CONCENTRATIONS AND INTERLACED BUSINESS TIES IN THE GLOBAL ECONOMY(THE BOW TIE EFFECT OF GLOBAL ECONOMICS)
Concentrations and Inter-Control of World's Companies In 1995 Ben Boothe, Sr., presented: WINNERS AND LOSERS IN THE NEW GLOBAL ECONOMY (a 14 day symposium on economic trends in the Global Economy) for the World Bank, in Asia.
The USIA, USIS, State Department and the World Bank saw this 200+ slide presentation of research on micro and macro economic trends and hired Ben Boothe as an economic consultant to present this material in several nations. This research was copied by other World Bank consultants, including university professors and economists who have presented this material in several nations.
In 2012, a group of computer statisticians, scientists and mathematicians did a global computer study, with results dominated by the BOW TIE effect. It validated the trends, predictions and conclusions of Ben Boothe's research 17 years earlier. We present some of this recent material, as well as some refined research on the global economy, concentrations of power and cycles of economic movement.
"The one difference I see from this recent computer study, is that concentrations have increased significantly in scope and impact since my initial research. I spent 5 years interviewing people around the world, and assembling data, and now I see that my predictions have come true. Now we can predict which nations and companies will be the WINNERS AND LOSERS IN THE NEXT CENTURY, AND WHY." Ben B. Boothe (www.benboothe.com).
Of millions of companies, it has been disclosed that a small number, through interlocking ownership and board members, control much of the world's wealth.
What do you see in the graphic above? This is a representation of a world wide computer study of over 37,000,000 businesses and investors around the world, representing their economic power, and influence based on sheer public economic data. Surprisingly, the research noted a core group of companies, that through over 600,508 nodes and 1,006,987 ownership ties, interlaced stock ownership (13 million directed and weighted ownership links, equity relations and common board positions), control an inordinate percentage of the world's profits, capital and wealth. The degree of concentrations and of mutual power over economies has surprised even the authors, but it is proven by this detailed computer analysis. The results have huge implications for the future, the way business is done and suggest winners and losers in the future economy. The results also give foundation material, validated by objective science, of socio-economic trends with cycles ahead, plus provide credible basis for predicting future economic cycles. By correlation and close study, it was determined that 147 global companies, own or control 40% of the worlds assets through interlocking business ownerships. 737 of these companies control 80% of the world's assets and wealth.
A VAST COMPUTER DATABASE OF CORPORATIONS
Swiss Federal Institute of Technology in Zurich, led by James Glattfelder, conducted a study of world economic leaders and interconnections. It documented the world's most powerful companies and found a far more intricate interconnectiveness in those companies than formerly believed. Glattfelder’s team unleashed an impressive armada of supercomputers on Orbis 2007 -- a very elaborate database of the top 37 million corporations and individual investors worldwide.
The results were absolutely stunning.
Of 43,060 TNCs [Trans-National Corporations] identified according to the OECD [Organization for Economic Co-operation and Development] definition, taken from a sample of about 30 million economic actors contained in the Orbis 2007 database, the scientists applied a recursive search that disclosed the network of all the ownership pathways originating from and pointing to TNCs [Trans-National Corporations].The resulting TNC network includes 600,508 nodes and 1,006,987 ownership ties….
MORE ABOUT THE DATABASE: This took enormous effort, only possible with massive computer power. It may not seem possible that one database could generate the findings you are about to see, andinformationthat many corporate owners might prefer you not to see. See additional information regarding the Orbis 2007 database and how it was used.
The Orbis 2007 marketing database comprises about 37 million economic actors, both physical persons and firms located in 194 countries, and roughly 13 million directed and weighted ownership links (equity relations).[Orbis 2007:http://www.bvdep.com/en/ORBI]
Among many others, information on the industrial classification, geographical position and operating revenue of the actors are provided. This data set is intended to track control relationships rather than patrimonial relationships. Whenever available, the percentage of ownership refers to shares associated with voting rights….
THE "BOW-TIE" STRUCTURE Of 43,060 trans-national corporations in the Orbis 2007 database, 147 global companies, own, control, or heavily influence 40% of the worlds profits or assets through interlocking businessownership's. The concept means that the knotted center represents the confluence of power. Without the power of the knot, the system falls apart.
