Globalization entered the common vernacular in the last few decades, but international monies and global financial markets have actually been around for centuries, James R. Lothian, Ph.D., said on Nov. 19.

“There is a quote from Ecclesiastes: ‘Nothing under the sun is new, neither is any man able to say: Behold this is new: for it hath already gone before in the ages that were before us,’” he told an audience at Fordham’s Rose Hill campus.

“This is true of a lot of things, but its certainly true of this financial globalization, or I’ll use the term financial integration, which is markets in different countries being integrated.”

A Fordham faculty member since 1990, Lothian delivered a lecture, Financial Globalization in Historical Perspective, after being named the inaugural holder of the Toppeta Family Chair in Global Financial Markets in the Fordham Schools of Business.

Bill Toppeta, FCRH ‘70, a member of Fordham’s Board of Trustees who, along with his wife Debra, generously funded the chair, said they look forward to the contributions not only that Lothian will make, but that all of his students will make toward greater understanding around the world.

“This is about global markets, and we’ve been very lucky as a family to be have been able to work in many countries around the world,” he said.

“It’s very hard to hate people you know and its very hard to fight with people you trade with, and as a consequence, we think that understanding . . . what we can do for each other across international boundaries is ultimately the way to peace. That’s the thing we all pray for.”

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James R. Lothian is congratulated by Joseph M. McShane, S.J., President of Fordham, and Debra and Bill Toppeta, FCRH ‘70.
Photo by Chris Taggart

For his lecture, Lothian presented examples of financial integration from three historical periods: The late 19th and early 20th centuries, the late 18th and early 19th centuries, and the medieval and early modern periods. He focused a great deal on trade between markets in London and Amsterdam stretching as far back as 1690.

He relied on evidence derived from yields on bonds and money-market instruments for major economies such as England, France and the Netherlands over the long span from 1800 on, and for a much broader group of countries from the 1970’s on.

The question he wanted to answer was whether these yields, after suitable adjustment, converge to one another as they should in an integrated world market. The answer is yes, financial integration has lasted for long periods in the 18th, 19th and early and late 20th centuries. The only interruptions have been major wars and their after effects, and in the case of the interwar years by the severe economic shocks of that era and governments’ reactions to them.

In his analysis of currencies over time, from the Roman Solidus, which lasted 700 years, to the British Pound Sterling, which was stable for a century before being supplanted by the dollar, Lothian found that stability is closely related to non-interference. It’s a lesson worth remembering.

“If the current move to greater regulation today should be in a manner in which it has been done, society will be made worse off, not better,” he said. “The attempts to date are pretty ham-fisted.

“To the extent that [intervention]is viewed as dumb by financial market participants, the participants will try to get around it. Society will probably be better off if they do, but there’s a problem here: That erodes the respect for law.”
Ultimately, Lothian said the popular notion that human nature is ever-changing should be rejected.

“Human nature is pretty constant over both time and human behavior is remarkably similar over both time and space,” he said.“That assumption, I believe, is borne out of the data.”