Allowing tiny numbers of financial actors to wreck things

The MOST astonishing thing about the current economic mess is how few people actually benefit from the current ruling ideology.  The numbers are TINY.  In fact, if one subscribes to the notion that the current rule of the banksters ensures calamities like climate change and that no one will escape those effects, there are actually NO winners from the current power arrangements.  NONE!

A scientific study analyzing over 30 million economic actors shows that an elite 147 actors control a vast amount of global upstream and downstream financial transactions.

Study shows powerful corporations really do control the world’s finances

 Dprogram.net   August 23, 2011

(ScienceNews) – For many years conventional wisdom has said that the whole world is controlled by the monied elite, or more recently by the huge multi-national corporations that seem to sometime control the very air we breathe. Now, new research by a team based in ETH-Zurich, Switzerland, has shown that what we’ve suspected all along, is apparently true. The team has uploaded their results onto the preprint server arXiv. 

Using data obtained (circa 2007) from the Orbis database (a global database containing financial information on public and private companies) the team, in what is being heralded as the first of its kind, analyzed data from over 43,000 corporations, looking at both upstream and downstream connections between them all and found that when graphed, the data represented a bowtie of sorts, with the knot, or core representing just 147 entities who control nearly 40 percent of all of monetary value of transnational corporations (TNCs). 

In this analysis the focus was on corporations that have ownership in their own assets as well as those of other institutions and who exert influence via ownership in second, third, fourth, etc. tier entities that hold influence over others in the web, as they call it; the interconnecting network of TNCs that together make up the whole of the largest corporations in the world. In analyzing the data they found, and then in building the network maps, the authors of the report sought to uncover the structure and control mechanisms that make up the murky world of corporate finance and ownership. 

To zero in on the significant controlling corporations, the team started with a list of 43,060 TNCs taken from a sample of 30 million economic “actors” in the Orbis database. They then applied a recursive algorithm designed to find and point out all of the ownership pathways between them all. The resulting TNC network produced a graph with 600,508 nodes and 1,006,987 ownership connections. The team then graphed the results in several different ways to show the different ways that corporate ownership is held; the main theme in each, showing that just a very few corporations through direct and indirect ownership (via stocks, bonds, etc.) exert tremendous influence over the actions of those corporations, which in turn exert a huge impact on the rest of us. 

The authors conclude their report by asking, perhaps rhetorically, what are the implications of having so few exert so much influence, and perhaps more importantly, in an economic sense, what the implications are of such a structure on market competitiveness. 

More information: The network of global corporate control, Stefania Vitali, James B. Glattfelder, Stefano Battiston, arXiv:1107.5728v1 [q-fin.GN] http://arxiv.org/abs/1107.5728 

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. more 

We even find a list of the big players in this post!

If the real problems facing global agriculture weren't bad enough, we have speculators to make things so much worse.  They must think they are invulnerable because hungry populations are very unpredictable.

Food Prices Could Hit Tipping Point for Global Unrest
By Brandon Keim
August 15, 2011

When food shortages and rising prices drive people to desperation, social unrest soon follows. It’s as true today as it was in 18th-century France. According to a new analysis of food prices and unrest, the 2008 global food riots and ongoing Arab Spring may be a preview of what’s coming. 

“When you have food prices peak, you have all these riots. But look under the peaks, at the background trend. That’s increasing quite rapidly, too,” said Yaneer Bar-Yam, president of the New England Complex Systems Institute. “In one to two years, the background trend runs into the place where all hell breaks loose.” 

Bar-Yam and his colleagues are hunters of mathematical signals in social data: market trends and economic patterns, ethnic violence, Hollywood movies. In their latest expedition, described Aug. 11 in the prepublication online arXiv, they focus on the 2008 food riots and the Arab Spring, both of which followed year-long surges in basic food prices.

 

FAO Price Index at current prices (black curve) and corrected for inflation (blue curve) between January 2004 and May 2011. Red dashed lines signify the beginning dates of food riots and unrest in North Africa and the Middle East. Black and blue horizontal lines represent the current-price and inflation-adjusted food price thresholds for riots. Bar-Yam et al/arXiv 

The researchers are hardly the first to portray food problems as a spark that inflames social inequality and stokes individual desperation, unleashing and amplifying impulses of rebellion. The role of food prices in triggering the Arab Spring has been widely described. Their innovation is a pair of price points on the United Nations Food and Agriculture Organization’s food price index: about 215 in current prices, or 190 when corrected for inflation. 

