The viral protest meme known as "Occupy Wall Street" is still going strong, and according to some provocative research to be published in PLoS One, it may never have reason to run out of steam. Why? Because "the 1%"--#OWS-speak for the tiny subgroup of wealthy interests that exerts outsize influence over "the 99%" comprising the rest of us--may be a mathematically inevitable consequence of the way networks self-organize.
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The paper, entitled "The network of global corporate control", is an attempt by complex systems theorists at the Swiss Federal Institute of Technology in Zurich to "go beyond ideology to empirically identify such a network of power," according to New Scientist.
The researchers' method: analyzing the ownership connections between 43,000 transnational corporations and seeing where the bulk of network control coalesces. The results, visualized in an infographic, appear to show that a "core" of 1,318 companies representing 20% of the global economy collectively own (through stock shares) an additional 60% of global revenues.
If that doesn't freak you out, within that core is a still smaller "super-entity" of 147 companies--mostly financial institutions, depicted as red dots--that appear to control 40% of the total revenue in the network.
The study and infographic have generated lots of press and intense debate about the researchers' methodology and assumptions (for example, that stock ownership is a proxy for direct influence/control). But the most provocative interpretation, validated by other systems theorists contacted by New Scientist, is that this sinister-looking concentration of influence is basically unavoidable in any network, capitalist or otherwise. One researcher says that similar clustering is common in similar networks found in nature; while Dan Braha of the New England Complex Systems Institute minces even fewer words:
"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."
COMMENTARY: From Orbis 2007, a database listing 37 million companies and investors worldwide, they pulled out all 43,060 transnational corporations or 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.
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.
The top 50 of the 147 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 work, published in PLoS One, revealed a core of 1318 companies with interlocking ownerships (see image). 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.
Courtesy of an article dated November 10, 2011 appearing in Fast Company Design
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