A small, tightly woven network of companies, mostly banks, wields disproportionate control over the global economy, according to a new study. The findings shed some light on the intimate ways 21st century capitalism works — and how those functions can undermine the entire system.
A trio of systems theorists at ETH Zurich examined the world’s 43,060 transnational corporations and studied their share ownerships, searching for commonalities that tie the companies together. They worked with techniques used to study complex systems in nature to construct a model of which companies controlled which other companies, and through which networks.
Ultimately, Stefania Vitali, James Glattfelder and Stefano Battiston identified a core of 1,318 companies with interwoven ownerships, each with ties to two or more other companies. They were connected to an average of 20 each, the researchers found. The network forms a “giant bow-tie structure,” with a small, tight knot in the middle and connections spanning outward in an increasingly nebulous pattern. The knot is very small and dense compared to the other sections, and the researchers dubbed it an economic “super-entity.” It is also very closely held — about three-quarters of the ownership remains in the hands of the core itself.
While the authors note that there’s no example of this core intentionally acting as a bloc — in other words, there’s no vast economic conspiracy — that doesn’t mean it can’t act that way. “Globally, top holders are at least in the position to exert considerable control, either formally (e.g., voting in shareholder and board meetings) or via informal negotiations,” they write.
|The Core of the Network|
The Top 20 Corporation in the Core of the Network:
9. UBS AG
12. Deutsche Bank AG
20. Legg Mason Inc
Source: New Scientist