Eye in the Sky

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).

The study determines that global corporate control is far more concentrated than many people think: a core of just 147 firms — many of them financial companies — control 40 percent of the wealth of 43,060 transnational corporations. A broader core of 737 control 80 percent, according to the theorists.

Map of the 1,318 companies at the heart of the global economy

Creating a ‘map’ of 1,318 companies at the heart of the global economy, the study found that 147 companies formed a super entity within this, controlling 40 per cent of its wealth. All own part or all of one another. Most are banks – the top 20 includes Barclays and Goldman Sachs. But the close connections mean that the network could be vulnerable to collapse.

In effect, less than one per cent of the companies were able to control 40 per cent of the entire network

says James Glattfelder, a complex systems theorist at the Swiss Federal Institute in Zurich, who co-wrote the research.

Some of the assumptions underlying the study have come in for criticism – such as the idea that ownership equates to control. But the Swiss researchers simply applied mathematical models usually used to model natural systems to the world economy. Moreover, the value of the study wasn’t to see who controlled the global economy, but the tight connections between the world’s largest companies. The financial collapse of 2008 showed that such tightly-knit networks can be unstable.

If one company suffers distress, this propagates

Glattfelder says.

The data used by the Swiss theorists was from 2007. IMHO that ownership is even more concentrated now. For example, Barclays is at the top of the list from the 2007 data. But Lehman Brothers, which was acquired out of bankruptcy by Barclays, is also on the list. The global financial consolidation that followed the financial crisis has only made the concentration worse.

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

The full study is available in PDF format:
S. Vitali, J.B. Glattfelder, and S. BattistonThe network of global corporate control (2011)

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