Thirty years after Big Bang: What have we learned?

by Barbara Ridpath

Posted: 27 Oct 2016

27 October 2016 marks the 30^th anniversary of Big Bang, the change in financial legislation that permitted outside ownership of member firms of the London Stock Exchange, and broke the division in the City between an agent for a transaction and a principle in that transaction (the distinction between jobbers and brokers). The Big Bang led to a consolidation of city institutions, a huge inrush of foreign ownership and capital, and the establishment of London as the pre-eminent centre of world financial markets.

October also marks the fifth anniversary of Occupy London setting up camp in the precinct of St Paul's Cathedral proclaiming 'we are the 99 per cent.' More connects these two events than their common location in the City of London.

Big Bang became necessary as exchange rates floated, and capital flows began to be liberalized so that money could flow where it could be put to most productive use. Flows of capital around the world enabled development in huge swathes of the emerging markets and returned significant wealth to savers, including pensioners, who could earn better returns on investments outside of the United Kingdom than at home. Flows of a new and diverse labour force brought talent and innovation to this country.

But all these changes had costs as well.  Opportunities in the financial markets and internationally made it possible for a small minority to earn far more and accumulate more wealth than the rest of the country. Flows of capital to emerging markets created manufacturing and services businesses which could compete at lower costs than some sectors in the United Kingdom, causing some jobs and whole industries to disappear in this country.

While everyone took advantage of lower cost imports, resentment grew as a fraction of the population became dramatically better off while the prospects for others diminished.  When scandals and 2008 financial crisis showed that some in the financial markets had made their money by less than honest means, and that taxpayers' money had paid to repair the damage, the backlash was swift and strong.

The uneven distribution of the fruits of liberalisation of trade and financial markets reverberated throughout the Occupy movement. Their search for a more equal distribution of power, for new economic models and for an alternative to the marketization of everything was ill-received by many in the City of London at the time. However, in retrospect, much of what was said then sowed the seeds for change that is occurring now.

New models of business, whether these are credit unions, social enterprises, or B corporations that engrain a social purpose in their articles of incorporation, are being tested in many sectors. Serious thought is being given to a new or at least adapted model of economics and how it is taught to understand better both the impact of human behaviour and choice in economic models, and the interaction of financial markets with the real economy. The concept of a universal basic income is beginning to make headway as a way to level the playing field.

Corporations are reconsidering their values and purpose. Even Harvard Business School is writing and teaching about 'shared value' between corporations and their stakeholders. Much of this is due to recognition that such actions make good business sense, but the aftershocks of Occupy and a generalised distrust of big business each had their part to play in these changes.

In other areas, there has been less movement. The income multiple between the highest and the lowest paid in many companies continues to increase to levels that bear little or no correspondence to relative value contributed by the highest paid. Educational systems have yet to change to encourage problem solving and lifelong learning so that displaced workers can adapt, and workers have often been slow to organize in order to increase their bargaining power in the new 'gig' economy. Many still feel powerless both economically and politically.

Occupy tried to give a voice to the powerless. It gave rise to conversations that are bringing changes to economics, finance and business in general. This movement was one of the first to raise its voice against the forces of globalisation. However, as the fall in the value of the pound since the Brexit referendum has demonstrated, the world we live in remains interconnected. Issues such as where corporations pay tax, global warming, and mass migration cannot be resolved at the nation state level. Some might hope we can turn back the clock with regressive isolationism, protectionism and xenophobia. However, the United Kingdom would actually lose authority and voice on the world stage should it choose that route. We must consider instead how to engage with finance without being ruled by finance; how to give our citizens a fair chance at economic opportunity by reconsidering how we educate, train, hire and retain staff; and how we give our citizens a better voice and participative role in the way this country is governed.

These are difficult questions. But thirty years on from Big Bang and five years on from Occupy, we need to find a way to engage with these questions if we are to own the answers.

Revd Stephen Niechcial - Posted: 27 Oct 2016

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