737 of these companies control a majority (believed to be 80%) of the world's profits (and by extension assets and wealth).
FORBES MAGAZINE had a different perspective, stressing how important ratings are in today's world, wrote that 4 companies, controlled the 147 companies. In an article of 10/26/2011 Forbes wrote: "The real power to control the world lies with four companies: McGraw-Hill, which owns Standard & Poor’s, Northwestern Mutual, which owns Russell Investments, the index arm of which runs the benchmark Russell 1,000 and Russell 3,000, CME Group which owns 90% of Dow Jones Indexes, and Barclay’s, which took over Lehman Brothers and its Lehman Aggregate Bond Index, the dominant world bond fund index. Together, these four firms dominate the world of indexing. And in turn, that means they hold real sway over the world’s money." It also implies that index systems can be manipulated, put simply, like someone manipulating his credit report to get a bigger loan. Impossible with the giant banks? No, we see it happening in the current news.
(Now it should be noted that Barclay's in July 3, 2012 saw its President, Chairman and CEO resign because of a decade of manipulation of their own bank rates, credit standing, LIBOR rates, and money market rates, fraudulently.)
This system was noted by the Obama Administration and the U.S. Fed Chairman to be corrupted and notice was given to Barclay's to clean it up several years ago. This suggests that the very heart of the global financial system has been corrupt at the core, due to interlaced business relationships and mutual stock and board ownerships. Now remember the "core" is largely made up of the mega-banks. Now if the "core" is rotten, what about the health of the system, as controlled by the giant banks and financial markets? It is interesting how much the banks actually influence.
Bank of America, while holding some 600 patents of their own, also holds some 55,000 patents belonging to other companies. JP Morgan, Citi and Goldman Sachs hold similar numbers, with over 200,000 patents. Why would these banks hold the rights to so many other companies’ intellectual property? It’s the price they charge for funding. The banks know that if you hold a company’s IP, you don’t need to own stocks to control what the company does. If you control the rights to the intellectual property you control the company.
Louis Brandeis, probably the most brilliant jurist this country has ever produced, wrote a series of essays for Harper’s Magazine in 1913 called “Other People’s Money and How Bankers Use It”. In 1914 it was turned into a little book which is still available.
'The book attacked the use of investment funds to promote the consolidation of various industries under the control of a small number of corporations, which Brandeis alleged were working in concert to prevent competition. Brandeis harshly criticized investment bankers who controlled large amounts of money deposited in their banks by middle-class people. The heads of these banks, Brandeis pointed out, routinely sat on the boards of railroad companies and large industrial manufacturers of various products, and routinely directed the resources of their banks to promote the interests of their own companies. These companies, in turn, sought to maintain control of their industries by crushing small businesses and stamping out innovators who developed better products to compete against them.'
The BOW TIE: Upon researching the system, the Swiss financial computer analysis showed that a "bow-tie" structure emerged, when they analyzed how these corporations were related to one another. The "bow-tie" is a visual metaphor of what their data actually looked like once they had everything mapped out. A bow-tie has a small central knot with two loops coming off of it. The equivalent of the bow-tie, in their computer data, was a very small central knot of corporations with branches that extended out to a surprising majority of the entire system. In this case, it looks more like a circle with a bunch of red dots in the middle -- but notice how the dots are all clustered in the center. Those dots are the world's most powerful corporations. Note how they are interlaced with other corporations.
See reference below:http://arxiv.org/PS_cache/arxiv/pdf/1107/1107.5728v2.pdf
Trans-national corporations form a giant bow-tie structure -- and that:
The "knot" of the bow tie, the center of the power, is evident. A large portion of control flows to a small, tightly-knit core of financial institutions.
Some of these institutions, such as Citi-Bank have been repeatedly fined, judged to have functioned illegally and have dissserved their clients. Yet they have continued on, simply "paying the fines" and buying immunity.
The rating agencies have huge impact on the financial institutions and all of the loans, bonds, and financial foundation for these global companies. All of this is determined by the LIBOR rating group, which has now been exposed as having systematically and fraudulently manipulated and set rates, for internal manipulation of profits at investor and public expense.
The way these companies work appears to be beyond what is normally considered ethical and legal. An excellent example is the LIBOR scandal, which illustrates how the largest banks in the world, have consistently been falsifying data to improve their credit ratings and lower their interest rates. Finally the Treasury Secretary of the USA became so concerned that he took steps, as reported today from Washington, DC.
