PROTESTS against financial power sweep the world<http://edition.cnn.com/2011/10/15/world/occupy-goes-global/?hpt=wo_t3>this week, science may have confirmed the protesters' worst fears. An
> analysis <http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf> of the
> relationships between 43,000 transnational corporations has identified a
> relatively small group of companies<http://www.newscientist.com/article/mg21228354.500-revealed--the-capitalist-network-that-runs-the-world.html#bx283545B1>,
> mainly banks, with disproportionate power over the global economy.
> [image: The 1318 transnational corporations that form the core of the
> economy. Superconnected companies are red, very connected companies are
> yellow. The size of the dot represents revenue <i>(Image: </i>PLoS
> One<i>)</i>]
>
> The 1318 transnational corporations that form the core of the economy.
> Superconnected companies are red, very connected companies are yellow. The
> size of the dot represents revenue *(Image: *PLoS One*)*
>
> *
> *
>
> 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<http://occupywallst.org/forum/proposed-list-of-demands-please-help-editadd-so-th/>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<http://www.sg.ethz.ch/people/formercoll/jglattfelder>.
> "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<http://www.bvdinfo.com/Products/Company-Information/International/Orbis>,
> 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 <http://www.econ.bbk.ac.uk/faculty/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<http://www.newscientist.com/article/dn20777-haircuts-identified-as-a-cause-of-financial-crisis.html>.
> "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<http://www.newscientist.com/articleimages/mg21228354.500/0-revealed--the-capitalist-network-that-runs-the-world.html>
>
> *(Data: *PLoS One*)         *
>
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-- 

Sincerely yours,

     Apostolis Xekoukoulotakis
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