Oligarchy Defined

No Gravatar

Before I turn this series onto a focus on entrepreneurial ventures, which serve as the primary means the world has to exit the Great Recession, let’s review whether Occupy Wall Street is wrong in their annoyances.  Two factors will be examined- people and corporations (you know, those artificial citizens).

First, people.  It’s not just in America where the rich have gotten richer.  No, according to Credit Suisse, the millionaires and billionaires of the world (29.7 million folks) constitute less than 1% of the world’s population.  And, they control $89 trillion, or 39% of the world’s wealth ($231 trillion).  [Some 35,400 Americans from the total of of 85,700 are worth at least $ 50 million or more] . And, the rich’s share grew at TWICE the rate of the rest of the population, by 29%, in 2010.  Oh, and 75% of that increase was shared by citizens in just five countries- US ($4.6), China ($4), Japan ($3.8), Brazil ($1.87) and Australia ($1.85) [all in trillions].

Add to this data, information from a new article (so new it probably won’t be published by the time this post exits the queue- ask me if you want a copy of the complex mathematical treatise) about corporate wealth and influence.  This report provides one of the best analyses I have seen on the subject.

Drs. Vitali, Glattfelder, and Battiston of the Swiss Federal Institution of Technology (Zurich) will be publishing their article in PlosOne soon.  (It is now available here.) Their analysis, based upon complex systems theory, was to discern if there was a network of power that exists among transnational corporations (TNC).  The premise was to avoid prejudice, dogma, and ideology- and instead rely on mathematics and systems analysis to afford the diagnosis.

While studies exist that demonstrate TNC control large portions of the global economy, these analyses often omitted the effect of indirect ownerships and their effect on the stability of the system.  So, the Battiston (senior researcher) group examined the database of 37 million corporations (no longer found on the web)  and investors worldwide.  They, then, analyzed the largest 43,060 TNC and interlocking ownerships among them.  Using these networks, the operating revenue for each firm, they mapped the economic power they controlled.

This universe was further culled down to 1,318 firms that had interlocking ownership, averaging ownership of 20 other firms.  While these 1300+ firms only controlled 20% of the global revenue for all firms, their interlocking network actually controlled 60% of all the corporate revenue generated around the globe.

Further analysis pared down this core into a “super-entity” of 147 firms.  These interlocked entities actually controlled 40% of the network’s wealth.  And, most of them were, indeed, financial entities, including AXA, Barclays Bank, Credit Suisse (the entity that authored the first study listed above), Deutsche Bank,  Goldman Sachs,  and Mellon Bank (among the top 20).

Therein lies the problem.  Just like the concentration of American and the world’s wealth in a very small portion of the population (the 1%), these firms control the wealth of the world.  And, if one of them suffers distress (like Goldman Sachs recently reported), with the interlocking nature of these firms, the perturbations echoes and propagates among the countries of the world.

There is a caveat to this analysis- ownership does not always equate to control of the enterprises.  There certainly is influence and there may be total control, but more analysis is required to discern this effect.  And, there may not be a conspiracy to control the world- but it certainly does let these firms exert political power over various countries.

The good thing is that there are 147; if the number gets smaller, the global situation will be in for a world of hurt.  The bad news- the 14 US companies control 16.2% of the world’s wealth; given that the world’s wealth is about $ 150 trillion, that means these 14 companies control some $ 25 trillion dollars of wealth or more than the US Gross Domestic Product.

Roy A. Ackerman, Ph.D., E.A.

Share this:
Share this page via Email Share this page via Stumble Upon Share this page via Digg this Share this page via Facebook Share this page via Twitter
Share

13 thoughts on “Oligarchy Defined”

  1. Your series of articles on the financial condition of the U.S. and the world have been very interesting. I am not educated in financial matters, but I have to say that these articles are somewhat depressing.
    Is there any hope for the middle class, Roy?