It’s at those points where, on a graph of food prices and social unrest between 2004 and 2011, unrest breaks out. But whereas they were crossed by price jumps in 2008, Bar-Yam and colleagues calculate that the underlying, steady trend — driven primarily by commodity speculation, agricultural crop-to-fuel conversion and rising prices of fertilizer and oil — crosses those points between 2012 and 2013. 

“Once we get there, the peaks aren’t the problem anymore. Instead it’s the trend. And that’s harder to correct,” said Bar-Yam. At that point, widespread political unrest and instability can be expected, even in countries less troubled than those in North Africa and the Middle East. 

“When the ability of the political system to provide security for the population breaks down, popular support disappears. Conditions of widespread threat to security are particularly present when food is inaccessible to the population at large,” write Bar-Yam and colleagues in arXiv. “All support for the system and allowance for its failings are lost. The loss of support occurs even if the political system is not directly responsible for the food security failure, as is the case if the primary responsibility lies in the global food supply system.” more

And in perhaps the most unusual sign of the crazy state of affairs out there, we have a young man writing for a Conservative German paper actually rabble-rousing.  It's not much of an effort considering how dangerous the times and how tiny the opposition, but it's not bad considering where it appears.

Facing the Crisis
Time to Get Angry, Europe
An Essay by Ulrich Beck   08/24/2011

The European common currency is in trouble, several EU countries are facing mountains of debt and solidarity within the bloc is declining. It is European youth, in particular, who have drawn the short stick. Closer cooperation is the only way forward.

Germany's European policy is about to undergo a transformation as significant as Ostpolitik --the country's improvement of relations with the Soviet bloc -- was in the early 1970s. While that policy was characterized by the slogan "change through rapprochement," Berlin's new approach might be dubbed "more justice through more Europe."

In both cases, it is a question of overcoming a divide, between the East and the West in the 1970s and between north and south today . Politicians tirelessly insist that Europe is a community of fate. It has been that way since the establishment of the European Union. The EU is an idea that grew out of the physical and moral devastation following World War II. Ostpolitik was an idea devoted to defusing the Cold War and perforating the Iron Curtain.

Unlike earlier nations and empires that celebrated their origins in myths and heroic victories, the EU is a transnational governmental institution that emerged from the agony of defeat and consternation over the Holocaust. But now that war and peace is no longer the overriding issue, what does the European community of fate signify as a new generational experience? It is the existential threat posed by the financial and euro crisis that is making Europeans realize that they do not live in Germany or France, but in Europe. For the first time, Europe's young people are experiencing their own "European fate." Better educated than ever and possessing high expectations, they are confronting a decline in the labor markets triggered by the threat of national bankruptcies and the economic crisis. Today one in five Europeans under 25 is unemployed. 

A New Age of Risky Confusion 

In those places where they have set up their tent cities and raised their voices, they are demanding social justice. In Spain and Portugal, as well as in Tunisia, Egypt and Israel (unlike Great Britain ), they are voicing their demands in a way as nonviolent as it is powerful. Europe and its youth are united in their rage over politicians who are willing to spend unimaginable sums of money to rescue banks, even as they gamble away the futures of their countries' youth. If the hopes of Europe's young people fall victim to the euro crisis, what can the future hold for a Europe whose population is getting older and older? 

News programs offer new visual material for the dawning of a new age of risky confusion -- the "world risk society" -- on an almost daily basis. The headlines have been interchangeable for some time: Insecurity Over the Future of the Global Economy, EU Bailout Fund in Jeopardy, Merkel Attends Crisis Meeting with Sarkozy, Rating Agency Announces Downgrade of US Debt. Does the global financial crisis signal the deterioration of the old center? Ironically, it is authoritarian China that is playing the moral apostle on the financial front, with its sharp criticism of both democratic America and the EU. 

There is one thing the financial crisis has undoubtedly achieved: Everyone (experts and politicians included) has been catapulted into a world that no one understands anymore. As far as the political reactions are concerned, there are two extreme scenarios that can be juxtaposed. The first is a Hegelian scenario, in which, given the threats that global risk capitalism engenders, the "ruse of reason" is afforded an historic opportunity. This is the cosmopolitan imperative: cooperate or fail, succeed together or fail individually. more