Stock market development: building a risk society since 1688

Abstract

ABSTRACT Created by speculators in Amsterdam in 1602, and unstable ever since, stock markets have become central to economies globally, despite being recognised as a significant contributor to today’s risk society. History exposes questionable reasons for the stock market’s rise and reveals reversion to a more productive economic framework to be a way of reducing societal risk. The stock market’s spontaneous development by opportunists in London following the 1688 ‘Glorious Revolution’ spread a non-essential, localised, and speculative market to the international political economy. This precipitated London’s first Big Bang: the privatisation of the Bank of England and stock market deregulation, followed by the South Sea Bubble within thirty years. Economists subsequently embedded the market in economic theory. Keynes’ re-definition of ‘investment’ to include share trading began an ontological drift that made stock markets a hallmark of capitalism. Unlike Knight, Keynes’ concern was share-trading risk, and the uncertainty of the unknown future remains an unresolved challenge for risk analysts, speculators, and regulators, their conflicting goals militating against regulation and stability. Re-building the successful capitalist framework that was abandoned as share markets attracted unjustifiable support, remains a viable alternative to continuing centuries of efforts to manage share-trading risks and the uncertainty of an unknowable future.