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Three complex systems theorists at the Swiss Federal Institute of Technology in Zurich have applied scientific principles to untangle and identify a small number of companies who control the world economy.  

The study was published by Andy Coghlan and Debora MacKenzie in an October 19th article for NewScience under the title:

Revealed – the capitalist network that runs the world

http://www.newscientist.com/...

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.

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 (see photo). 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).

Though the study refutes the claim that the companies are engaged in a conspiracy to rule the world, it reveals an incestuous relationship that is scary because of the vulnerability it creates to world markets.  More importantly, the scientists believe the study will help to identify ways to make the world economy more stable.

Here is a list of the top 50 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 article is an interesting read and hopefully, the economists on this site can illuminate the significance of the report.  Once again, here is a link to the article:

http://www.newscientist.com/...

1:30 AM PT: I just read this article on Raw Story.  It shows how internationally interconnected global finances are at the moment.

BRUSSELS — Eurozone leaders are toying with the idea of asking China and other emerging powers to help them out of the debt crisis by taking part in a bailout fund, but some are reluctant to call in Beijing.

The possibility of asking for China, Brazil and others to come to their rescue emerged at a summit on Sunday as European leaders scrambled to find ways to boost their defenses against the crisis.

The so-called BRICS group – Brazil, Russia, India, China and South Africa – has voiced willingness to help Europe overcome its debt crisis amid concerns it could spark a new global recession.

http://www.rawstory.com/...


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Comment Preferences

  •  And look at what a wonderful job... (10+ / 0-)

    ...they do...NOT!

    Float like a manhole cover, sting like a sash weight! Clean Coal Is A Clinker!

    by JeffW on Sun Oct 23, 2011 at 10:25:16 PM PDT

  •  They don't need a "conspiracy" (5+ / 0-)

    They are exactly that by nature.  

    I don't believe they could be anything else.  Even if they wanted to.  And they don't.

    •  think "swarm behavior." (5+ / 0-)

      Complex behavior caused by simple rules.

      Bees don't need to "conspire" to swarm, nor fish or birds to move as schools and flocks respectively.

      A few simple rules and common causes, and then you get all the observed behaviors.  

      This also means that these behaviors are sensitively dependent on initial conditions (chaos theory), so if we find the right rule to change (and it will be a subtle one that does not at first appear to be significant), it will indeed cause significant changes in the resulting behaviors.  

      "Minus one vote for the Democrat" equals "plus one vote for the Republican." Arithmetic doesn't care about your feelings.

      by G2geek on Mon Oct 24, 2011 at 01:44:47 AM PDT

      [ Parent ]

  •  Here is a link to the whole study (10+ / 0-)

    http://arxiv.org/...

    How its starts;

    Abstract
    The structure of the control network of transnational corporations affects global market competition and financial stability. So far, only small national samples were studied and there was no appropriate methodology to assess control globally. We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.

    Dailykos.com; an oasis of truth. Truth that leads to action 48forEastAfrica - Donate to Oxfam

    by Shockwave on Sun Oct 23, 2011 at 11:37:32 PM PDT

  •  Not Surprised About the Banks (1+ / 0-)
    Recommended by:
    praenomen

    Currently, banks generate more than 50% of the global wealth; and the great part of that wealth created remains within the banking system and does not create jobs or increase societal utility. However, it does water down the puchasing power of ordinary citizens. So it's the destructive rewarding of money for creating absolutely nothing. Who knew?

  •  Deeply flawed study IMO (1+ / 0-)
    Recommended by:
    Gustogirl

    This is not the way to understand how the economy works or how control is exercised.  

    I think this is a case of scientist hurbris -- thinking they can understand an area outside their field of expertise.

    There is so much wrong here, I don't know where to begin.

    The first big error is to focus on share ownership (ie stocks).  Yes, majority shareholders can basically dominate a corporation by voting the shares to control the board of directors.  