On July 20th, 2012, the following announcement took place: Treasury Secretary Timothy Geithner on Wednesday faced questions about the Libor interest rate manipulation scandal, telling lawmakers on a House Financial Services Committee that he had done "the important and fully appropriate thing" in 2008 by bringing the problem to the attention of regulators in the U.S. as well as in the U.K. Geithner had expressed concerns in 2008 about international banks possibly manipulating the key benchmark rate during his tenure as president of the New York Federal Reserve Bank. "We were aware of the risk that the way [the rate-setting process] was designed created not just an incentive for banks to underreport, but gave them an opportunity to underreport. And that was a problem," Geithner said Wednesday, noting that he sent a "very detailed" memo to the head of the Bank of England.
This type of behavior within the "core companies" can be seen as an example of how the economic “super-entity” of concentrated power, (the companies in the core than control a majority of the world's profits, estimated from 60% to 80%) raises new important issues both for researchers and policy makers….
A CORE OF 1,318 COMPANIES THAT RUN THE SHOW
The Swiss team revealed that a very small ‘core’ of 1,318 companies was in direct control of many more corporations. In total, these corporations earned a large percentage percent of the world’s wealth, as we will see. This 'core' is the first level of the "bow-tie" structure they discovered. The 1,318 companies were the "knot" of the bow-tie, which extended out and entangled many other corporations.
This excerpt from page 5 is where they first mention the core:
Thus, similar to the WWW [the Internet], the TNC [trans-national corporation] network has a bow-tie structure  (see Fig. 2 A and SI Appendix, Sec. 6).Its peculiarity is that the strongly connected component, or core, is very small compared to the other sections of the bow-tie…
The core is also very densely connected, with members having, on average, ties to 20 other members. 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….
ALL ACTUAL OWN EACH OTHER
It is very, very strange that all these corporations, theoretically in competition with each other, all actually own each other's companies. The same "establishment" conservatives, who preach free enterprize and an absence of undue regulation or control, actually "own each other" and "seem to be playing a massive game of 'pretend' free economics, so long as they are the one's pulling the strings." said Ben Boothe, Sr. who has for 2 decades warned of the dangers of concentrations.
The scientists and computer analysts were shocked, because the ownership was far more entangled and interrelated than anyone could ever have imagined -- even for those with the unsavory label of a "conspiracy theorist." These were not crackpots or political motivated ideologues. Credible scientists explored virgin territory, using super-computers and a vast database -- and discovered an astonishing "ghost in the machine."
THE CORE IS EARNING 20% OF ALL THE PROFITS ON EARTH
Ben B. Boothe, Sr., (www.benboothe.com) in his research some 17 years earlier concluded that the highly concentrated economic system that was emerging would become more unstable, increasing risk and noting that a lack of confidence in the system, or a failure of a weak link in the economic/financial chain could bring about systematic failure, recession or even worse in a global economic network. This computer model confirms this hypothesis. Boothe presents three major concerns.
THREE MAJOR CONCERNS:
1. Contagion/Destabilization:What are the implication for global financial stability? It is known that financial institutions establish financial contracts, such as lending or credit derivatives, with several other institutions. This allows them to diversify risk, but, at the same time, it also exposes them to contagion when a financial network is very densely connected it is prone to systemic risk. Indeed, while in good times the network is seemingly robust, in bad times firms go into distress Simultaneously. This knife-edge property was witnessed during the recentfinancial turmoil.
2. Elimination of market competition: Monopolization.Even small cross-shareholding structures, at a national level, can affect market competition in sectors such as airline, automobile and steel, as well as the financial one. At the same time, antitrust institutions around the world (e.g., the UK Office of FairTrade) closely monitor complex ownership structures within their national borders. The fact that international data sets as well as methods to handle large networks became available only very recently, may explain how this finding could go unnoticed for so long.
3. Lack of enforceable regulation, standards.Since most of the companies are international and deal in numerous legal systems it becomes almost impossible to regulate, set standards, or enforce laws relating to abuses, national standards, safety standards, over pricing, labor disputes, price gouging, and tax collection issues.
