Monopoly #2

Why waste words when the numbers speak for themselves? However, a little explanation may be useful in this case. *

The numbers in the table below are taken from a study of some 43,000 international companies in 2007. That means some of the information is now a little dated, with the demise of Lehman Brothers being one example. However, the broad picture remains and it is one showing that the top 50 companies 'controlled' (ie had ownership of 50% or more of the equity in) some 40% of the network of 43,000. US monopolists account for nearly half of the entries in the table, but the UK is second in line.

Analysing these relationships is complicated since it must take into account the common fact that company A owns a share of company B; B also owns a share of company C, and C may also own a share of the equity in A and B. Such relationships are open to network analysis, however, and the results show the concentration of power in a core group of companies, of which these are the top 50.

Most of the corporations listed are in the financial sector, a fact that illustrates both how equity markets enable the centralisation of ownership through cross-shareholdings, mergers and takeovers, and how financial companies are at the centre of this relationship nexus. I have some qualms with the view that this means actual control, however. There may be an accumulation of relatively small shareholdings by a wide range of subsidiaries and loosely linked companies, so that implementing control may prove to be difficult, even if it were attempted. Furthermore, if 20 separate financial institutions owned 60% of a particular company's equity, they will not necessarily act as a group. Nevertheless, this does not change the picture of monopolistic ownership of the world's companies.

A different issue that could upset the calculation either way, and I do not think this was (or could have been) allowed for in the study, is that owning 1% of the equity does not necessarily give 1% of the voting rights. It may give more, or even zero, voting power, depending on the type of equity. Take Facebook's Zuckerberg as an example: he is reported to own 18% of the company's shares but has more than 50% of the voting rights.

The original study giving the method behind the analysis and some more information on the work done is found here.

For those who may frustrated with the way that mathematics is often used to obscure economic relationships, let this stand as one of the rare examples where it elucidates them!

Rank	Company name	Country	Cumulative % network control
1	Barclays Plc	GB	4.1
2	Capital Group Companies, Inc	US	6.7
3	FMR Corp	US	8.9
4	Axa	FR	11.2
5	State Street Corp	US	13.0
6	JP Morgan Chase & Co	US	14.6
7	Legal & General Group Plc	GB	16.0
8	Vanguard Group Inc	US	17.3
9	UBS AG	CH	18.5
10	Merrill Lynch & Co	US	19.5
11	Wellington Management Co LLP	US	20.3
12	Deutsche Bank AG	DE	21.2
13	Franklin Resources Inc	US	22.0
14	Credit Suisse Group	CH	22.8
15	Walton Enterprises LLC	US	23.6
16	Bank Of New York Mellon  Corp	US	24.3
17	Natixis	FR	25.0
18	Goldman Sachs Group Inc	US	25.6
19	T Rowe Price Group Inc	US	26.3
20	Legg Mason Inc	US	26.9
21	Morgan Stanley	US	27.6
22	Mitsubishi UFJ Financial Group Inc	JP	28.2
23	Northern Trust Corp	US	28.7
24	Société Générale	FR	29.3
25	Bank Of America Corp	US	29.8
26	Lloyds TSB Group Plc	GB	30.3
27	Invesco Plc	GB	30.8
28	Allianz Se	DE	31.3
29	TIAA	US	32.2
30	Old Mutual Plc	GB	32.7
31	Aviva Plc	GB	33.1
32	Schroders Plc	GB	33.6
33	Dodge & Cox	US	34.0
34	Lehman Brothers Holdings Inc	US	34.4
35	Sun Life Financial Inc	CA	34.8
36	Standard Life Plc	GB	35.2
37	CNCE	FR	35.6
38	Nomura Holdings Inc	JP	35.9
39	The Depository Trust Company	US	36.3
40	Massachusetts Mutual Life Insurance	US	36.6
41	ING Groep NV	NL	37.0
42	Brandes Investment Partners LP	US	37.3

43	Unicredito Italiano Spa	IT	37.6
44	Deposit Insurance Corporation Of Japan	JP	37.9
45	Vereniging Aegon	NL	38.3
46	BNP Paribas	FR	38.6
47	Affiliated Managers Group Inc	US	38.9
48	Resona Holdings Inc	JP	39.2
49	Capital Group International Inc	US	39.5
50	China Petrochemical Group Co	CN	39.8

Source: Vitali S, Glattfelder J B, Battiston S 2011, ‘The Network of Global Corporate Control’, PLoS ONE 6(10): e25995. doi:10.1371/journal.pone.0025995

Notes: 'Home countries' of the corporations are shown by their 2-letter ISO code. Note that CA is Canada, CH is Switzerland and CN is China.


