Coming Round Full Circle: The Financial Markets as Pop Events
by Felix Stalder, 31.10.97||||||||||||||| back to homepage ||||||||||||||||||||||
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The usual copyright stuff: personal use and feedback is encouraged, all distribution only with my written permission (easy to get).
What we are witnessing in the current market turmoil is a truly global pop event. A 'crash' sending shock waves through all economies wealthy enough to experience shock as an exception. The event is staged by dead-serious men and women asserting that the occurrences are exceptional and dramatic -- "the biggest point drop ever!" -- but that we have nothing to worry about -- "just sit back and relax!" What happened?
In the last two decades, the financial markets have turned from a relatively peripheral phenomenon into a central event of mainstream business, media and popular attention. This development is related to a considerable extent to the increased incorporation of advanced telecommunication and computer technology. For three reasons, at least:
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1. The volume of money and transactions which can be handled has increased dramatically through the automation of the financial markets. As the markets grew beyond any limitations more money -- and influence -- became concentrated there.
2. Automation of the markets has made it possible to provide ever more customized services at an ever lower rate allowing for an increased participation of small investors, i.e., the traditional middle class concerned about their pensions. Not only has the volume handled in the markets increased, but also the number of market participants. And the demographic profile of those participants has changed from (young) highly educated professionals to the upper and middle class segments of the general public. An indicator of the extent of this change is the fact that mutual funds and other previously exotic financial products have become advertised heavily in mass media in recent years (at least in North America).
3. Increased computerization and increased volume then led to a simultaneous integration and fragmentation of the markets. On the one hand, more and more abstract, complex and entirely computer-based products, such as derivatives (e.g., options: the right, but not the obligation, to an underlying asset for a predetermined price in the future), have greatly expanded the number and types of tools available to brokers and their customers. The markets fragmented into a plethora of submarkets.
On the other hand, the increased abstraction of those products has extended their reach (the option to buy stock costs only a fragment of the stock itself, i.e., one can "control" more assets with less money). This enlarged extension of financial products has connected everything with everything and interrelated markets which were traditionally separated and insulated from one another.
The transfer and expansion of the financial markets into advanced, networked media has led to a paradoxical situation. While the markets have grown and have become much more complex, the number of poorly informed participants have risen steadily.
The network condition, characterized by Berkeley sociologist Manuel Castells as "spaceless space" and "timeless time" (from the point of view of the insider, everything is here and now), has further shifted the market's mode of operation from analyzing the economy to anticipating participants own reaction. In other words, they have become increasingly psychological, or, as McLuhan used to say, "in the electric age rumors become news."
In the meantime, the ever larger segment of small investors has been looking out for comprehensible coverage of those markets they have invested in and the popular media have picked up that demand quickly. Programs entirely devoted to financial news, such as CNN's Money Line, have sprung up all over, adding their part to the spin.
For mass media, financial markets are an ideal match, even better than sports. They provide everything: 24-hour, global events, lots of participants eager to appear on television as a way to promote their own businesses and, though maybe not for long, all content is free of charge. Most importantly, the financial news produce the most interesting audience to sell to advertisers: the wealthy middle class.
These different threads have reinforced one another in the last decade with an increased participation of the public and the mass media in the last few years. They have created a truly global pop event which feeds upon its own hype. Thus turning expectations, dreams, and nightmares into reality which reflects less the material reality it is supposed to represent -- the physical economy -- but more the dynamic of electronic media in which it is organized.
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