Of the 147 companies with huge control, only 1% of the total of companies, only 1% of the stockholders control a majority of all of the "global companies", which control 80% of the world's assets and profits.In causal terms, this makes a very potent 'country club" of people who have inordinate power, wealth and influence. They own and control most of everything, all under a guise of a market that is competing freely.The Orbis 2007 marketing database comprises about 37 million economic actors, both physical persons and firms located in 194 countries, and roughly 13 million directed and weighted ownership links (equity relations). Among many others, information on the industrial classification, geographical position and operating revenue of the actors are provided. This data set is intended to track control relationships rather than patrimonial relationships. Whenever available, the percentage of ownership refers to shares associated with voting rights.
The definition of TNCs given by the OECD states that they [...] comprise companies and other entities established in more than one country and so linked that they may coordinate their operations in various ways, while one or more of these entities may be able to exercise a significant influence over the activities of others, their degree of autonomy within the enterprise may vary widely from one multinational enterprise to another.
Ownership may be private, state or mixed. Quoting the scientists: "Accordingly, we select those companies which hold at least 10% of shares in companies located in more than one country. However, many subsidiaries of large TNCs fulfill themselves this definition of TNCs (e.g. The Coca-Cola Company owns Coca-Cola Hellenic Bottling Company which in turn owns Coca-Cola Beverages Austria). Since for each multinational group we are interested in retaining only one representative, we exclude from the selection the companies for which the so-called ultimate owner (i.e., the owner with the highest share at each degree of ownership upstream of a company) is quoted in a the stock market. In substitution, we add the quoted ultimate owner to the list (if not already included). In the example above, this procedure identifies only the Coca-Cola Company as a TNC."
The group used a list of 43,060 TNCs located in 116 different countries, with 5,675 TNCs quoted in stock markets.
The resulting network can be divided into three classes of nodes, TNC, SH and PC, as shown in Fig. S2.
1.The TNC network constructed in this way consists of 600,508 economic entities and 1,006,987 corporate relations. 2.Notice that it may be possible to reach a PC from several TNCs, or to reach a TNC from several SHs. 3.In other words, paths proceeding downstream or upstream of the TNCs may overlap, giving rise to CCs of various sizes.It is worthwhile to distinguish the data set constructed here from the one analyzed in , which was not obtained using a recursive search, but with the simple method of collecting only listed companies.
See the following example of a company that didn't even make the "top 50" list, in size and influence:
Start with: Benetton Then, Benetton GroupThen, Bencom BenTech Benneton Intl, which owns Benetton India Benetton Deutschland United Colore Comm Benetton DenmarkThen, Benetton USA Corp.Then, BenindThen, Edizione Participations, parent of Union ServicesThen, Olimpias S.P.A., parent of Filatura Di Vittoruo Veneto and Ben AirThen, Benetton Realty FranceThen, Benetton France CommercialThen, SH G l Parent of Buenos Aires 2000 S.R.I.Then, Benetton Retail Italia, parent of Milao ReportThen, Benetton Manufacturing Holding Parent of: Benetton Retail Spain Benetton Retail Benetton 2 RetailThen, Nordica Parent of: Rollerblade Nordica France Nordica Rollerblade Nordica USA.
EXTENTIONS OF CORPORATE POWER AND OWNERSHIP EXIST WHERE THERE ARE INTERLOCKING DIRECTORS AND INVESTORS:
NOW IF THERE ARE FINANCIAL ISSUES, CONFLICTS OF INTEREST, FIANCIAL FAILURE AT THE CENTER, OF A COMPANY LIKE BENETTON, WHICH IS A TYPICAL EXAMPLE, IT COULD IMPACT THE ENTIRE ORGANIZATION. CERTAINLY, THIS COMPANY HAS COMPETITIVE POWER TO MONOPOLIZE AN ECONOMY IN AN AREA OF COMPETION OR A SMALL LOCAL COMPANY. IF THE COMPANY CANNOT DO AS WELL, IT CAN USE PREDITORY COMPETITION, BUY THE LOCAL COMPANY OUT, BUT IF THE PARENT COMPANY IS IN TROUBLE, THE ENTIRE ORGANIZATION SYSTEM SUFFERS.
