Wednesday, November 2, 2011

Revealed – the banking network that runs the world

I've been wanting to get this on the blog for the past week. The original title is Revealed – the capitalist network that runs the world, but that assumes that what these massive banks have been doing is capitalism. As readers who have followed this blog for a while know, the banksters are not practicing capitalism at all - they have actively and greedily de-capitalized companies and industries for decades now. If you want to call it "capitalism" truth-in-advertising demands that you use a phrase, such as "pirate capitalism" or "financial capitalism" to distinguish it from industrial capitalism.

Three complex systems theorists at the Swiss Federal Institute of Technology in Zurich used a database of 37 million companies and investors worldwide to construct a picture of the most powerful by analyzing managerial and cross-ownerships link to reveal
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. 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.
Especially interesting is that almost all of the top 100 entities identified as controlling the world's economy are financial institutions, proving further evidence that a new, powerful oligarchy of rentiers and usurers has arisen. The most important entities is Barclays plc, which I know from work I did in the mid-1990s is one of the most important institutions in the carefully concealed still extant British Empire. Included in the top ten are investment vehicles Capital Group Companies Inc., FMR Corporation (which runs Fidelity Investments), the French global insurance group AXA, State Street Corporation, JP Morgan Chase & Co., the British firm Legal & General Group plc, Vanguard Group Inc., and Swiss banking giant UBS AG.

Merrill Lynch shows up in the number ten slot, but it imploded in the financial collapse of September 2008, and is now part of Bank of America. Goldman Sachs comes in 18th, and Morgan Stanley 21st. The first name that is not a "bankster bank" shows up in slot 15: Walton Enterprises LLC, the investment vehicle for the Wal-Mart family.

The first company tied to the real economy that shows up is China Petrochemical Group Company, in the fiftieth position.

According to the article,
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.
Below is a computer-generated image of the 1,318 transnational corporations that form the core of the world's economy. Superconnected companies are red, very connected companies are yellow.

Revealed – the capitalist network that runs the world

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).
"Reality is so complex, we must move away from dogma, whether it's conspiracy theories or free-market," says James Glattfelder. "Our analysis is reality-based."
Previous studies have found that a few TNCs own large chunks of the world's economy, but they included only a limited number of companies and omitted indirect ownerships, so could not say how this affected the global economy - whether it made it more or less stable, for instance.
As Thom Hartmann reported a few weeks ago, Four US banks hold a staggering 95.9% of U.S. derivatives: The $600 Trillion Time Bomb That's Set to Explode. Obviously, anti-trust actions are desperately needed - and soon - to deal with the monster-beast these banks have become. Last week, a contributor to ZeroHedge noted in The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System:
The amount of money that we are talking about is absolutely staggering. Graham Summers of Phoenix Capital Research estimates that the notional value of the global derivatives market is $1.4 quadrillion, and in an article for Seeking Alpha he tried to put that number into perspective....
If you add up the value of every stock on the planet, the entire market capitalization would be about $36 trillion. If you do the same process for bonds, you’d get a market capitalization of roughly $72 trillion.
The notional value of the derivative market is roughly $1.4 QUADRILLION.
I realize that number sounds like something out of Looney tunes, so I’ll try to put it into perspective.
$1.4 Quadrillion is roughly:
Modern financial innovation is one genie that MUST be put back in the bottle. Human survival depends on it.

1 comment:

  1. Damn, Tony, I am glad you got to this. I have been sitting on the links to this story for a while, too, waiting to think of something intelligent to write about it.

    I like a LOT about this study but the biggest reason is that it is a computer verification of C. Wright Mill's "The Power Elite." One of the reasons the primitive thinking of neoliberalism took hold in the academic centers of economic thought is that you could dress those ideas with some pretty math. Try throwing math at Institutional Analysis and you will discover it is MUCH harder.

    But the guys in Zurich have done an amazing job of using new and powerful methods to mathematically illustrate something like "The Power Elite." I guess we Institutionalists just had to wait for more powerful computers. And to think I could run the math of neoliberalism on my Mac Performa in 1995.