King of the Jungle by Shirl
The idea that the world is controlled by a small group of powerful corporations isn’t new. It has been a popular inspiration for sci-fi authors like Peter Hamilton, a well-discussed topic in conspiracy forums, almost everyone who browses the Internet more than occasionally has met the term “Illuminati,” and all protesters who occupy Wall Street claim the same. Now, not only writers with great imagination, not only conspiracy fans and dissatisfied protesters talk about this idea. Swiss scientists from the Federal Institute of Technology (ETH) published an analysis of the relationships between 43,060 transnational corporations (TNCs) in October 2011 that identified a relatively small group of companies with disproportionate power over the global economy.
Controlled system? Naturally!
Their motivation doesn’t come from conspiracy theories or common intuition, but is based on natural observations. Networks where smaller members are connected to a strong dominating system can be commonly observed in nature, from neural networks to animal societies. The scientists only combined mathematics and models of natural systems with comprehensive corporate data.
“Reality is so complex, we must move away from dogma, whether it’s conspiracy theories or free-market,” says James Glattfelder, one of the authors. “Our analysis is reality-based.”
They pulled out all TNCs from the Orbis 2007 database and constructed a model of which companies controlled others though shareholding. They found a core of 1,318 companies with interlocking ownerships that represented 20 per cent of global operating revenues and collectively own the majority of the world’s large blue chip and manufacturing firms – the “real” economy – representing a further 60 per cent of global revenues. The team untangled the web of ownership again and identified 147 companies, mostly banks, controlling 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.
Control Doesn’t Equal Wealth or Ownership
There are several analyses that research global wealth and its concentration, but their results aren’t the same. Swiss scientists noted that top-ranking corporations in their network hold control ten times bigger than what could be expected based on their wealth. Only 737 top holders accumulate 80 per cent of the control over the value of all TNCs.
On the other hand, the head of the New England Complex Systems Institute, Yaneer Bar-Yam, objected that the Swiss analysis assumes owning equals controlling, 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. So the power of the selected 147 companies may not be so huge. The authors claim that top holders are at least in the position to exert considerable control, either formally or via informal negotiations.
Behind the Scenes by The Cable Show
Although society doesn’t like the idea that there is someone behind the scenes who controls everything, it could have good effects if it is strong enough, as it would guarantee order and stability. However, no scientific study demonstrates or excludes that this 147-faced super-entity has ever acted as a bloc, although there are signs that this is not an unlikely scenario. Analysts noted that TNCs’ goal doesn’t seem to be world domination; they buy shares in each other for business reasons.
If it is true, it is now evident that the entity is not stable inside. You can find Lehman Brothers in the list of top 50 companies because when scientists started their work, they actually existed. Now, it is more than three years since it has bankrupt and the entity structure has probably changed. Observations suggest that while in good times the network is seemingly robust, in bad times companies go into distress simultaneously. That’s why Glattfelder suggests global anti-trust rules, which now exist only at national level, to limit over-connection among TNCs.
“It’s disconcerting to see how connected things really are,” said George Sugihara of the Scripps Institution of Oceanography in California, a complex systems expert who has advised Deutsche Bank.