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

Thai ex-civil servant

Bangkok:

 Thai ex-civil servant found very rich


Thai ex-civil servant found very rich

A Thai court has ordered more than $1.4m in assets seized from a former top civil servant whose wealth was revealed when burglars robbed his house.

The Civil Court said on Friday that former Transport Ministry Permanent Secretary Supoj Saplom could not prove his wealth was honestly earned. It said his civil servant’s salary from 1978 until 2002 could not account for it.

Supoj had reported to police that $156 000 was missing after a burglary at his home in 2011. But when the burglars were caught, they confessed to stealing $570 000 in cash and gold. Prosecutors found Supoj had about $2m in assets, $1.4m presumed ill-gotten by the court.

Supoj claimed that part of his fortune was earned before he joined the government and some belonged to relatives.

85 Elites Have As Much Wealth As Half The World’s Population

85 People, a group that could easily fit on a single subway car:

85 Wealthy Elites Have As Much Wealth As Half The World’s Population

85 Wealthy Elites Have As Much Wealth As Half The World’s Population

The extent to which both global wealth has become cornered by a virtual handful of so-called “global elite” is exposed in a new report by Oxfam on Monday. He warned that the 85 richest people in the world share a combined wealth of £ 1 billion , as much as the poorest 3.5 billion of the world population .

The organization fears that the development of this concentration of economic resources is threatening the political stability and increasing social tensions.

The report found that in recent decades , the rich have successfully managed to skew political influence policies in their favor on issues ranging from financial deregulation , tax havens to reduce tax rates on high incomes and cuts in public services for most. Since the late 1970s , tax rates for the wealthy have declined in 29 of the 30 countries for which data are available , according to the report .

Americans Think the Rich Are Different

Americans Think the Rich Are Different:

 

Americans Think the Rich Are Different

Americans Think the Rich Are Different

Americans tend to think the rich are different from average people, branding them as more hardworking and intelligent, but also greedier and more dishonest, a new survey finds. Most Americans (65 percent) think the income gap between rich and poor has grown in the past ten years and most believe that’s a bad thing for the country, the Pew Research Center survey found. The majority (58 percent) also thinks the rich pay too little in taxes, while 26 percent think they pay their fair share and 8 percent think the wealthy pay too much, according to the poll. But there is a partisan divide behind some of these views. Pew found that 55 percent of Republicans described the rich as hard-working, compared with 33 percent of Democrats. And 65 percent of Democrats think the rich are greedy, compared with 42 percent of Republicans When it comes to taxes, 78 percent of Democrats said the rich pay too little, compared with 33 percent of Republicans. Meanwhile, 44 percent of Republicans said the rich pay their fair share, in contrast with 13 percent of Democrats who said the same thing. The poll found other factors besides income that set the rich apart. Americans who identified as upper-class in the survey were more likely to be satisfied with their family life, health, housing situation and education than their middle-class and lower-class counterparts, according to Pew. With the presidential election coming up in November, politicians might want to take note of how the public perceives their treatment of the rich. About 63 percent of those surveyed said the Republican Party favors the wealthy over the middle class and poor, while 71 percent believe Mitt Romney’s policies, if he became president, would be good for rich people. Fewer said the same about the Democratic Party (20 percent) and President Barack Obama in a second term (37 percent), according to Pew. Conversely, Americans are convinced Obama’s policies would do more to help the poor (60 percent) and the middle class (50 percent) than the policies of Romney (31 percent and 40 percent, respectively).

CEO’s above the law

Studies Show CEOs Not Subject to Same Rule of Law as You:

Super Rich

Super Rich

Recent academic papers begin the formal work of proving that CEOs and giant corporations face a completely different legal system than the rest of us, one in which their vast resources are used to insure that they can safely ignore laws and rules applicable to small fry. One study looked at the influence of corporate lobbying on fraud detection. Corporate Lobbying And Fraud Detection, 46 Journal of Financial and Quantitative Analysis 1865 by Frank Yu of Barclays Global Investors and Xiaoyun Yu of Indiana University available here. From the abstract:

We find that firms’ lobbying activities make a significant difference in fraud detection: compared to non-lobbying firms, firms that lobby on average have a significantly lower hazard rate of being detected for fraud, evade fraud detection 117 days longer, and are 38% less likely to be detected by regulators. In addition, fraudulent firms on average spend 77% more on lobbying than non-fraudulent firms, and spend 29% more on lobbying during their fraudulent periods than during non-fraudulent periods. The delay in detection leads to a greater distortion in resource allocation during fraudulent periods. It also allows managers to sell more of their shares.