    1. There is hope for the middle class- if we take action.
      1. We need to change- or solidify- our votes. if we don’t stop the tax code from borrowing from the middle class and enriching those at the top, then we get what we deserve. If we don’t push our legislatures to disallow the payment to executives of salaries and bonuses that approach 200 and 300 times their average payroll, then the middle class is doomed. Especially, when these same executives claim they are trimming the sails of their firms, hunkering down- by cutting the pay of the workers that make the products/services they sell and aggrandize their own compensation- or, worse yet, lay off those same workers while they raise their own compensations.
      2. We need to insure that our children get educated. The best way to stay employed is to have a college degree AND to stay current with new developments. (The latter applies to everyone- including us). The unemployment rate- the last time i looked- was bout 6% for college grads and 12% for those without that credential.
      3. We need to start new businesses and keep the climate positive for their formation. That means penalize the banks- that own all these corporate behemoths already- when they fail to loan money, at reasonable rates (say prime + 1 or +2%, at a maximum) to small companies that plan to expand.

      Those are just for starters.

      Thanks for your comments- and your queries…

      Roy

  2. Hi Roy,

    This article confirms my take on why the middle class keeps getting poorer and the rich keep getting richer. While these stats are most depressing, they give me the drive to continue my journey down the entrepreneurial path so I can find my own way.

    For to many years I relied on the corporations to set me up for retirement and comfort in my older years. Now, at the age of 58, I am having to start a new path so I don’t go down the path of poverty.

    Thanks for sharing this so that I can continue my determination to be my own boss.

    Have a great weekend,

    Cindy

    1. Thanks for dropping in and commenting, Cindy.
      It sounds like you missed two pieces in this series. This one, https://www.adjuvancy.com/wordpress/http:/www.adjuvancy.com/wordpress/forget-dream-downward-mobility/, defined what is happening to the middle class (there have been others- but this is specific to the changes to the census) and this one, https://www.adjuvancy.com/wordpress/http:/www.adjuvancy.com/wordpress/american-dream-20/, which discussed the “American Dream”…
      I will be publishing a few more – about entrepreneurship- and what has to happen to change this trend… Stay tuned next week!

      Roy

  3. Interesting how what is hidden is where the bigger picture is. I wonder what would happen if the power base of finance companies truly shifted what would the world be like. And where would it shift to?

    1. Roberta:
      You are right. This information is difficult to obtain. Which is why i published it. I believe that the more REAL information- not the half-truths, not the malarkey foisted upon the public by politicians and others- one has, the better the decision making.
      Thanks for dropping in.

      Roy

  4. Great series Roy, and pretty sad and frightening. I am less than educated in the finances of the world and the US, but you are helping me with that. I hope there is an end to this disparity in wealth in the future. Thanks for the great insights! ~ Suerae

  5. Roy, Thank you for this series of articles. I have a much better understanding now and appreciate that. I’ve also read your comments and responses. I was finding things depressing as Janette and really appreciated your reply to her. Shining a light not just on the problems but on some solutions and avenues to begin is key to making a real difference.

    1. Bonnie- you are absolutely correct. I actually have an article in the queue about prophets. To go around proclaiming the end is near (oh, I know, we have one charlatan who proclaims the world ends tomorrow making big headlines) is not the way to get things changed.
      Every one of us knows we shall die. But, that fact alone does not seem to make us immediately change. The true prophet augurs the future as things may be tending- but provides prescriptions for change to insure the outcome is altered.

      Roy

  6. I didn’t realize until reading your post Roy that other countries have similar ‘pyramids’ to wealth. I have always said there is a huge gap and you really have proved it here. And because after reading your series, I ponder now on who really in our political arena really understands this and is ready to take action?

    1. Lynn:
      For years, our country would officially express disdain at other countries for their aristocractic, non-democratic ways. Yet, since the days of Ronald Reagan, we have been wending in exactly the same direction. All the while, promising our citizenry that the American Dream, “trickle-down”, and similar myths obtain here. As the long-term trend data indicate, the middle-class is being eradicated, the rich are being further empowered and endowed, and the only thing that trickles down can’t be discussed in a forum for all.
      The data is not only evident, but in the open and being repeated often. We have some political leaders (the operative word is “some”) who are, indeed, trying to ation. But, unless the middle class- the majority of the US population (until it is totally shredded) joins up, open their mouths, and vote for change, I fear we are doomed to being led by those who actually want these trends to accelerate- and not be changed.
      Roy

Comments are closed.