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Why is finance so important? How do stock markets work and what do they really do? Most importantly, what might finance be and what could we expect from it?
Exploring contemporary finance via the development of stock exchanges, markets and the links with states, Roscoe mingles historical and technical detail with humorous anecdotes and lively portraits of market participants.
Deftly combining research and autobiographical vignettes, he offers a cautionary tale about the drive of financial markets towards expropriation, capture and exclusion. Positioning financial markets as central devices in the organisation of the global economy, he includes contemporary concerns over inequality, climate emergency and (de)colonialism and concludes by wondering, in the market’s own angst-filled voice, what the future for finance might be, and how we might get there.
Chapter 1 introduces the concept of agency theory as a means of exploring the pressures that modern corporations are placed under by the financial sector, leading them to shrink productive capacity and outsource costs. It describes these practices as rent-seeking, and suggests that they are responsible for many of the challenges we face today: environmental, social, inequality. It introduces notions of critique concerning the move from productive to financial activity in the economy, before arguing that these approaches end up reifying the power of finance. It proposes instead a critique based on humour.
Chapter 2 argues that financial markets are embedded in material structures with distinctive historical trajectories. It tells the story of the development of futures markets in Chicago as an example, before exploring how buildings and technologies (especially the ticker tape) constituted the market. It brings the trading pits up to date, noting some of the problems with their operation. The chapter mingles historical narrative (Sinclair’s The Jungle and Norris’ The Pit) with contemporary social science to show how these pre-digital markets produced prices: human powered computers combining cutting-edge technology with old fashioned pushing and shoving, dense social networks and long established interpersonal routines.
Chapter 3 explores the historical interdependency of market and state, via the early history of London’s stock market. It shows how markets support states, taking the case of London. The London Stock Exchange developed as a mechanism for generating liquidity in the UK’s national debt, allowing the government to fund its colonialist activities. It examines how the occupation of stockjobber (the early market-makers) arose and the contestations, especially in terms of gender, that surrounded it. The chapter then looks at how states support markets, via the dispute between the Chicago Board of Trade and the city’s bucket shops, which eventually led to the legalization of options trading.
Chapter 4 returns to London’s jobbers in the final years of the London Stock Exchange’s face-to-face trading (circa 1960 until October 1986). The stockjobbers practised an ambulatory form of trading, circulating around pitches on the floor of the Old House, and using a system of spoken deals based on ‘my word is my bond’. Conservative social structures made the institution durable but prevented change. This chapter introduces the hierarchical structures of the exchange, the apprenticeships served by new clerks, and the subsequent career progression of its members. These are presented through oral testimonies and archival sources. The chapter characterizes the Exchange as a struggling institution, little able to adapt to difficult economic times. Yet its long-standing traditions and practices were soon to be swept away by the changes of the 1980s.
Chapter 5 tracks the political economic changes that transformed the London Stock Exchange – and the world of finance – in the 1980s. It begins with a short political-economic history of the period, before zooming in on the abolition of exchange controls and the Big Bang reforms of 27 October 1986. It shows how a string of privatizations helped inflate profits for jobbers, just as the firms became open to foreign ownership, and the takeover frenzy that resulted. It notes the changes that were wrought to the social structure of the City during that period, especially the end of the partnership structure.
Setting out from Joseph Wright of Derby’s two paintings of scientific discovery (‘An Experiment on a Bird in the Air Pump’ and ‘The Alchemist, in Search of the Philosopher’s Stone’), Chapter 6 explores two rival conceptions of economic activity: discovering and making of prices. It sets out the proposition, drawn from science and technology studies, that financial facts are made through networks of experimentation and debate. These ideas are fleshed out using examples: the daily LIBOR (London Interbank Offered Rate) fixing, and then, in more detail, the development of the CBOE (Chicago Board Options Exchange) underpinned by new ideas in mathematical finance. The chapter concludes with the construction of the first mortgage-backed securities by Salomon Brothers in the 1980s, an example of ‘securitization’, a novel mode of financial operation.
Chapter 7 begins by examining another novel mode of financial operation: the leveraged buyout. Fact and fiction overlap in the discussion of this financial practice, and the chapter moves to consider fictional representations of finance and to explore the narrative construction of finance. It deals with the written underpinnings of finance, from Daniel Defoe onwards, and then examines contemporary financial print culture, epitomized by Tom Wolfe’s Bonfire of the Vanities, in more detail. It moves to a focus on gender, both in fiction and practice, and considers the changing performances and representations of gender in finance, exploring how elitism and exclusion can be reproduced in finance.
Chapter 8 brings to a close the book’s account of the 1980s and the accompanying transformations in finance. It tells the story of Harvard Securities, a broker dealing over-the-counter (OTC) to private investors, and its founder Tom Wilmot. Wilmot’s firm sold stocks directly to investors. It also made the market in them, to the disadvantage of investors, many of whom lost money. Alongside this narrative, it explores the automation of the London Stock Exchange and the changes of the ‘Big Bang’ and then the crash of 1987, following the evolving fortunes of a small group of market traders.
Chapter 9 moves to the dotcom bubble of 1999. It introduces an autobiographical element, reflecting on the author’s own experiences as a financial journalist during this period. It then picks up the story of the founding of OFEX, a small company-focused stock exchange, which emerged from the London Stock Exchange’s own over-the-counter (OTC) rules. It highlights the role of technology in this development, centring on the Stock Exchange’s ‘non-SEAQ’ screen. The chapter concludes with an account of the growing business of financing dotcom start-ups, and the cultural circuit in which the author was active as a journalist, all of it paid for by other people’s money, or OPM.
