Who Owns the World?
A little while back I wrote an article entitled Digital Colonialism[1] which made the case that the ‘data-grab’ currently underway in the digital world is reminiscent of the ‘land-grab’ that occurred in the New World during the age of European colonialism. I argued that as wealth migrates from the physical economy to the digital economy the general public in developed countries are at risk of becoming a new indigenous population – likely to suffer the same fate as every indigenous population that finds itself subject to colonial conquest.
In that article I drew attention to the role data networks play in concentrating wealth to extraordinary degrees. The following research, which has been around for some time, demonstrates my point very well: TED Talk[2], TheRulesOrg[3],Inequa
In the TED talk (above), which I highly recommend, James Glattfelder and a team of researchers from the Swiss Federal Institute of Technology in Zurich use complexity theory to identify how a small group of highly interconnected shareholders get to control over 80% of the total value of all the world’s trans-national corporate activity. Employing mathematical models used to analyze complex natural systems, Glattfelder and his team started with a database fromOrbis[5] listing 37 million companies and investors worldwide. From this they extracted a sub list of 43,060 multi-national corporations (MNC’s). They then constructed a map of which trans-national companies controlled other trans-national companies through shareholding networks. They coupled this with each company’s operating revenues, to build a model of global economic power.
The team created a network of ownership holdings where the nodes in the network were companies and the ownership relations formed the links. They ended up with a network of shareholding relationships for the 43K MNC’s which contained 600,000 nodes and one million links. Glattfelder and his team then subjected this data set to a network analysis using a computer simulation. This sort of data is well suited to a network analysis because most complex systems when subjected to a network analysis display a property called ‘emergence’. This means that the system as a whole shows behaviors which cannot be understood or predicted by looking at the individual components of the system.
Concentration of Control
The work revealed that within the centre of the global network of MNC’s there were 1,318 companies with interlocking ownerships which controlled almost all global economic activity. Each of the 1,318 had ties to two or more other companies, and on average they were connected to 20. What’s more, although they represented only 20 per cent of global operating revenues, these 1318 companies at the centre of the network appeared to collectively control (through their shareholdings) the majority of the world’s blue chip firms representing a further 60 per cent of global revenues.
But it gets worse; within this group of 1,318 companies the researchers found there was a dominant core of 146 companies (mostly financial institutions) which have ownership control over 40% of all the companies in the centre. As a result of the networking effect of ownership and control in the global economy, it turns out that the top 737 shareholders of the 146 core companies have the potential to collectively control almost half of all trans-national corporate activity. This means that less than 0.1% of 1.0% of shareholders, or 737 to be precise, control of a significant portion of all global economic activity[6]. This is an astounding finding and it correlates highly to other research on global wealth distribution.
Complexity Theory
Glattfelder believes that what’s going on here is similar to the swarming behavior exhibited by birds and insects. While this behviour looks complex at a macro level, it’s often predicated on a few very simple rules. You need just three simple rules to simulate swarming behavior: move in the same direction as your neighbor, stay close to your neighbor, but avoid collisions.
Because his team could easily reproduce the current network of trans-national corporate ownership in a computer simulation with a few simple rules, Glattfelder believes it’s probably not the result of a top-down management approach like a global conspiracy. His conclusion is that the structure of the global economy is probably the result of self-organization – an emergent property which depends on the rules of interaction within the system: e.g. maximize short term profit, grow market share, and control/eliminate competition.
Of course when it comes to the global economy this situation has some serious implications: a high degree of centralized control and interconnectivity is bad for both efficiency and stability. In addition, with extreme wealth comes the power to influence the rules. Those companies in the core eventually end up controlling the media, think-tanks, markets, regulators and even governments to their advantage – distorting (or corrupting) every self-regulating mechanism within the system. This is especially bad for democracy since we end up with government policies that favour corporations and the super-rich, regardless of the impact on the rest of us – precisely the situation we have now.
