Revealed – the capitalist network that runs the world

[DaveS]

more at:
http://www.newscientist.com/article/mg21...world.html

... 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.

... 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.

[davester]

If you read to the end, they note that the study tracks ownership, not control, and that much of the ownership (through stock fund managers) does not equate to control of the owned companies.

[cbelt3]

[Black]

Keep posting about this and you're going to get the forum, and maybe even OWC, and possibly Woodstock IL. disappeared.

[OWC Jamie]

[Black]

Seriously, does anyone here not believe that persistent scrutiny would eventually lead to confirmation that a majority of the world's wealth is controlled by a very small group of people?

[rjmacs]

davester wrote:
If you read to the end, they note that the study tracks ownership, not control, and that much of the ownership (through stock fund managers) does not equate to control of the owned companies.

LOL. You really don't think that ownership is control? Do you know anything about how markets work? It's a straw man to change the conversation to be about operational control of corporations. The study is about control of wealth. Let's stay on point.

[Ted King]

Great article, thanks for the link DaveS. Good scientific studies often create more questions than they answer and that is the sense I get from this study. For example, I think the following are begging for more consideration (not all of those considerations being scientific in nature):

(from the article)

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."

The instability is really important and needs to be understood; e.g., is this true:

Glattfelder says we may need global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs. Sugihara says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk.

If it is true, how would we go about making global anti-trust rules?


Another quote:

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".

Not a scientific question, but how do we interpret this dynamic in terms of the morality of who deserves how much of the wealth created? If the system is evolving to concentrate more wealth in fewer hands, is that because those few who get the greater wealth deserve to have that wealth because without their unique efforts (something hardly anyone else could do) that wealth wouldn't exist, or is the concentration of wealth the byproduct of the structure of our economic systems (and not unique individual efforts)?

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.

This has huge ramifications for the dynamics of "free" markets. Resisting changes to network structure is contrary to "free" market theory.


And in the comments, the first commenter made an interesting point, "It's interesting that only ONE of the top 50 appears to have any connection with real production - China Petrochem. All the rest are, as far as one can tell, just a bunch of money launderers." Of course, using the term, "money launderers" is unnecessarily provocative, but the underlying point is interesting.

[rjmacs]

Ted King wrote:

As the world learned in 2008, such networks are unstable. "If one [company] suffers distress," says Glattfelder, "this propagates."

So, the super-entity may not result from conspiracy. . . 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.

It doesn't matter whether or not this network is conscious and intentional (i.e., conspiratorial in nature) to the people who are deprived wealth through its hoarding; their suffering is the same either way. That its collective actions would be aimed toward self-preservation (i.e., maintaining an impervious system of wealth concentration against all threats) is quite unsurprising. An effective system's first priority is always the propagation of itself. Events (like the Lehman collapse) or threats (like greater regulation or taxation) are bound to elicit strong concerted efforts.

That being said, i think it's useful not to demonize rich individuals or ascribe undue responsibility for current circumstances to those at the top. In the same way that many of these people did not earn their wealth (or may not 'deserve' the sums they have been paid), neither are they the authors of the system in which they thrive. Similarly, those suffering at the bottom are not accountable for their 'lot in life'; everyone is born into a story s/he did not create and cannot fully control. We would do well not always to conflate success with individual agency, even though such a suggestion flies in the face of the American story. Rather, do as these academics have done and examine the system, and consider how best to reform the system without egregiously punishing those not truly responsible for its harms.