This quantifies earlier anecdotal data. For example, look at the collapse of Lincoln Savings and Loan. Five senators intervened to stop an investigation, and the business collapsed two years later at a cost of at least $3 billion. The delay sought by the Keating Five increased the losses, particularly to small savers who bought Lincoln Certificates of Deposit. Yu and Yu show that this hideous perversion never stopped, and not only includes direct campaign contributions but also lobbying. They show that firms increase their lobbying expenses after they commit fraud. During the time they are committing fraud, executives of lobbying firms sell their stock about four times more than firms that aren’t lobbying. Sarah Fulmer and April Knill of Florida State build on that study in their recent paper Political Contributions and the Severity of Government Enforcement, available here, with abstract. Fulmer and Knill examine data on PAC contributions by corporations and CEOs and SEC data on enforcement to show that

…accused executives whose firms have contributed to political campaigns via a PAC are banned as an officer for three fewer years, serve probation for five fewer years, prison for six fewer years and are 75% less likely to be given both prison time and an officer ban (the most severe form of criminal and civil penalties)…

Fulmer and Knill point to Judge Rakoff’s refusal to rubber-stamp the SEC settlement with Citigroup over cheating its investors in a late-stage RMBS deal. They also mention an earlier repulsive settlement between the SEC and Citigroup CFO Gary Crittenden. On an analysts conference call, Crittenden said Citi had reduced its subprime exposure by 45% to $13 billion, not mentioning the other $40 billion in super-senior tranches. Crittenden settled for a meaningless $100K and there was no discussion of the fraud on investors. The SEC Inspector General began an investigation to determine whether, as alleged by Senator Charles Grassley, Robert Khuzami, the SEC Chief of Enforcement, had a secret meeting with Crittenden’s lawyer and good friend of Khuzami, and subsequently told his staff to lighten up. The IG eventually cleared Khuzami. The reporter, Allison Frankel, said the IG report shows the cozy club approach to settlements at the SEC. Friends call friends, there are discussions about whether Crittenden would have to resign from his Church positions and the impact of a fraud settlement on Citi. Marcy Wheeler sees that club in action again in the efforts to cover up the Standard Chartered fraud.

First, you hire Sullivan and Cromwell and act contrite. Then, you pay a consultant to conduct a review and claim the violations involved just $14 million in transactions as opposed to $250 billion shown in your bank records. … Then you bury all the embarrassing details showing willful flouting of the rules, so the proles don’t learn how craven banks really are.

Then there is the latest whitewash of Goldman Sachs. The Department of Justice won’t prosecute for the allegations made in the report of the Senate Permanent Subcommittee on Investigations, and the SEC won’t file charges over its subprime mortgage portfolio. One channel for creating these relationships is the personal connections created as people rise through the ranks of government and move into white collar defense in the private sector. Political contributions and lobbying are another channel. Everyone knows that your rise to wealth is dependent on following the rules of connection, and eventually you get to the point where you can do the contributing and lobbying, and use those connections for your personal benefit and the benefit of your clients, which enables you to get even richer. That has now culminated in the capture of the Department of Justice by financial interests. Attorney General Eric Holder is a rich guy from Covington and Burling. He bundled contributions for Obama and served as a co-chair of the campaign. Three other top Justice Department officials played major roles in fundraising and came from white-collar defense firms. It’s worth noting that the right wing is all over these connections. No links from me, but google “holder west perrelli mason” and see for yourself. The prosecutors, the rich, the politicians: all buddies in the rarefied atmosphere of wealth and power. How could such great guys possibly be a lying cheat? And if there is a slip-up, they cover up.

Greed an American Virtue

 “The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent:

