The industrial revolution is a phrase that was employed to mark the transition to new forms of manufacturing processes that took place in the early nineteenth century. However, the industrial revolution greatly transformed in the mid-nineteenth century, particularly due to the invention of computer technologies. Subsequently, computer systems greatly impacted the performance of numerous sectors of the global economy, more so in the banking industry. Today, computer technology can be argued to be a core aspect of today's modern industrial revolution. This research focuses on modern industrial revolution by analyzing its occurrence with respect to the dimensions of computer technology and financial economics.
The following research will be based on the publication Investment Banking, institutions, politics, and Law, a book that was authored by Morrison and Wilhelm in 2007. In addition, the book offers a discussion of the dominant economic roles of various investment banks that operated in the capital markets during the start of the modern industrial revolution. Subsequently, the authors used the resultant information to provide an explanation pertaining the historical evolution in the banking industry and also the recent recorded trends in the banking sector's organization. Moreover, the authors provide the technological explanation in the substantial restructuring in the global capital markets that was recorded in the recent decades.
The publication ascertained that the second half of the twentieth century in numerous parts of the world was marked by dual revolutions both in computer technology as well as in financial economics. In this case, the computer technology sector was characterized by the development of software programs that permitted individuals and corporations to complete financial transactions seamlessly and on time. Furthermore, the invention of computer technologies ensured that the banking sector could handle gigantic transactions, which significantly elevated the scale of local and international banking operations. Moreover, according to the publication, the changes in the level of computer technologies and financial economics had two significant repercussions.
First, the inventions brought about the codification as well as standardization of a range of banking activities, which had been in the past exclusively preserved for human capitalists. Subsequently, numerous investment bankers could now be attained in professional schools and at the same time, the competition levels in the banking-related businesses significantly increased. Furthermore, the change that was recorded in the technological sector in respect to the real income created a need for investment bankers in the global economy. In this case, such investment bankers were required to create the necessary reorganization of the global corporate landscape with respect to promoting the industry's vibrancy.
Moreover, according to the publication, the early computerization in the banking sector opened new channels to the back-office automation (Morrison and Wilheim 224). Also, the retail-oriented banks formed a restructuring of their operations in an effort to benefit from the subsequent economies of scale (Morrison and Wilheim 224). Furthermore, at the same time, the revolution in the financial economics took place and it created an expanding body of methods that could be vastly applied in the investment analysis of all aspects of investment banking (Morrison and Wilheim 224). Also, in 1976, the adoption of desktop computers in the banking sector elevated the level at which human capitalists could operate (Morrison and Wilheim 224).
At the same time, some roles of human capitalists were replaced by the emerged computer technologies and the occurrence resulted into major changes in the banking practice. Additionally, unlike the investment banking skills, the new form of financial engineering characterized by the use of computer systems could be taught at professional learning institutions. Subsequently, this dropped the reputations of investment bankers in the financial sector due to the increased codification of numerous banking operations. Ultimately, the early computers in the banking sector were well fitted for batch-processing tasks and this increased the productivity of operations in the clerical departments of the banking institutions (Morrison and Wilheim 225).
The modern industrial revolution also played a significant role in increasing the retail businesses for the investment banks. For instance, through the use of computerized systems financial banks were able to provide financial settlements through their regional branches at reduced costs (Morrison and Wilheim 233). Subsequently, it was therefore easy for such financial institutions to exploit their newly emerged growth in the trading volumes by quickly enhancing their retail networks (Morrison and Wilheim 233). Also, through the use of computer technologies, most financial banking institutions at the mid and late nineteenth century were able to profit from the large brokerage fees facilitated through the use of numerous retail brokerage networks.
The rise of computerized systems in the mid-century's financial sector also led to the automation of the banks' routine administrative functions (Morrison and Wilheim 232). Subsequently, it became very economical for financial managers to accept small-scale financial investments in which case market participation, as well as risk-sharing, could be offered to persons who in the past were not offered a chance to participate in the stock markets (Morrison and Wilheim 232). Also, as a result, most of the trading in the stock exchange market became dominated by institutional investors who traded at a greater frequency and in larger quantities than individual financial market investors.
In the second half of the nineteenth century, the advancements in the financial economics created a transformation in the investment banking practice. Additionally, the transformation in the financial economics caused a change in the work on portfolio theory that permitted the accurate evaluation of investment characteristics as well as performance (Morrison and Wilheim 242). Also, the revolution in the financial economics created clear implications to the extent at which human judgment could be replaced by standardized practices (Morrison and Wilheim 244). Such trends were made possible through the adoption of technological systems that enabled banking institutions to be in a position to compute complex investment portfolios.
In the 1950s, the financial economic theory became widely practiced in the banking sector (Morrison and Wilheim 243). Additionally, this is because it provided the method and formulae for computing the riskiness of portfolios of securities (Morrison and Wilheim 243). Moreover, the economists at the time created models that were based upon simple statistical measures addressing risk and return. However, such measures required a wide range of price observations if they were to be accurately projected (Morrison and Wilheim 243). Nevertheless, the rising computer power, as well as the rising trading volumes, helped in ensuring that the computation of large risk and return financial accounts by financial institutions was possible.
Ultimately, at the end of the twentieth century, investment banking was measured to be rather a bipolar activity (Morrison and Wilheim 264). In addition, this is because, at one extreme, investment banks progressed in offering the form of relationship-intensive services that they had always offered to the banking sector's clients (Morrison and Wilheim 264). Furthermore, this is both in the advisory banking work and also in complex security underwriting. On the other hand, the investment banking was largely engaged in the execution of capital-intensive businesses that were characterized by high-volume, low margin as well as largely commoditized aspects.
In conclusion, modern industrialization was marked by the invention and adoption of computer technologies in different sectors of the global economy. Also, in the banking sector, the invention of computer technologies ensured that the banking sector could handle gigantic transactions, which significantly elevated the scale of local and international banking operations. Moreover, the inventions brought about the codification as well as standardization of a range of banking activities, which had been in the past exclusively preserved for human capitalists. In addition, the early computerization in the banking sector opened new channels to the back-office. Also, some roles of human capitalists were replaced by the emerged computer technologies and the occurrence resulted into major changes in the banking practice. Furthermore, the rise of computerized systems in the mid-century's financial sector also led to the automation of the banks' routine administrative functions. Also, the mid-nineteenth century caused the transformation in the financial economics that resulted in a change in the work on portfolio theory that permitted the accurate evaluation of investment characteristics as well as performance. Ultimately, the revolution in the financial economics created clear implications to the extent at which human judgment could be replaced by standardized practices.
Morrison, Alan D., and Wilhelm. Investment Banking: Institutions, Politics, and Law. Oxford: OUP Oxford, 2008. Print.
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