Tony Norfield, 19 August 2013

* Clarification note, 20 August 2013: Vitali et al's document makes a clear distinction between ownership and control. To clarify, the table above gives figures for control, not ownership. The control estimate is based on owning 50% or more of the equity and thus having control over a company's decisions. In an extreme case, owning 50.1% of equity would give 100% control. Hence, the measure of control will overstate the actual figure of ownership. So these top 50 companies do not own nearly 40% of the network of corporations, although, by their measure they control nearly 40% of them.

Unto Us A Child Is Born

Many moons ago, I used to think that a good argument against the monarchy and the associated hangers on was that they were the rich, whose lives had nothing in common with the masses of ordinary people, and they were the gilded edge of privilege and class oppression. True, that was not exactly a Leninist polemic, but I thought then that it might have some resonance. Among the people with whom I conversed on this topic, in the bottom 0-40% of the income/wealth distribution, the answer, however, was that the Queen (and the Queen Mother) was not like the rest, and that they, at least, stood for the country (in some undefined fashion). They represented ‘us’. This idea was widespread, even among children.

I see little to challenge the validity of that observation today. Things are, if anything, worse. While the notion that Britain awaited the latest Royal Birth is media hyperbole that echoed in an empty, ‘awaiting’ street peopled by summer news-starved journalists, not the adoring masses, it is a sure bet that the birth will be welcomed by masses of people. There is simply no political class antagonism in Britain to offset a natural empathy with a new mother and baby, still less anything that sees a clash between the national foundation of the extended royals and popular interests. Newspaper front pages today are not a conspiracy to deceive; they reflect a political reality. In case you have doubts, search for any news of dissenting voices. If there are such, then millions will trample the treachery to the national psyche. At least we had the Sex Pistols in 1977.

Tony Norfield, 23 July 2013

99% versus 1%? Or 50% and 40% versus 10%?

Does the phrase ‘the 99% versus the 1%’ make any sense? Firstly, it assumes that there is a clear dividing line of income, or perhaps ownership of wealth, between the bottom 99% and the top 1% in a particular society. Secondly, it assumes there is a difference of political outlook between those who are in the 99% and those who are in the 1%. Thirdly, users of the slogan mostly ignore the fact that there is a clear hierarchy of income and wealth among countries in the world, separate from whatever may be the distribution within a particular country.

Here I will present some information on the first of these issues. The second can be dismissed simply by noting that there is no necessary relationship between a person’s political outlook and their position in a country’s income and wealth tables. A more relevant fact is that masses of people in richer countries can be pro-imperialist, to the point of signing up for a war, even if they are not in the higher echelons of society. The third point has been examined in a number of other articles on this blog.

Statistics for rich countries commonly show that the very richest people have large multiples of everyone else’s income or wealth, so that it does indeed seem as if those at the top, the 1%, are a well-defined separate group. However, a closer look at the figures reveals a different picture.

The examples I will give are focused on the ownership of financial assets in the US and the UK. Not only the ‘rich’, but also millions of others own these assets, perhaps directly, but more commonly via savings plans, endowment policies and pension schemes.

US Census Bureau data for 2007 show the following:

- For US families in the 80-90th percentile of the income distribution, the median holding of equities was $62,000, and for families in the top 10% of the income distribution, the median holding was $219,000.

- By comparison, the median value of equity holdings for families in the 40-60th percentile was less than $18,000; it was less than $9,000 for the 20-40^th percentile.

The families counted were only those owning equities, however half of US households do, directly or indirectly, so the top 20% of these families will account for some 30 million and the top 10% are 15 million people in the US, based on a population of 300 million. These figures exclude other assets, such as bonds, property and pensions, which would substantially raise the sums, especially for the higher income groups.

A variety of UK data sources show the following facts:

- In 2005 there were some nine million people in the UK owning equities either directly or via mutual funds, some 15% of the UK population.

- At the end of 2010, UK individuals directly owned 11.5% of the value of UK equities, of £204.5bn worth, excluding any holdings via investment funds.

- Estimates of the net financial wealth of UK households in 2008-10, including cash savings, bond and equity holdings minus financial liabilities (excluding mortgages), showed a mean figure of £44,200.

- The latter distribution was skewed dramatically, and the median net household wealth was only £6,600, but it is instructive to note the details.

- Nearly a quarter of all households had zero or negative net financial wealth, 55% of households had from zero to £50,000 net financial wealth, 9% had from £50,00 to £100,000 and nearly 12% of households had more than £100,000.