Concentration of Wealth
Given the high level of concentrated control in the corporate world, I was unsurprised earlier this year when the UK charity, Oxfam, released a report on wealth inequality at the Davos World Economic Forum entitled “Wealth: Having It All and Wanting More”[7]. Their research found that the richest 1 percent of individuals in the world have seen their share of global wealth increase from 44 percent in 2009 to 48 percent in 2014 and on current trajectory the top 1% will own more than half of all global wealth sometime in 2016. The Oxfam report found that the richest eighty people in the world hold the same amount of wealth as the poorest 3.6 billion people and that since 2009, the wealth of those 80 richest individuals had doubled in nominal terms in the past few years while the wealth of the poorest 50 percent of the world’s population had actually fallen.
In another report Oxfam released last year entitled “Working for the Few – political capture and economic inequality”[8], Oxfam found that over the past few decades the rich have successfully wielded political influence to skew policies in their favour on issues ranging from trade agreements, financial deregulation and tax havens, to government subsidies and monopoly protection. This report shows how financial deregulation directly benefits the richest 1%; how trillions in private wealth are hidden from taxation authorities through tax havens and tax-exempt foundations; how austerity is applied to the poor and middle classes while the ranks of billionaires swell. The report also notes that just as the rules are being skewed to favour the very wealthy, outsourcing and automation are forcing many blue and white collar workers to compete (unsuccessfully) with cheaper labor in developing countries or worse, software.
Political Capture
One of the most effective means of entrenching the advantages of the top 1% is through trade agreements like the Trans Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) which usurp the sovereignty of Nation States and replace it with systems of international corporate governance – which are extremely favourable to the super-rich. These trade agreements are the modern face of imperialism and they allow companies like Apple to get away with paying just 4.0% tax on their earnings, globally. US defense secretary Ashton Carter says the Trans-Pacific Partnership is as important to him as another aircraft carrier.[9]
In addition to favorable trade and taxation regimes for their companies, the super-rich benefit from extensive programs of corporate welfare. While social welfare is universally attacked by corporate owned media as unaffordable, the cult of corporate welfare experiences no such problems. Corporate welfare refers to money distributed from tax payers to corporations for everything from the introduction of carbon pricing to export subsidies, agricultural subsidies, research grants and tax discounts for investment as well as massive industry bailouts in times of crisis; such as we saw recently in the banking and automotive sectors.
Oxfam is of the view that the undue political influence of multinational companies and some super-rich individuals is at the heart of all the social, economic and environmental issues we face, both in Australia and globally. Physicist Stephen Hawking made exactly this point in a recent Reddit: “Ask me anything”[10] session, where he expressed more concern about our ability to deal with economic inequality than about rouge artificial intelligence. He offered this view in an answer to a question about technological unemployment:
“If machines produce everything we need, the outcome will depend on how things are distributed. Everyone can enjoy a life of luxurious leisure if the machine-produced wealth is shared, or most people can end up miserably poor if the machine-owners successfully lobby against wealth redistribution. So far, the trend seems to be toward the second option, with technology driving ever-increasing inequality.”
Hawking is endorsing my own contention that when it comes to technological unemployment, it’s not technology that’s the problem; it’s the distribution mechanisms within our economy. Hawking also alludes the fact that despite all the rhetoric of innovation and micro-entrepreneurship, digital technologies are exacerbating the existing wealth gap – significantly. Extreme inequality is not just an accident or a natural rule of economics. It is the result of policies and choices. With different policies and choices we can enjoy different outcomes. We need to make these choices now as a society. But it seems that concentrated economic power has extended its reach so far that no government can control it. We see a concentration of wealthy actors capturing all the institutions of power and leveraging them to their own advantage, leaving ordinary people voiceless and their interests ignored.
Solutions
As a solution Oxfam has proposed a seven point plan for governments to adopt which they believe will help rebalance the distribution of wealth around the world:
- Clamp down on tax dodging by corporations and rich individuals.
- Invest in universal, free public services such as health and education.
- Share the tax burden fairly, shifting taxation from labour and consumption towards capital and wealth.
