Anthony J. Pennings, PhD

WRITINGS ON DIGITAL STRATEGIES, ICT ECONOMICS, AND GLOBAL COMMUNICATIONS

When Finance Went Digital

Posted on | February 5, 2016 | No Comments

By the end of the 1970s, a basic domestic and international data communications system was created that provided for the regime of digital monetarism to expand around the world. Drawing on ARPANET technologies, a set of standards emerged that was conducive to the public-switched telephony networks operated by the national telecom authorities such as France Telecom and Japan’s NTT (Nippon Telephone and Telegraph).

Rather than the user-oriented TCP/IP protocols that would take hold later, early packet-switched networking using a series of ITU technical recommendations emerged. The move was indicative of major tensions emerging between the governments that controlled international communications and the transnational commercial and financial institutions that wanted to operate globally. National telecommunications systems wanted to organize and control the networks with financial firms as their customers. They developed packet-switching protocols such as X.25 and X.75 for national and globally interconnected networks. Finance found their networks slow and wanted much more robust service that could give them competitive advantages and securer communications.

The increase in financial activity during the 1970s fed the demand for data communications and new computer technologies such as packet-switching networking, minicomputers, and “fail-safe” mainframes, such as Tandem Computers.

After the dissolution of the Bretton Woods Agreements, banks, and other financial businesses made it clear that new data services were needed for this changing monetary environment. They wanted computerized “online” capabilities and advanced telecommunications for participating in a variety of global activities including currency transactions, organizing syndicated loans, communicating with remote branches, as well as the complex data processing activities involved with managing ever-increasingly complex accounts and portfolios for clients.

For corporations, it meant computerized trading systems to manage their exposure in foreign currencies as they were forced, in effect, to become currency gamblers to protect their overseas revenues. Their activities required new information technologies to negotiate the complex new terrain brought on by the new volatility in international foreign exchange currency and the exponential rise in lending capital due to the syndicated Eurodollar markets.

The flood of OPEC money coming from the Oil Shocks increased the need for international data communications, as money in the post-Bretton Woods era was becoming increasingly electronic, and the glut of OPEC petrodollars needed a more complex infrastructure to recirculate its bounty to industrializing countries around the world.

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AnthonybwAnthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.

Category: democratic political economies, digital destruction, digital monetarism

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    Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.

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