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Me and Louie on the Stoop

by Tricia

Sitting on the stoop last night, my next door neighbor, a retired Brooklyn Navy Yard stevedore, asked me, "What exactly is this globalization thing?"

"Louie," I said. "This is one of the great questions of our time."

He chomped on his cigar. "Do you know, or don'tcha?"

I said, "The Vlasic pickle stork dropped it off on Pier 81 in 1991. Where were you?"

He said, "The one that talks like Groucho Marx?"

I think it's funny that the financial services industry likes to market itself as a bulwark of change and immutability ("Get a piece of the rock"; "The company you keep,") when really, it was the prime mover for one of the biggest paradigm shifts in human history.

"Globalization started as a campaign to move more cash faster around the planet," I said. "Around when Ronald Reagan and Maggie Thatcher were in office."

"Hold on." He popped the tops off two Rheingolds and handed me one. "OK, go ahead."

In the early 1980s, the leaders of the three biggest capital markets -- New York, London, and Tokyo -- looked ahead and realized that their domestic markets would be saturated in 10-15 years. They began a campaign to deregulate banking for the oldest reason in the world: to expand their markets.

Almost twenty years later, they got their wish: the member countries of the WTO signed 1999 the Agreement on Banking and Financial Services. Prior to that agreement, most banks could only operate in their countries. Exceptions were few, far between, and expensive. (That same year Congress also repealed Glass-Steagall, the law that forbid investment banks and commercial banks from operating under the same roof. That's why Citibank was able to buy Travelers and Smith Barney or why JP Morgan could buy Chase.)

The fact that banks could now effectively operate across borders intensified the utility of things like 24-hour markets, e-trading, and currency consolidation. It made it easier, cheaper, and faster, to move money across borders: cheaper capital, bigger balance sheets, and more service options=more trade. More trade=more globalization.

"That's why," I said, "when I went to visit my sister in Paris in 1988, I had to take traveler's checks and dollar bills. Now I get on a plane with my passport and my debit/credit card and still get a better rate."

"That's crazy," he said. He glanced at my half-finished beer. "You gonna finish that?"