Powerful transnational corporations “Super Entity”

In the first such analysis ever conducted, Swiss economic researchers have conducted a global network analysis of the most powerful transnational corporations (TNCs). Their results have revealed a core of 737 firms with control of 80% of this network, and a “super entity” comprised of 147 corporations that have a controlling interest in 40% of the network’s TNCs.

When we hear conspiracy theorist talk about this or that powerful group (or alliance of said groups) “pulling strings” behind the scenes, we tend to dismiss or minimize such claims, even though, deep down, we may suspect that there’s some degree of truth to it, however distorted by the theorists’ slightly paranoid perception of the world. But perhaps our tendency to dismiss such claims as exaggerations (at best) comes from our inability to get even a slight grip on the complexity of global corporate ownership; it’s all too vast and complicated to get any clear sense of the reality.

But now we have the results of a global network analysis (Vitali, Glattfelder, Battiston) that, for the first time, lays bare the “architecture” of the global ownership network. In the paper abstract, the authors state:

“We present the first investigation of the architecture of the international ownership network, along with the computation of the control held by each global player. We find that transnational corporations form a giant bow-tie structure* and that a large portion of control flows to a small tightly-knit core of financial institutions. This core can be seen as an economic “super-entity” that raises new important issues both for researchers and policy makers.”

TNC21

TNC21

Data from previous studies neither fully supported nor completely disproved the idea that a small handful of powerful corporations dominate much or most of the world’s commerce. The researchers acknowledge previous attempts to analyze such networks, but note that these were limited in scope to national networks which “neglected the structure of control at a global level.”

What was needed, assert the researchers, was a complex network analysis.

“A quantitative investigation is not a trivial task because firms may exert control over other firms via a web of direct and indirect ownership relations which extends over many countries. Therefore, a complex network analysis is needed in order to uncover the structure of control and its implications. “

To start their analysis, the researchers began with a list of 43,060 TNCs which were taken from a sample of 30 million “economic actors” contained in the Orbis 2007 database [see end note]. TNCs were identified according to the Organization of Economic Co-operation and Development (OECD) definition of a transnational corporation [see end note]. They next applied a recursive search algorithm which singled out the “network of all the ownership pathways originating from and pointing to these TNCs.”

The resulting TNC network includes 600,508 nodes and 1,006,987 ownership ties.

Bow-tie structure of the largest connected component (LCC)

In terms of the connectivity of the network, the researchers found that it consists of many small connected components, but the largest one (encompassing 3/4 of all nodes) “contains all the top TNCs by economic value, accounting for 94.2% of the total TNC operating revenue.”

Two generalized characteristics were identified:

1] A strongly connected component (SCC), that is, a set of firms in which every member owns directly and/or indirectly shares in every other member. The emergence of such a structure can be explained as a means of preventing take-overs, reducing transaction costs, risk sharing and increasing trust between “groups of interest.”

2]

The largest connect[ed] component contains only one dominant, strongly connected component (comprised of 1347 nodes). This network, like the WWW, has a bow tie structure. What’s more, they found that this component, or core, is also very densely connected; on average, members of this core have ties to 20 other members. “Top actors” occupy the center of the bow tie. In fact, a randomly chosen TNC in the core has about 50% chance of also being among the top holders, as compared to, for example, 6% for the “in” section. [emphasis added]

“As a result, about 3/4 of the ownership of firms in the core remains in the hands of firms of the core itself. In other words, this is a tightly-knit group of corporations that cumulatively hold the majority share of each other.”

In examining the details of this core, the analysis also showed that only 737 top holders accumulate 80% of the control over the value of all TNCs (in the analyzed network). Further,

“…despite its small size, the core holds collectively a large fraction of the total network control. In detail, nearly 4/10 of the control over the economic value of TNCs in the world is held, via a complicated web of ownership relations, by a group of 147 TNCs in the core, which has almost full control over itself. The top holders within the core can thus be thought of as an economic “super-entity” in the global network of corporations.” [emphasis added]

Concerning the implications of this super entity, the researchers asked two fundamental questions: First, what are the implications for market competition, and, second, what are the implications for economic stability?

