Title: CRASH, BANG,WALLOP: The Inside Story of London’s Big Bang and a Financial Revolution that Changed the World
Author: Iain Martin
Publication: Sceptre
Pages: 340
Price: Rs. 599
Financial markets are considered to be the growth engines of the modern day economies. Information Technology enabled financial markets to grow at an unprecedented speed as within a fraction of second huge amounts of money get transferred from one account to another making geography a history. This also enabled new instruments. Besides social, cultural and political dimensions also play a critical role in building finance factories.
London’s “Big Bang” financial reforms of October 1986 became the testing grounds for a new type of global finances. It was the birth of a new age of fully electronic trading, transcontinental commerce and wealth creation. Iain Martin tells us how 30 years ago, Margaret Thatcher’s free market revolution transformed London into the financial hub of the world.
Iain Martin is a former editor of the Scotsman and a former senior executive at Daily Telegraph and Sunday Telegraph. He is the author of the award-winning book “Making it Happen: Fred Goodwin, RBS and the men who blew up the British Economy.” He regularly contributes to Financial Times and appear on television.
The market revolution ended fixed commissions on trading shares and introduced ownership of brokers and paved the way for screen-based trading. The move smashed the cartels of British finance transforming UK’s dysfunctional and parochial capital into a dynamic, outward-looking metropolis. The value of shares traded in London increased from 161 billion pounds to 2.5 trillion pounds in the subsequent two decades.
By 2007, London became the location for 70 % of the global secondary bond market and almost 50 % of the derivatives market. It dominates global foreign exchange trading. More than one third of European Union’s financial services activity is in London. Martin tells us that 80 % of all hedge fund assets, more than 75 % of Forex trading and 50 % of fund management and 19 % of all bank lending is in London.
Interestingly, the role of Margaret Thatcher was marginal, according to the author. Home Secretary and future Conservative Party leader Michael Howard, who brought a network of self-regulatory bodies under the umbrella of the new Securities and Investment Board and UK Chancellor Nigel Lawson, played a critical role in Big Bang, Martin tells us.
The Big Bang changed the working hours and also the social life in London. 9 am to 4.30 PM working days became the thing of the past. Citigroup, Goldman Sachs, Merrill Lynch, Morgan Stanley and Bank of America opened huge offices in London on Thames at Canary Wharf. Deutsche Bank moved the global headquarters of its investment banking division from Frankfurt to London.
They not only brought new working practices, but also much-needed new capital. “The future after Big Bang was big firms, big banks. The city’s victory has been total,” Martin reports. The Big Bang brought new skilled manpower from across the globe, particularly from European Economic Union to London. These boys only think of the money as the Big Bang paved the way for “greed is good” syndrome that amounts to corruption and did sow the seeds of financial crisis. But one cannot and should not underestimate the role of financial markets, underlines the author.
Drawing on deep archival research and exclusive new interviews, Martin charts the rich history of the city and explores dramatic upheavals of the ‘80s and their consequences. As a journalist he is more focused on the personalities, who shaped this era called Big Bang. In the wake of the Brexit, he assesses the future prospects of the city.
London can combine its first-mover advantage with all the traditional strengths of the city- English language, rule of law, history, experience, time zone (as it is situated between New York and Tokyo), stable government, lack of corruption, education and culture.
Footloose, if not quite fancy-free, the new city will survive and prosper, making money, out of money, as it usually does,” he concludes. But that will only happen if London creates a political economy that welcomes immigrants, entrepreneurs and innovators.
