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Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

A Physicist’s Deep-Dive into Who Controls the World Economy

ownership-networks-smallIn this TED talk, physicist James B. Glattfelder looks at who controls the world economy, focusing first on ownership as a complex system. He says, in his introduction:

“We spend billions of dollars trying to understand the origins of the universe while we still don’t understand the conditions for a stable society, a functioning economy, or peace.”

Network Analysis of Economics as a Complex System

He uses analytic techniques from science to look at the ownership of global corporations and control of the economy.

So we started with a database containing 13 million ownership relations from 2007. This is a lot of data, and because we wanted to find out who rules the world, we decided to focus on transnational corporations, or TNCs for short. These are companies that operate in more than one country, and we found 43,000. In the next step, we built the network around these companies, so we took all the TNCs’ shareholders, and the shareholders’ shareholders, etc., all the way upstream, and we did the same downstream, and ended up with a network containing 600,000 nodes and one million links. This is the TNC network which we analyzed.

So he goes from there to control. How much control is how concentrated?

Disturbing data with disturbing conclusions

The talk is from 2012. It looks at the phenomenon of the great recession, the 2008 world financial crisis. But he goes into the underlying structure, and the enormous problems related to concentrated ownership and control in a very few hands.

If you want to compute the flow in an ownership network, this is what you have to do. It’s actually not that hard to understand. Let me explain by giving you this analogy. So think about water flowing in pipes where the pipes have different thickness. So similarly, the control is flowing in the ownership networks and is accumulating at the nodes. So what did we find after computing all this network control? Well, it turns out that the 737 top shareholders have the potential to collectively control 80 percent of the TNCs’ value. Now remember, we started out with 600,000 nodes, so these 737 top players make up a bit more than 0.1 percent. They’re mostly financial institutions in the U.S. and the U.K. And it gets even more extreme. There are 146 top players in the core, and they together have the potential to collectively control 40 percent of the TNCs’ value.

And what does that mean for the long-term stability, and peace, in the world? You decide. First, watch this 13-minute video. And by the way, the original is on the TED site as Who Controls the World.

  • Bryan Zak

    Tim can you create a spreadsheet that would allow the user to apply this theory to different layers of a societal network? For instance the lowest level might be the economy generated by the local farmers market, then the next layer up might be the community that includes non-profits, for-profits, city government, local state and federal employees, and public utilities.

    • Hi Bryan, interesting thought, I can imagine such a thing but I couldn’t imagine it well enough to lay it into a spreadsheet.

      • Bryan Zak

        I think I could start a spreadsheet and it might be because I live in a small community of just over 5,000. But if we had a spreadsheet with the top ten economic employers on one tab, and a separate tab for what the local Chamber of Commerce considers the top small business sectors, a separate tab for proximity to other communities, or natural parks, etc., this might be simple enough to come up with a template. I will see what I can do to build a sample. This might also work well as a template using live plan to then follow the template to build some questions to develop an economic roadmap of a community.

        • I hope you do. It could be a fascinating real-world, accessible example. And an interesting project too.

A physicist studied economic ownership networks to discover a disturbing concentration of economic control in the hands of a very small number of people