One Percent takes half

One Percent takes half

In a piece by Joseph E. Stiglitz in the new issue of Vanity Fair. These facts confirm my impression that greed is now seen as a virtue in America. I’m not surprised by the greed of the One-Percenters. I’m mystified by the lack of indignation from so many of the rest of us.  Day after day I read stories that make me angry. Wanton consumption is glorified. Corruption is rewarded. Ordinary people see their real income dropping, their houses sold out from under them, their pensions plundered, their unions legislated against, their health care still under attack. Yes, people in Wisconsin and Ohio have risen up to protest these realities, but why has there not been more outrage?  The most visible centers of these crimes against the population are Wall Street and the financial industry in general. Although there are still many honest bankers, some seem to regard banking and trading as a license to steal. Outrageous acts are committed and go unpunished. Consider this case of money laundering by Wachovia Bank, now part of Wells Fargo. This Guardian article reports: “The authorities uncovered billions of dollars in wire transfers, traveler’s checks and cash shipments through Mexican exchanges into Wachovia accounts.”  The bank paid fines of less than 2% of its $12.2 billion profit in 2009. No individual was ever charged with a crime. We need not doubt that Wachovia executives received bonuses over the period of time when they were overseeing these illegal activities. Permit me to quote one more paragraph:  “More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4 billion — a sum equivalent to one-third of Mexico’s gross national product — into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business.”  If a third of the Mexican GNP passes through your bank and you don’t ask the questions required by law, you are either (1) a criminal, or (2) incompetent. I can’t think of another possibility.  Stories like this have become commonplace. Two of the most common types of news stories about banks recently have involved their losses, and the size of their executive bonuses. Bloomberg News reports: “JPMorgan Chase & Co. gave Chief Executive Officer Jamie Dimon a 51 percent raise in 2010 as the bank resumed paying cash bonuses following two years of pressure from regulators and lawmakers to curb compensation.”  And here’s more, from the Wall Street journal: “$57,031. That’s about what the average U.S. archaeologist made last year. It’s also what J.P. Morgan CEO Jamie Dimon made every day of last year — $20.8 million total, according to the firm’s proxy filing this week. Anyone who has doubts about the resiliency of Wall Street banks and brokerages should ponder that figure for awhile. The J.P. Morgan board also spent about $421,500 to sell Dimon’s Chicago home. And they brought back the big cash bonus, doling out $30.2 million in greenbacks to Dimon and his top six lieutenants.”  The CEOs of the venerable trading firms that were forced into bankruptcy were all paid bonuses. In a small recent case, executives of Borders intended to pay themselves $8 million in bonuses until a U. S. Trustee objected. A company spokesperson said, “The proposed programs were designed to retain key executives at Borders as we proceed through the Chapter 11 reorganization process.” In short, retain those whose management bankrupted the corporation.  Corporations in theory are managed to benefit their shareholders. The more money Wal-Mart can make by busting unions and allegedly discriminating in its hiring practices, the happier its shareholders become. Yet obscene bonuses penalize even the shareholders. Isn’t that, in theory, their money? Wouldn’t it be decent for the occasional corporation to put a cap on bonuses and distribute the funds as dividends?  I have no objection to financial success. I’ve had a lot of it myself. All of my income came from paychecks from jobs I held and books I published. I have the quaint idea that wealth should be obtained by legal and conventional means–by working, in other words–and not through the manipulation of financial scams. You’re familiar with the ways bad mortgages were urged upon people who couldn’t afford them, by banks who didn’t care that the loans were bad. The banks made the loans and turned a profit by selling them to investors while at the same time betting against them on their own account. While Wall Street was knowingly trading the worthless paper that led to the financial collapse of 2008, executives were being paid huge bonuses.  Wasn’t that fraud? Wasn’t it theft? The largest financial crime in American history took place and resulted in no criminal charges. Then the money industries and their lobbyists fought tooth and nail against financial regulation. The Republicans resisted it, but so did many Democrats. Partially because of the Supreme Court decision allowing secret campaign contributions, our political system is largely financed by vested interests.  We know that Bernie Madoff went to jail. Fine. No Wall Street or bank executive has been charged with anything. It will never happen. The financial industries are locked an unholy alliance with politicians and regulators, all choreographed by lobbyists. You know all that.  What puzzles me is why there isn’t more indignation. The Tea Party is the most indignant domestic political movement since Norman Thomas’s Socialist Party, but its wrath is turned in the wrong direction. It favors policies that are favorable to corporations and unfavorable to individuals. Its opposition to Obamacare is a textbook example. Insurance companies and the health care industry finance a “populist” movement that is manipulated to oppose its own interests. The billionaire Koch brothers payroll right wing front organizations that oppose labor unions and financial reform. The patriots wave their flags and don’t realize they’re being duped.  Consider taxes. Do you know we could eliminate half the predicted shortfall in the national budget by simply failing to renew the Bush tax cuts? Do you know that if corporations were taxed at a fair rate, much of the rest could be found? General Electric recently reported it paid no current taxes. Why do you think that was? Why do middle and lower class Tea Party members not understand that they bear an unfair burden of taxes that should be more fairly distributed? Why do they support those who campaign against unions and a higher minimum wage? What do they think is in it for them?  If it is “socialist” to believe in a more equal distribution of income, what is the word for the system we now live under? A system under which the very rich have doubled their share of the nation’s income in 25 years? I believe in a fair day’s work for a fair day’s pay. Isn’t that an American credo? How did it get twisted around into an obscene wage for shameless plunder?  One of the challenges facing the One-Percenters these days is finding ways to spend their money. Private residences grow as large as hotels, and are fitted out with the amenities of luxury resorts. Fleets of cars and private airplanes are at their owners’ disposal. At work, they sink absurd mountains of money into show-off corporate headquarters that have less to do with work than with a pissing contest among rival executives. Private toilets grow as large as small condos, outfitted with Italian marbles and rare antiques. This is all paid for by the shareholders. One area of equality between the One-Percenters and the rest of us is that we sit on toilets of about the same size. What’s different is the size of our throne rooms.  I find this extravagance unseemly in a democracy. Many of today’s One-Percenters feel no more constraint than Louis XIV. A culture of celebrity has grown up around these conspicuous consumers, celebrating their excesses. I believe rewards are appropriate for those who have been successful. I also believe a certain modesty and humility are virtuous. I find it unbecoming that those who fight most against social welfare are those most devoted to their own welfare.  In America there is an ingrained populist suspicion of fats cats and robber barons. This feeling rises up from time to time. Theodore Roosevelt, who was elected as a Trust Buster, would be appalled by the excesses of our current economy. Many of the rich have a conscience. Andrew Carnegie built libraries all over America. The Rockefeller and Ford Foundations do great good. Bill Gates lists his occupation as “philanthropist.”  Yet the most visible plutocrat in America is Donald Trump, a man who has made a fetish of his power. What kind of sick mind conceives of a television show built on suspense about which “contestant” he will “fire” next? What sort of masochism builds his viewership? Sadly, it is based on viewers who identify with Trump, and envy his power over his victims. Don’t viewers understand they are the ones being fired in today’s America?