Pennings, A.J. (2010, Oct 03) How IT Came to Rule the World-The Information Standard and Other Sovereignties. apennings.com https://apennings.com/dystopian-economies/the-information-standard/

Introduction

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 marked the end of the containment of international finance established 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 Hampshire.

Known more commonly as the Bretton Woods conference, leaders from the major Allied countries tied the US dollar to gold and to major currencies around the world. With the end of this de facto gold standard, a new type of global power emerged based on news flows, financial information, and computer and communications technologies.[1]

Empowered by new developments in computer services and data communications, currency markets turned electronic in the wake of Nixon’s decision. Banks worldwide began trading 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 financial news services, they monitored economic information, military movements, political crises, and weather forecasts, all to make instantaneous decisions about the viability of the country’s currency and other financial instruments.

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. With the vast funds 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 utility of global communications and information technologies, which Walter Wriston, the notorious and visionary Citibank CEO, called the “information standard” in his controversial book, The Twilight of Sovereignty.[2]

This global information standard became a sovereign power in its own right. 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 inaugurated a global panoptic market system that read and interpreted the world according to the regimen of electronic finance. This system expanded rapidly, globally, and comprehensively. It affected the policies and practices of nearly every nation and organization, both public and private. Reuters caught a break when the Arab-Israeli War broke out in October of 1973, sending the newly freed currency markets into a frenzy and panicked dealers to their computer monitors. Reuters ‘ “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 were based on its 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 crises that created the dollar surpluses that were lent to nation-states around the world. Addiction to oil drove the growth of the “eurodollars” – USD monies outside US geographical boundaries that led to that debt. Banks pressured countries around the world to take loans for a variety of projects. Growing national debt during the 1970s led to the so-called “Third World Debt Crisis” that blew up in the early 1980s, and gave financial traders substantial leverage within this global system of discipline.

The information standard began disciplining the world political economy and its nation-states into adopting an agenda that included: 1) privatizing government assets and agencies while capitalizing domestic industries on newly networked stock markets; 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 workers or innovating entrepreneurs. This new global political economy combined a new “free enterprise” fundamentalism led by Margaret Thatcher and Ronald Reagan, with a system of unprecedented capital mobility.

Empowered by the spreadsheet’s calculative and organizing powers, global finance targeted debt-ridden governments. It began a process of “privatizing” public assets such as airlines, broadcasting, electricity, transportation, oil fields, and telecommunications by valuing assets, creating state-owned enterprises (SOEs), and then finally selling them off as corporate entities to global institutional investors such as pension and sovereign funds. Most significantly, governments sold off their telecommunications infrastructure and listed it on domestic and international stock markets, a process known as “privatizing.” These former PTTs (Post, Telephone and Telegraph) eventually incorporated Internet Protocols (IP) and began opening up to the World Wide Web and its flows of capital, news, global e-commerce, and social media.

Public and private institutions began to succumb to the new logic of digital 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 this emerging regime of “digital monetarism” was the knowledge disciplines of accounting and finance, that congealed their techniques into a new tool, the digital spreadsheet. The original “killer app” of the personal computer revolution, this versatile program allowed the widespread collection and valuing of inventory items. It also empowered the 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.

The use of the electronic spreadsheet exploded after IBM introduced its own “Personal Computer” in August of 1981. Soon after, Lotus 1-2-3 became available for the “PC” and all the “IBM-compatible” clones such as Compaq and Dell. Mitch Kapor named Lotus 1-2-3 for its spreadsheet, graphing, and database capabilities, which combined to produce an extraordinary new facility for both conceptually and textually organizing financial information. Lotus 1-2-3 didn’t make the transition to the graphical user interface, and Microsoft’s Excel, originally developed for the Apple Macintosh, became the dominant spreadsheet application.

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 hyper-mediated information organized around the techno-economic imperative. Money emerged as a leverage factor, and VisiCalc, Lotus 1-2-3, and Excel became 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. Combined with innovations in mathematical algorithms, global money morphed into a variety of financial instruments traded in electronic “dark pools” and on interconnected financial exchanges.

The world economy began to undergo what Harvey called a “time-space compression” due to new permissive technologies such as jet airplanes and IP-based telecommunications.[3] This transition has meant a shift from vertically organized to new networked organizations that privilege inter-organizational ties through means such as outsourcing and subcontracting. The spatial and temporal dimensions of the economy are being reorganized to reduce turnover times for flexible production and marketing strategies on a global scale. For example, coordinating the logistics of containerization, inventory control, and packaging needed to compete in the new marketplace requires contact with a wide array of competing services.

Notes

[1] A classic source on Bretton Woods was Moffit, M. (1983) The World’s Money. NY: Simon & Schuster, Inc.
[2] Wriston’s interpretation of the Information Standard The Twilight of Sovereignty: How the Information Revolution Is Transforming Our World was organized around a rhetoric of assurance, not a critical analysis. He argued the power of multinational corporations, nation-state dictatorships, and any aggregation of power antithetical to democratic prospects will fall to the sovereign power of the information standard.
[3] Harvey, D. (1989) The Condition of Post-Modernity. Oxford: Basil Blackwell. p. 147.

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Anthony J. Pennings, PhD is the Professor of Global Media at Hannam University in South Korea. Previously, he taught at St. Edwards University in Austin, Texas and was on the faculty of New York University from 2002-2012. He also taught at Victoria University in Wellington, New Zealand and was a Fellow at the East-West Center in Hawaii in the 1990s.