Regarding the first question, the authors  assert that no matter the origin of the SCC, due to its high degree of TNC network control, “it weakens market competition”.

Regarding the first question, the authors  assert that no matter the origin of the SCC, due to its high degree of TNC network control, “it weakens market competition”.

It is clear just from the history of anti-trust laws in this country (the U.S.) that concentrated ownership stifles free market competition and innovation, reduces over-all employment, and leads to excessive pricing.

some major TNCs in the financial sector.(source: Orbis 2007)

In regards to the second question, the researchers note that “the existence of such a core in the global market was never documented before and thus, so far, no scientific study demonstrates or excludes that this international ‘super-entity’ has ever acted as a bloc.

However, there is historical data — such as within the airline, auto and steel industries — supporting this possibility.

“…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.”

Additionally, recent studies (Stiglitz J.E., 2010, Battiston S. et al, 2009) have shown that densely connected financial networks are highly susceptible to systemic risk. Despite the fact that such networks may seem robust in good economic times, in times of crisis however, member firms tend to enter ‘distress mode’ simultaneously. This was seen recently in the 2008 (“near”) financial collapse (note: 3/4 of the network core in this analysis are financial intermediaries).

Calling their findings “remarkable”, they suggest that because “international data sets as well as methods to handle large networks became available only very recently, [this] may explain how this finding could go unnoticed for so long.”

While the researchers acknowledge that verifying whether the implications of their findings “hold true for the global economy” is beyond the scope of their current research, they assert that their unprecedented attempt to uncover the structure of corporate control is “a necessary precondition for future investigations.”

 

Source:  Planetsave.com

Palm Oil Companies Start Forest Fire killing hundreds

 

 

Hundreds of orangutans killed in north Indonesian forest fires deliberately started by palm oil firms:

 

Hundreds of orangutans killed in north Indonesian forest fires deliberately started by palm oil firms

Hundreds of orangutans killed in north Indonesian forest fires deliberately started by palm oil firms

 

Hundreds of orangutans are believed to have died in fires deliberately lit by palm oil companies.

Conservationists say the rare Sumatran orangutan could be wiped out within weeks.

‘It is no longer several years away, but just a few months or even weeks before this iconic creature disappears,’ said Briton Ian Singleton, of the Sumatran Orangutan Conservation Programme.

Shocking: Hundreds of orangutans are believed to have died in fires deliberately lit by palm oil companies Tripa forest on the coast of Aceh province in northern IndonesiaShocking: Hundreds of orangutans are believed to have died in fires deliberately lit by palm oil companies inTripa forest on the coast of Aceh province in northern Indonesia

The apes, which live in the Tripa forest on the coast of Aceh province in northern Indonesia, have had to flee the flames as fires wipe out their habitat – and palm oil companies have been blamed for starting the blazes.

The companies have already been accused of offering a bounty for the heads of orang-utans in Borneo after blaming the animals for destroying their young palm trees – but conservationists say the animals have had to encroach on the plantations because their own habitats have been destroyed.

The Daily Mail revealed the bounty hunt earlier this year with a sad photo of a mother trying to protect her baby as Indonesian palm oil workers moved in for the kill.

Fortunately on that occasion wildlife officials were on hand to rescue the pair and move them to a safe area.

Sad: The apes have had to flee the flames as fires wipe out their habitat ¿ and palm oil companies have been blamed for starting the blazesSad: The apes have had to flee the flames as fires wipe out their habitat and palm oil companies have been blamed for starting the blazes

Now the new threat to the Sumatran orangutan has erupted in the officially protected Tripa forest, which is hemmed in by palm oil plantations.

Land clearing fires have been started inside the forest, resulting in the animals fleeing – but hundreds are feared to have died in the flames because Indonesians in the employ of the palm oil companies have been accused of driving them back into the flames.

Dr Singleton, originally from Hull, said the remaining orangutans will die either in the fires or of gradual starvation and malnutrition as their food resources disappear.

He added: ‘We are currently watching a global tragedy.’