The huge number of transnational capitalist firms straddling the planet are effectively controlled by a very small group of centrally important players, says a ground-breaking survey conducted by Swiss researchers.
Deploying statistical methods normally used in physics, Stefania Vitali, James B. Glattfelder and Stefano Battiston of the Swiss Federal Institute of Technology, Zurich, data-mined information held by business intelligence firm Bureau van Dijk. The data, which included company ownership structures, allowed a new insight into the relationships between 43,060 corporations.
In 2007, a mere 147 entities controlled nearly 40% of the monetary value of all transnational corporations, they said in their paper titled The Network of Global Corporate Control.
They defined a transnational company as one having at least 10% of its holdings in more than one country. They then looked at “upstream and downstream” ownership connections.
This produced a network of 600,508 “economic actors” connected through more than a million ownership ties. Just 737 of these “actors” control 80% of the operating revenue of the 43,060 transnational firms.
Within this central group there is a core of 147, which controls 38.4% of all the wealth. “The top actors are in the core and hence are interconnected and do not carry out their business in isolation,” Glattfelder said on his blog.
The researchers call this core group an economic “super-entity”.
Glattfelder told Sciencenews.org that ownership of publicly held corporations is broadly distributed, but, “take a step back and it’s all flowing into the same few hands.”
This level of centralisation gives control and, of course, profits but also brings its own risks, as Brandy Aven of Pittsburgh’s Carnegie Mellon University Tepper School of Business said to Sciencenews.org.
“Imagine a disease spreading,” she said. “If you have a high school where everyone’s sleeping together and one person gets syphilis, then everyone gets syphilis.”
As it draws on pre-global financial crisis data, the report shows the now defunct Lehman Brothers as one of the big players at the centre — an example of capitalist “syphilis”, if ever there was one.
Vitali, Glattfelder and Battiston’s paper is the first time research of this sort has been carried out on the international economy. Earlier, Griffith University researcher Georgina Murray in her Capitalist Networks and Social Power in Australia and New Zealand made a similar analysis. She coupled it with individual interviews of leading capitalists, revealing their sincere beliefs.
“The whole world is our oyster so what is so special about here,” one of them told her, referring to Australia. “We put our money out when we think it's good for us. That's all we do. We don't look for any other reason.”