These figures, as in the US case, also ignore the large exposure to equities and bonds that individuals have via pension funds, which in the UK case make up 39% of total household wealth compared to just 11% for financial wealth. Another 39% of household wealth is made up from property holdings, with 68% of households being owner-occupiers.

In conclusion, those who want to use a slogan like the ‘99% versus the 1%’ might consider revising it to ‘the 30% broke and the 50-60% doing all right versus the 10-20% rich’. Admittedly, it is not as catchy, but having to mouth it less often might allow some time to examine the realities of the imperialist world economy today.

Tony Norfield, 17 June 2013

Monopoly

‘If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism.’ Lenin, 1916

Lenin’s definition of imperialism involves the control of the world economy by groups of monopolistic companies, not simply monopolised production in particular countries, and also a hierarchy of nations in the world economy, with the biggest capitalist powers dominating. The role of the state is important because of the inevitably uneven development of world capitalism. More economically developed countries will tend to have more productive companies that are larger and stronger in the world market, and a state that will tend to have bigger resources for domination than others. Lenin’s five summary features of imperialism were posed as the key aspects of a single imperialist reality, not as independent factors that happen to coincide, and the monopolistic development of the world economy was key.

Monopoly power is good for the monopolist, but less so for the national economy in which it operates. Hence, there is usually a state policy against local monopolies and cartels, complete with legislation or regulatory bodies to limit the abuse of market power. This is a rational move on the part of state authorities for the working of the domestic capitalist system, since a stranglehold over the supply of key commodities and services by a few companies could be damaging for all the others. Marx had already noted in Capital that the establishment of monopolies in certain spheres had provoked ‘state interference’.

Probably the most famous early example of this was the Sherman Antitrust Act of 1890 in the US, although it took other state measures to limit the power of Rockefeller’s Standard Oil, a trust that refined 80% of the national US oil output and overwhelmingly dominated the production, transport and markets for a range of other oil and energy products. There have been further ‘anti-monopoly’ policies in the US in the past century, and in other countries that have agencies to investigate and rule on markets, such as the UK’s optimistically named Competition Commission, a successor to its Monopolies Commission. Yet these have done little to prevent a steady drift towards further monopoly power in most sectors of the economy. An extreme example is in South Korea, which has been dubbed ‘the Republic of Samsung’ by locals, since the company’s conglomerate structure, from road construction to oil rigs, to hotels, insurance and smartphones, accounts for a fifth of national output.

However, the concern a particular state might have about market domination in the domestic sphere does not extend to the operations of its companies in the international market. On the contrary, large companies get significant backing from their states for expanding their foreign business. The logic here is that the consequence of any exercise of monopoly power is another country’s burden, one that might even favour the home country via the improved profitability of the domestically based company. Apart from any technical cost advantages that might result from larger scale global operations, international expansion also enhances the global market position of the company, boosting its monopolistic power.

Perhaps the only exception to this lax international policy is where EU member states have adopted an anti-monopoly policy within the EU area, as a means to promote a large single market that is considered to be in member countries’ joint interests. Hence, there have been some (limited) measures against price fixing in the EU. That has not stopped widespread manipulation of the ‘free market’, as detailed in a study of some 20 cartels published in 2006.

The result of the trend towards monopoly is that the worldwide production of most of the key products and the provision of most of the key services of modern capitalism is today dominated by a small number of companies. Fewer than around 10 companies often control the bulk of global activity in many areas, despite the further opening up of the world market in the past 30 years. Here are some examples:

• Over half of global vehicle production in 2001 was attributable to just five companies, and 11 companies accounted for over 80% of output.

• In the case of beer, so to speak, just four companies provided over half the world’s consumption in 2009.

• Glencore, ahead of its merger with Xstrata in May 2013 was reported to be controlling ‘more than half the international tradable market in zinc and copper and about a third of the world's seaborne coal; was one of the world's largest grain exporters, with about nine percent of the global market; and handled three percent of daily global oil consumption’.

• In a more recently developed market, mobile phones, the degree of monopolisation is little different: in 2010, six companies accounted for just over 60% of global sales, with Nokia and Samsung having nearly half the market between them.

• Everybody knows about the domination of Apple, Microsoft and Amazon in their respective markets.

Naturally, the monopolistic corporations of the world are not equally distributed among countries. An UNCTAD report showed that of the top 100 international non-financial corporations in 2008, ranked by total assets, 75 had a ‘home’ in just six: the US (18), UK (15), France (15), Germany (13), Japan (9) and Switzerland (5).

None of this information is a big surprise. However, I though it was worth sharing as a further illustration of today’s imperialist world economy.

Tony Norfield, 14 June 2013