Are SuperConnected Finance Networks Inherently Unstable?

October 26, 2011 2:30pm by Barry Ritholtz

Interesting look at the network of firms that in the words of New Scientist, “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).”

The architecture of global economic power, the concentration of wealth combined with the super connectedness is what is so problematic.

I disagree with their list — its less about influence than having massive amounts of capital. As an example, my perspective is that Goldman Sachs (#18) is far more influential than Vanguard (#8). So I am not sure what to make about their top 50.

Still, its an interesting concept — that its the inherent nature of these super connected networks that breeds instability and crises.

The top 50 of the 147 super-connected 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
8. Vanguard Group
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

Source:
Revealed – the capitalist network that runs the world
Andy Coghlan and Debora MacKenzie
New Scientists October 2011
http://www.newscientist.com/article/mg21228354.500-revealed–the-capitalist-network-that-runs-the-world.html

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