THE QUESTION IS: HOW MUCH IS ENOUGH? EVEN IF HERE ARE LAWS AGAINST MONOPOLY IN ONE NATION, THERE ARE NOT ENFORCEABLE INTERNATIONAL LAWS AGAINST MONOPOLY. THUS THE ENTIRE NETWORK IS SUBJECT TO PRICE FIXING, CONFLICTS OF INTEREST, NEPOTISM, CROSS ELEMENTS OF CONTROL, EVEN POWER THAT EXCEEDS GOVERNMENT REGULATION, TAXING ABILITY AND EVEN POLICE POWERS.
IS THERE ANY DOUBT THAT SUCH COMPANIES, SUCH A 'BOW TIE' CAN INFLUENCE POLITICAL AND GOVERNMENT DECISIONS, PASSAGE OF LAWS, AND EVEN INFLUENCE GOVERNMENT LEADERSHIP?
CONVERSELY, IF A COMPANY BECOMES CORRUPT OR FINANCIALLY TROUBLED, COULD IT'S PROBLEMS IMPACT AN ECONOMY OF A CITY, REGION, NATION OR EVEN THE WORLD? (The USA and Europe have just dealt with the worst recession in 40 years, caused primarily by actions of the 'Bow-Tie')
IT IS OUR HYPOTHESIS THAT THE PUBLIC INFORMATION AVAILABLE IS ONLY THE TIP OF THE ICEBERG.
FACTUAL INFORMATION SUGGESTS THAT A SMALL MINORITY OF VERY WEALTHY PEOPLE OWN AND CONTROL MUCH OF THE WORLD'S WEALTH, TO THE DETRIMENT OF THE VAST MAJORITY OF PEOPLE ON EARTH.
An unregulated "free market economy" as slowly evolved into a system of monopoly or concentrated power, even as past history has demonstrated in Kingdoms, Dictatorships, Dynasties and varies political systems.
17 years ago, when Ben Boothe presented this information to the leaders of India, he was honored for services to the nation. Again in Cambodia and Mongolia, government leaders applauded Boothe for seeing, what they feared most, FAT CATS AT THE CENTER OF POWER, COMING IN AND OWNING THEIR NATIONS. At the end of his research presentation he gave this 7 point conclusion.
7 CIRCULAR STEPS OF ECONOMIC CYCLES: WHERE IS THE WORLD IN THIS CYCLE? © 2012 by Ben B.Boothe, Sr. (not to be copied without permission of Ben B. Boothe, Sr.) www.bootheglobalperspectives.com
1. DEREGULATION: ENTREPRENURESHIP, CREATIVITY, THE DREAMERS AND CREATORS.......... this emerges to:
2. STRUCTURE, ORGANIZATION AND DEHUMINIZATION (A PURE GREED BOUND INSTITUTION), THE CORPORATION......... this free market entity, presses and eventually succumbs to abuses or corruption leading to:
3. CONCENTRATIONS OF WEALTH, MONOPOLY, CONTROL (A few at the top own most)this power, corruption, combined with social inequity....... leads to:
4. ECONOMIC INSTABILITY, BOOMS, BUSTS, LACK OF STABILITYthe great market swings, stock markets and money markets goberserk.........eventually causes:
5. SOCIAL INSTABILITY, PROTESTS, REVOLUTIONthe corruption, instability, and lack of financial equity and opportunity causes political masses to rise up......... forcing:
6. REGULATION, LAWS, PROTECTIVE STEPS AND GOVERNMENT CONTROLS the regulated economy, generally brings stability. But while government control eventually tends to press down creativity and freedom it provides confidence and certainty. But, eventually, regulation succumbs to......
7. DEREGULATION deregulation allows creativity, entrepreneurship, freedom, but eventually ..................leads to:
8. STRUCTURE, ORGANIZATION,DEHUMANIZATION.................emerges to:
9. CONCENTRATIONS OF WEALTH, MONOPOLY, CONTROL................leading to
10. Abuses, Economic and social instability....on and on and on.....
"In my opinion the work of these scientists, gives even more logical power to concerns that we have expressed now for two decades. That is, unbridled, economics, creates anarchy, which only leads to re-regulation. The solutions and the wise path is policies that are well thought out, that have a strong dose of wisdom and moderation. A balanced system needs stability, and regulations, but also flexibility to encourage creativity and new growth." Ben B. Boothe http://www.benboothe.com