- Introduce minimum wages and move towards a living wage for all workers.
- Introduce equal pay legislation and promote economic policies to give women a fair deal.
- Ensure adequate safety-nets for the poorest, including a minimum-income guarantee.
- Agree a global goal to tackle inequality.
We’re now a little over six weeks away from the next Davos World Economic Summit on 20 January 2016 where the rich and beautiful will once again congregate in a winter paradise to anguish over how difficult it is to be spectacularly rich (and beautiful) in the midst of so much inequality. Bloomberg and CNBC will provide a veneer of sincerity to George Soros and Bill Gates – and all the other imposters – as they pontificate on what needs to be done to help the poor. There will be yet another round of global faux policy initiatives proposed which will exonerate the rich and leave the poor to pull themselves up by their own bootstraps. But the vapidness of the whole show will be borne out by the statistics: while it took the wealth of the world’s richest 80 individuals to eclipse the wealth of the world’s poorest 3.5 billion in 2015, in 2016 the assets of just the richest 67 billionaires will exceed the wealth of the poorest 3.5 billion[11]. So much for all those commitments made at last year’s summit.
For my part, I don’t see any of the 0.1% of 1.0% giving up any of their wealth or influence any time soon. As the former slave and abolitionist, Frederick Douglass noted: “Power concedes nothing without a demand. It never did and it never will.”[12] The tragic irony of our situation is that, thanks to digital technologies, we really, truly are on the brink of an age of incredible abundance.
Re-Creating the World
I’ve pointed out elsewhere that the defining feature of information goods is that they are infinitely replicable (at almost no cost) and capable of almost friction free distribution. This quality makes digital goods almost infinitely abundant (think music files) and as more and more components of our economy become digitized the challenge of dealing with abundance in a ‘scarcity-based’ economy will become acute. In order to realize the abundance that digital technologies offer us, we all need to let go of some of our cherished and rather ossified ideas around scarcity, justice, ownership and control. While it’s comforting to blame the winners under the existing system for the desperate disparities that exist, all of us will need to change the way we think about how wealth is generated and distributed in our economy if we want a better world.
As the ideologies of scarcity and abundance square-off against each other, it’s going to take some really courageous thinking and action on the part of many people to change the dominant memes of our culture. What’s required is an entirely new social and economic paradigm; an entirely new way of thinking, acting and relating. The birth of a new paradigm occurs first and foremost inside people’s heads. That’s where the real battle is fought and won (or lost). We all need to be a part of it. I’m certain we can do much better than we’re doing now but I don’t have all the answers. I have some ideas but only some. There are plenty of other smart people who have lots of great ideas as well. We need them all. One thing I know for sure is that only when a critical mass of people decide to embrace a new paradigm will it begin to materialize in the physical world; and even then it requires a struggle to be born.
Like Stephen Hawking, I’m very concerned that those people who’ve benefited most from the current scarcity-based system are not going to let go of their privileges without a fight and their greatest ally is passivity on the part of the rest of us. We could enter an age of incredible abundance for everyone, or an age of grinding austerity for most – it will be up to us to decide. I think we can do better than we’re doing now and it’s time for a change. If you agree, why don’t you join the discussion at i-human.com.au[13].
Alan Hamilton
Alan Hamilton is technology advocate and commentator on the future of work. He has spent over 25 years working in multinational corporations in sales, management and human resources. His primary interest is the future of work in a digital economy. He holds a Bachelor’s Degree from La Trobe University and a Master’s Degree in Philosophy from the University of Sydney.
[1] https://www.linkedin.com/
[2] https://www.ted.com/talks/
[3] https://www.youtube.com/
[4] http://therules.org/
[5] http://www.bvdinfo.com/en-
[6] http://journals.plos.org/
[7] https://www.oxfam.org/en/
[8] http://www.oxfam.ca/news/
[9] http://www.abc.net.au/
[10] http://www.cnet.com/au/
[11] http://www.forbes.com/
[12] http://thinkexist.com/
