History of Globalization

Corporatization and Securitization

Corporations and securities are institutions which were generally unknown until the nineteenth century. Even in Europe during the nineteenth century, corporations were few in number and few people understood what securities were. Today these institutions are ubiquitous and influential everywhere. They are creations of law, abstract objects quite different from physical objects like ships and food (which are the subject of later chapters). Ships and food were known before maritime law and food law. In contrast, it is the globalization of companies and securities law that constitutes the corporatization and securitization of the world.

Corporations existed for more than a millennium before securities. For our purposes, a security is a transferable instrument evidencing ownership or creditorship, as a stock or bond. The legal invention of the security in the seventeenth century was the most transformative movement in the history of corporations. It enabled the replacement of family firms with very large corporations based on pooled contributions of capital from thousands of shareholders and bondholders. These in turn enabled the great technological projects of eighteenth- and nineteenth- century capitalism - the railroads, the canals, the mines.

When it was first invented, however, the historical importance of the security had nothing to do with the corporatization of the world. Rather, it transformed state finances through bonds that created long-term national debts. Still today, some of the most important securitization involves a transformation of banking and finance, not the creation of new corporations. An example is mortgage-backed securities - securities backed by bundles of loans on real estate, automobiles or credit cards issued by banks (Cooper & Fraser 1993: 222). Even FIFA's insurance cover against soccer's World Cup being cancelled has been securitized. These securities may not create or be issued by corporations (e.g. when they are issued by a government home-loan insurance organization). Other forms of securitization, such as the privatization of fractions of the state by selling them to shareholders, continue to accelerate the corporatization of the world. Securitization has therefore been a great historical force in its own right as well as the major cause of an even greater historical force - corporatization.