    But share ownership is a minor and declining aspect of how businesses are controlled.  The reigning theory of "corporate democracy" is no democracy -- the take it or leave it theory.  In other words, the business schools have been teaching for several generations that shareholders are passive investors who only "vote" by buying and selling, not by exercising control.  Share ownership tends to be diffuse with various big owners canceling each other out.  Control is exercised by management insiders.

    Also, the study doesn't seem to factor in that the economies of the various countries are radically different.  For example, in the US depository banks (or depository divisions of mixed banks) do not own shares; they own bonds and corporate loans.

    In Germany, however, banks own shares and even control corporations.   This is how the Germans like it, with corporate boards controlled by a very forward looking coalition of share-owning banks, management and unions.  

    One way US banks control the actual operating corporate sector is through loans.  The loan agreements are staggeringly onerous.  This is how US banks run the system, not by owning shares.

    Also, because the authors seem not to understand how various economies work, they have omitted Chinese state corporations and almost all Japanese banks and corporations -- which cannot be a true description of the world economy.

    They also made at least one ridiculously stupid error because of their focus on formal share ownership.  They list The Depository Trust Company as 39 and assume that it is somehow powerful.  But DTC is a "dummy corporation" sort of.  It is simply a vehicle through which other entities hold shares.  It's kind of a way of avoiding having to issue paper stocks and bonds.  Issuers of stocks and bonds issue big chunks to DTC and investors then have accounts with DTC.  It's very confusing, but DTC doesn't itself exercise control.  My guess is that there are other glaring errors like that simply because the world of finance would be very opaque to any scientist without lots of background in business.

    At the same time, it leaves out extremely powerful groups that fly under the radar screen of stock ownership -- global corporate law firms that influence dozens of corporations, privately held investment funds, boutique investment banks, and trade groups.

    I think it's good that someone tried to study global corporate control, but I think that this study is probably worthless.

    •  Good points. (0+ / 0-)

      What would you recommend as pertinent data?  

      I'd just like to see the flow of money around the world; where it moves, where it settles and stays.  Identify the "jet streams", so to speak.

      The most interesting part of the article to me was the first mention I've ever heard that we may well need international anti-monopoly laws.  Then again, I would like to see our present law enforced - most industries are acting like cartels these days, IMO.  

      Government of the people, by the people, for the people, shall not perish from the earth - Abraham Lincoln

      by Gustogirl on Mon Oct 24, 2011 at 07:11:12 AM PDT

      [ Parent ]

      •  This isn't going to be a popular thing to say, but (1+ / 0-)
        Recommended by:
        marsanges

        I think the study's basic premise is wrong.  I'm definitely not a free marketeer, but I also don't think that the world economy is "controlled" by a small set of players.  The only player that certainly can dictate global economic trends right now is probably China's State Administration of Foreign Currency, which holds something like $2 trillion in foreign currency and government bonds.  

        You are right to focus on the right 'data set' but that would be almost impossible to get.  For example, the ownership of shares by these banks is probably mostly along the lines of DTC's ownership.  In other words, it's impossible to tell whether JP Morgan Chase is on the list because it owns shares in operating companies and other banks or because it's clients own share in companies and other banks, and Chase is merely the nominee.  There is a staggering amount of that in the financial sector.  

        For example, my one personal business experience with Schroders (which is on the list) many years ago when I was a junior associate, is that they are a very proper, very British, very legal bunch of money launderers.  There was this bunch of Latin American oligarchs who wanted to violate their country's currency laws and they established a Cayman's Island (hence secret) company to hold the securities through Schroders.  So who owned and exercised control over the shares?  The secret oligarchs, Schroders or the Cayman shell company?

        If you wanted to know who dominates the economy, best way would be to interview a large number of business executives and ask them.

        Btw, this reminds me, if you want to see a funny, satirical, but deadly accurate film about "who runs the world," try to get hold of this weird little film made by Lewis Lapham (former editor of Harpers) called "The American Ruling Class."  He actually did that -- had a young student sit down with the ruling class business elite and ask them who runs the world and how, and they were vary candid in answering.

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