The changing face of markets.
If Rip Van Winkle had gone to sleep in the early 1970s and woken up 30 years later, he would recognise little of today’s f inancial landscape. True, there are companies with shareholders, and banks and stock exchanges; and there are still plenty of lawyers and bankers who help to transfer money from one pocket to another so that companies can raise the finance they need and business may be done. But the way the money is raised and the speed with which it is done have changed virtually beyond recognition.
Thirty years ago, banks were still the main source of finance for most big companies, especially in Japan and continental Europe. Today, for the most part, banks play second fiddle to the equity and bond markets for big companies; even in Germany and Japan, the part played by banks has diminished.
Equity and bond markets have become more international and have extended their influence in ways that would have been unimaginable 30 years ago. Compared with their counterparts of even a decade ago, today’s financial institutions are not only more diverse, both geographically and in terms of their businesses, they are also better capitalised.
In 1990, the biggest financial firms were commercial banks, most of them Japanese, whose main function was the taking of deposits and the making of loans. At that time, banks in continental Europe were typically engaged in a broader range of activities than their US counterparts which, under the Glass-Steagall Act, since repealed, had to choose between commercial banking, investment banking and specialist financial services such as insurance. Nowadays, by far the largest firms are financial-services conglomerates.
These combine commercial banking with a range of other financial services, such as underwriting bond and equity issues and advising on mergers and acquisitions. They also provide consumer finance and sell on loans to other investors, for example, by arranging syndicates, buying and selling derivatives, and issuing securities backed by mortgages, credit-card receivables and the like. In 1990, the list of the top 15 financialf irms by market capitalisation (as compiled by Morgan Stanley Capital International) was dominated by Japanese banks, the largest of which had a stockmarket capitalisation of $57 billion.
A decade later, partly because of a spate of mergers among such f irms, international financial-services groups took up most of the places; and the biggest (Citigroup) was then capitalised at more than $250 billion. The sheer size of the conglomerates has undoubtedly helped them to withstand the shocks that have beset the banking system since the dotcom boom turned to bust and stockmarkets began to slide. Between 1998 and 2001, according to the Federal Reserve, America’s central bank, telecommunications firms worldwide alone borrowed around $1 trillion.
Many of these loans have since had to be written off because their borrowers went bankrupt. In quick succession in the United States, Enron, WorldCom, Global Crossing and others collapsed. Yet in contrast to previous setbacks following similar bouts of overexuberance and overinvestment, banks were able to continue lending to companies that needed money. The growth of sophisticated debt markets also helped to reduce companies’ reliance on bank credit and equity to finance their operations. As a result, the US economy in particular was able to maintain a faster pace of growth than many had feared.
That J.P. Morgan Chase was able to absorb the billions of dollars in losses that resulted from the collapse at the end of 2001 of Enron, an energy-trading company, speaks volumes not just about the size of J.P. Morgan Chase’s balance sheet, but also about its ability to spread the risk by selling derivatives to other investors. In the 1980s, a loss on the scale of Enron, then one of the world’s biggest companies, might have toppled Texas’s banking system. In the event, Texas was spared by the deregulation of state banking laws that subsequently took place, which allowed J.P. Morgan Chase (itself an amalgam of two big banking groups) to buy Texas Commerce Bank, one of Enron’s biggest lenders.
Sceptical opinions like that given by Rushkoff are worth considering, especially given the tendency of the press and other media toward sensationalism. But even if it turns out from empirical research findings that SMS is far less a genuine political tool than the media has led us to believe, there is still wisdom in the sceptic's point of view. Reflecting on the mobile phone trace mobile number and its cultural impact., George Myserson writes, because the mobile is going to be so important, the ways in which ideas are associated with it is also important'.37 in other words, public perception of SMS and the mobile phone as a political tool is an important development in and of itself because by this very fact it will continue to influence the co-evolution of politics, culture and technology.
The second generation of mobile phones launched a personal communications revolution and forever changed our perception of the black box with an antenna stuck on top. Today we are even hard pressed to find the antenna on our mobile phone. Certainly the development of digital cellular was important in this rel,ro-lution, in part because it improved spectral efficiency through new multiplexing methods. Improved spectral efficiency meant that operators could offer services to a large customer base at reasonable prices and tap into new segments in consumer markets. In addition to this important technical innovation, the influence of design and marketing in the mobile phone sector has been equally important. Firms such as Nokia and its design team led by Frank Novo realized the value of associating mobile communications with lifestyle and emotional appeal. As a result of these efforts, the mobile phone is now widely accepted as a deeply personal object, and one that is well suited to the idiosyncrasies of self-expression in the (post)modern urban context. In a sense the mobile phone has become a kind of 'strange attractor' of aesthetics, digital technology and emerging communication practices.