Complexity, Economics, and Who Controls the World

James B. Glattfelder begins his TED Talk with a couple of quotes (related to the 2008 crash) from powerful representatives of capitalist ideology that seem to imply "we still don't understand the conditions for stable society, a functioning economy, or peace."

1. "When the crisis came, the serious limitations of existing economic and financial models immediately became apparent." ~Jean-Claude Trichet, from a speech he made when he was governor of the European Central Bank.

2. "There also a strong belief, which I share, that bad or over-simplistic and overconfident economics helped create the crisis." ~Jonathan Adair Turner, Baron Turner of Ecchinswell, from Socially useful and socially useless financial activities.

Glattfelder suggests (and uses) the Science of Complexity as a means to better understand economics. He uses it in his TED Talk to look for potential hazards and points of failure.

Glattfelder describes complex systems as being made up of many connected, interacting parts, such as bird swarms, ant colonies, and - more to the point - financial markets. Complex systems are hard to map into physics equations, but can be understood easily by studying interactions and by determining the rules of interactions. They are emergent, and show behavior that can't be understood by looking at the components - the whole is greater than sum of its parts.

What [equations] are for physics, [complex networks] are for the study of complex systems. This approach has been successfully applied to many complex systems in physics, biology, computer science, and social sciences. Nodes are system components, while links are the interactions.

Glattfelder applied the principles of Complexity to economic networks - specifically, in a first of it's kind study of the network of global corporate control. The study looked specifically at ownership networks in which companies, people, governments, and foundations represented nodes while the links represented shareholder relations (shareholder A's percent of shares in company B) factoring in value assigned to companies based on operating revenue.

1. who are the key players?
2. how are they organized? (isolated? interconnected?)
3. what is the overall distribution of control.

Concerned that a high degree of inter-connectivity can be bad for stability, the study was narrowed to the most relevant nodes. Of 13 million ownership relations, the focus was reduced to trans-national corporations (or TNCs) consisting of 600,000 nodes and more than a million links. The structure revealed consisted of a periphery, a center, and a dominant core (36% of the TNCs, making up 1300 nodes but a whopping 95% of the value).

Based on the idea that ownership gives voting rights dependent on relative distribution of shares and that control over TNC value leads to a degree of influence assigned to each shareholder, the study indicates that 737 top shareholders (0.123%, mostly financial institutions in the US and UK) have the collective potential to control 80% of the TNCs value. Further, within those, a 146-node minority holds the potential to control over 40% of Trans-national Corporation value.

In other words, this study gives a remarkable into the question of "who controls the world?"