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Timeline of Financial Capitalism Close

Sarah Grochala | Jan. 17, 2014

An electronic stock market board. Photo: Katina Tuliao.

 

1971 – Increasing international competition and the outsourcing of industrial production to developing countries causes a drop in the value of wages. Soaring inflation means that the dollar becomes tremendously over-valued in relation to gold. The relationship between the dollar and gold is suspended, and the dollar is formally devalued. Richard Nixon introduces price controls in the United States. A long period of stagflation begins in both Britain and the United States.

1973 – The Bretton Woods currency markets are closed. From this point on floating exchange rates operate, which creates a market for currency speculation. The value of the pound falls dramatically in relation to the value of the dollar. In response to US and European support for Israel during the Yom Kippur War, OPEC introduce an oil embargo. This raises the price of oil from $3 to $12 a barrel. This leads to dramatic price increases in both Britain and America. The international SWIFT payment network is created. This is one of the first electronic banking systems.

1974 – Stock markets in both America and Britain drop dramatically in value. Between January 1973 and December 1974, the Dow Jones drops by 45%. During the same period, the value of the London Stock Exchange falls by 73%.

1975 – The British government introduces wage controls that limit pay rises in the hope that this will bring down the rate of inflation.

1976 – The British government requests a loan from the IMF. This is granted on the condition that public expenditure is cut dramatically.

1978 – The drop in the real value of wages and increasing price rises in Britain lead to a series of public sector strikes. Rubbish is left uncollected. Bodies are left unburied. The period is dubbed the winter of discontent.

1979 – Margaret Thatcher is elected as the British prime minister. She implements monetarist policies in order to tackle stagflation. These includes the progressive deregulation of British financial markets and a reduction in the power of the trade unions. In 1979, the Thatcher government sells 80 million of the government’s shares in BP, marking the beginning of a policy of privatising of nationalised industries. By the end of the Thatcher era, financial services as opposed to industrial production have become the foundation of the British economy.

1980 – Deregulation of Savings and Loans in America.

1981 – Ronald Reagan is elected president of the Untied States. He appoints Milton Friedman to his Economic Policy Advisory Board. Under the Reagan administration the powers of the Glass-Steagall Act are effectively weakened allowing retail banks to acquire investment banks, creating universal banks that are able to engage in a full range of financial activities.

1982 – The rise of the congeneric merger, in which companies merge with or acquire other companies within the same industry who produce a different product. For example, a bank might merge with an insurance company.

1983 – The first commercially available mobile phone, the DynaTAC 8000x, comes onto the market.

1984 – British Telecom is privatised. The government sells 100% of its shares in the company.

1985 – The Home State Savings Bank of Cincinnati collapses. A bank holiday is declared in the state of Ohio to prevent a run on the bank. This marks the beginning of the Savings and Loans Crisis in which over 20% of American Savings and Loans Associations collapse.

1986 – On 27 October 1986, the British Stock Market moves from an ‘open-outcry’ system of trading to a screen based one. On the same day, know as ‘The Big Bang’, the British and American financial markets are interlinked which sparks the integration of the world’s financial markets in to a single globalised system.

1987 – The New York Stock Exchange crashes. The Dow Jones falls 27% in a single day, a greater drop than in 1929. The American Saving and Loans Crisis may have contributed to the crash and to the recession that followed. The recession also affects countries with strong economic links to the United States, such as Britain.

1989 – A British computer scientist, Tim Berners-Lee submits proposal to produce a more effective communication system for the CERN research institution. This idea will eventually grow into the world wide web.

1991 – Canary Wharf opens in London.

1995 – Tony Blair removes clause IV from the Labour Party constitution. He redefines the party’s aims in the following terms: ‘It believes that by the strength of our common endeavour we achieve more than we achieve alone, so as to create for each of us the means to realise our true potential and for all of us a community in which power, wealth and opportunity are in the hands of the many, not the few, where the rights we enjoy reflect the duties we owe, and where we live together, freely, in a spirit of solidarity, tolerance and respect.’

1997 – New Labour comes to power in Britain. They operate an economic policy that places the financial sector at the heart of the British economy.

1998 – The average house price in Britain is £80,000.

1999 – Sections 20 and 32 of the Glass-Steagall Act are repealed. This means that commercial banks can officially engage in investment banking again.

2001 – The American company ENRON is declared bankrupt. The company’s huge revenues, estimated at $101 billion in 2000, were revealed to have been the product of ‘creative accounting’.

2006 – The American housing market peaks and starts to fall in value. This had a damaging effect on the trade in securitised mortgages which was based on the assumption that the housing market would continue to rise in value.

2007 – The average house price in Britain rises to £220,000. The British bank Northern Rock fails and is bailed out by the British government.

2008 – Financial crisis hits. House prices in Britain start to fall. In one week in September 2008, $144 billion dollars were withdrawn from the international money markets, compared to only $7 billion in the previous week. Lehman Brothers goes into liquidation. This is partly caused by its huge investment in securitised mortgages. The British economy suffers as a result of its heavy reliance on property prices and financial services.