by Andy Coghlan and Debora MacKenzie
19 October 2011
from NewScientist Website


The 1318 transnational corporations

that form the core of the economy.

Super-connected companies are red,

very connected companies are yellow.

The size of the dot represents revenue


This 2011 study examined connections between 43,000 transnational corporations and its conclusion is that a relatively small group of companies control just about everything.


This is where the seat of Technocratic strategy can be found.




As protesters 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.


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 movement and protesters elsewhere.


But the study (The Network of Global Corporate Control), 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.


"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, 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. 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

  • The Goldman Sachs Group

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."


"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 behavior, 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.


James 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.

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-organizing 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.


When this article was first posted, the comment in the final sentence of the paragraph beginning,

"Crucially, by identifying the architecture of global economic power…" was misattributed.




The top 50 of the 147 super-connected 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

  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

(Data: PLoS One)