A significant portion of the global economy flows into the hands of a small group of financial institutions—that much we’ve known for some time. But in a new paper, flagged by the New York Times’ Economix blog, Stefania Vitali, James B. Glattfelder and Stefano Battiston name names. Using a methodology based on “
network topology,” the Swiss researchers identify which financial actors are at the core of the global economy.
Top 10 network control-holders
1. Barclay’s (Great Britain)
2. The Capital Group Companies (U.S.)
3. Fidelity Investments (U.S.)
4. AXA (France)
5. State Street Corporation (U.S.)
6. JP Morgan & Chase (U..S)
7. Legal & General Group (Great Britain)
8. Vanguard Group (U.S.)
9. UBS (Switzerland)
10. Merrill Lynch (U.S.)
Altogether, the top 10 firms control 19.45 percent of the global financial network, and the top 50 firms control nearly 40 percent.
What’s most significant, the researchers say, is not that these financial institutions wield so much power, but that they are highly interconnected. As they explain, “the interest of this ranking is not that it exposes unsuspected powerful players. Instead, it shows that many of the top actors belong to the core. This means that they do not carry out their business in isolation but, on the contrary, they are tied together in an extremely entangled web of control.”
Tyler Cowen isn’t convinced. He counters that the paper doesn’t adequately distinguish between what it calls ownership or control and “financial intermediation”—in other words, a big portion of the global economy flows through these firms, but individual shareholders don’t wield the same control over a mutual fund as, say, a commercial firm.