Revealed – the capitalist network that runs the world

Fascinating article about research into the structure of major companies across the world. Using complex systems theory the scientist have mapped the alliances and interconnectedness. They found that:

‘When the team further untangled the web of ownership … 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.’ 

The study is strictly neutral about the consequences of such a web of connections. Does it promote resilience, or is it source of potential weakness? The article suggests that: 

 ‘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. Sugihara says the analysis suggests one possible solution: firms should be taxed for excess interconnectivity to discourage this risk.’ 

 Well, possibly. But it’s not a conspiracy the authors say: 

 ‘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.’ 

 It’s natural in its genesis: 

 ‘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.” 

 Of course just because something doesn’t start out as a conspiracy, it doesn’t mean it won’t become one. 

 ‘ 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.’ 

 Indeed. 

 http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html#.VRB_jBjfWrX

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Revealed – the capitalist network that runs the world

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