How IT Came to Rule the World, 2.11: The Information Standard and Other Sovereignties

Posted on | October 3, 2010 | No Comments

President Nixon’s decision to close the gold window in 1971 signaled a dramatic shift in the US international financial policy and the future of the world political economy. The move largely meant the the end of the containment of international finance set up at the end of World War II. No longer was the US constrained by the financial rules it set up during the United Nations Monetary and Financial Conference at Bretton Woods, New Hamphshire. Known more commonly as the Bretton Woods conference, leaders from the major Allied countries tied the US dollar to gold and major currencies around the world to the dollar. With the end of this defacto gold standard, a new type of global power emerged based on news flows, financial information, and computer and communications technologies.

Empowered by new developments in computer services and data communications, currency markets turned electronic in the wake of Nixon’s decision. Banks throughout the OECD started to trade the US dollar, the British pound, the German mark, the French franc, the Russian ruble, the Italian lira, the Japanese yen, the Korean won, the Brazilian real and others. Traders bought and sold currencies, betting on the direction of price movements that had been previously pegged under the Bretton Woods rules. Through new electronic conduits and news services, they monitored economic information, military movements, political crises, and weather forecasts, all for the purpose of making instantaneous decisions about the viability of country’s money.

This decision-making capability propelled financial traders, who Tom Wolfe called “the Masters of the Universe” in his (1987) Bonfire of the Vanities, into a major power. Through the vast funds that they accumulated in their portfolios they effectively began to discipline countries around the world through the force of their trading decisions. With the end of the gold standard’s discipline, a new power emerged based on the emergence of global communications and information technologies, what Walter Wriston, the notorious and visionary Citibank CEO, called the “information standard” in his controversial book, The Twilight of Sovereignty (1992).

This global information standard became a sovereign power in itself. Nation-states and organizations were caught up in the opportunities and consequences of the new financial trading system that began to structure modern life along the dictates of a new techno-economic imperative. When Reuters offered international price information over data communication lines, it initiated the beginning of a global panoptic market system that read and interpreted the world according to the regiment of electronic finance. This system expanded rapidly, globally, and comprehensively. It reached into the policies and practices of nearly every nation and organization, both private and public. Reuters caught a break when the Arab-Israeli War broke out in October of 1973, sending the newly freed currency markets into a panic and panicked dealers to their computer monitors. Reuter’s “Money Monitor Rates” became the news agency’s major source of revenue and a pioneer of the electronic marketplace.

While the mechanics of the information standard was based on the capability to develop virtual markets using the Reuters electronic news and trading system, the “energy” of the system was provided by the infusion of debt taken on by countries around the world. Ironically, it was the oil crisis that created both the surpluses of dollars that were lent to nation-states around the world and the addiction to oil that largely drove the demand for the “eurodollars” – US monies outside its geographical boundaries that lead to that debt. Growing national debt during the 1970s led to the so-called “Third World Debt Crisis” that blew up in the early 1980s, and gave the traders the leverage within this global system of discipline by giving them the power to trade against the state.

The information standard began disciplining the world political economy and its nation-states into operationalizing an agenda that included: 1) privatizing government assets and agencies while capitalizing domestic industries on newly electronic stockmarkets; 2) deregulating domestic industries and taking down barriers to flows of capital and investment; 3) reducing government expenditures and increasing taxes to pay off debt; and; 4) disciplining labor forces into lower cost, enterprising subjectivities. As a result, government owned telecommunications systems were sold off and listed on domestic and international stockmarkets, dometic companies began to modernize, eventually opening up to the World Wide Web and other flows of capital and news.

Public and private institutions began to succumb to the new logic of electronic finance and a system of hyper-real representational strategies. Both types of organizations fell under the discipline of the financial markets with the former particularly susceptible to bond and currency traders, while the latter continued under constant surveillance by the stock markets and lenders. Central to the regime of digital monetarism was the knowledge disciplines of accounting and finance and the congealing of their techniques into a new tool, the electronic spreadsheet. The original “killer app” of the personal computer revolution, this versatile program allowed the widespread calculation of financial formulas and “what-if” scenarios allowing the plotting of a wide variety of corporate acquisitions, initial public offerings (IPOs), leveraged buyouts (LBOs), and mergers.

In a new era of “spreadsheet capitalism”, countries were forced to succumb to a new logic of numerical, graphical and textual representations – a realm of computerized hyperreality organized around the techno-economic imperative. Money emerged as a leveraging factor and VisiCalc, Lotus 1-2-3 and Excel became the new tools of control and discipline. Facilitated by high-speed network technologies and powerful trading workstations, the information standard began to subject organizations, both public and private, to a new international discipline.

Anthony J. Pennings, PhD has been on the NYU faculty since 2001teaching digital media, information systems management, and global political economy. He can be reached at ap70@nyu.edu

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