“Super-entity” has interlock on global economy

Mathematical analysis of corporate interlocks by Swiss scientists reveal a “super-entity” of 147 companies which potentially dominate the world economy and potentially threaten world economic stability.

A team of three scientists at the Swiss Federal Institute of Technology began with a data base of about 37 million companies whose stock is publicly traded, according to a report in New Scientist.  From this they selected 43,060 companies which own shares in other companies.  Within this group they found 1,318 that owned shares in two or more other companies; they accounted for 20 percent of global corporate revenues, and 60 percent of the revenues of blue chip and manufacturing companies.

At the heart of those companies was a “super-entity” of 147 companies whose shares were entirely owned by other members of the group.  Although they comprised fewer than 1 percent of the companies analyzed, they accounted for 40 percent of the wealth in the group.  About three-quarters of the companies are banks and financial firms.

The scientists said there is no evidence that this is the result of a conspiracy.  Rather it is the logical working out of an algorithm which allows for corporate ownership of other corporations.  But it could create problems for world economic stability.  Failure of one or more of the 147 companies could endanger the others, and the ripples would spread into the world economy.  And if the heads of the companies acted in concert, they would be a superpower.

So in addition to a “too big to fail” problem, we have a “too interlocked to fail” problem.

Click on Revealed: the capitalist network that runs the world for the full article in New Scientist.

Click on A tightly knit network of companies runs the world for more about the study.

Below is a list of the top 50 companies in the 147-company “super-entity.”

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 plc

8.  Vanguard Group Inc

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

via New Scientist.

Lehman Brothers is on the 147-company list because the study is based on 2007 figures.   Since Lehman Brothers did go bankrupt, individual members of the “super-entity” can fail without a domino effect.  Even so, this group of companies represents a lot of concentrated power.

[Added 10/25/11]  Below is a diagram showing the connections of all 1,318 transnational companies in the study.

Tags: Chaos theory, Corporate interlocks, Corporate networks, Economic power