Bourses have become hugely more effective

FOR most of human history, exchanges involved physical contact. Whether trading gossip, gold or grain, people came together to give and take in a manner that was both social and, with luck, __(1) __beneficial. Marketplaces, the forerunners of exchanges, were the heart of early financial centres.

Once professional brokers got in on the act, though, the nature of exchanges began to shift. Buyers and sellers lost some of their close __ (2) __ with markets. Transactions became more complex, involving for instance the right to buy and sell goods in the future at a price fixed in the present. The brokers promised efficiency and superior returns, but some put their own interests above those of their clients. Outsiders had to take it on __ (3) __ that all the shouting and hand-waving by men in brightly coloured jackets meant they were paying, or being paid, a __ (4) __ price.

Over the past decade financial exchanges have changed out of all recognition. From Stockholm to Singapore, they have modernised and __ (5) __. Fortunately for investors, most of the changes have been for the better. They have brought more choice, faster trading and greater efficiency. Trading costs have come down, too. This __ (6) __ to financial centres, because exchanges are still at the heart of the world's financial network.

Much of the transformation is being driven by the increasing sophistication of investors and financial __ (7) __, particularly big investment banks, which direct the bulk of capital flows around the world. "Give a call to Goldman and you have a choice of all these global exchanges," says an official in Asia. Regulation has played a role as well. In both America and Europe, politicians have introduced rules aiming for greater transparency and competition.

As a result, the world's biggest exchanges are vying as never before for a share of highly mobile global capital. Their vast computerised hubs and their ability to zip transactions around the world in split-seconds allow them to play a dual role reminiscent of the marketplaces and sailing ships of medieval times. The most successful are those with attractive goods on offer, competitive prices and speedy response times.

__ (8) __ the rise of electronic trading, exchanges may have become more virtual than physical marketplaces, but the broader __ (9) __ of exchanges on cities - their "multiplier effect"-keeps on growing. An official at the London Stock Exchange notes that although its total listing fees (as opposed to trading fees) in the past financial year were a relatively puny Ј28m ($56m), fees __ (10) __ by advisers to new companies on the exchange - lawyers, investment bankers, accountants, public-relations firms and so on - were estimated at Ј3.5 billion.

1. A. economic B. economical C. economically D. economy

2. A. contact B. control C. support D. distance

3. A. behalf B. trust C. confidence D. charge

4. A. fair B. fare C. fares D. free

5. A. updated B. contracted C. expanded D. risen

6. A. deals B. matters C. essential D. important

7. A. facilitators B. helpers C. subsidiaries D. intermediaries

8. A. Given B. Taken C. Putting D. Allowing

9. A. demand B. impact C. pressure D. dependence

10. A. produced B. given C. generated D. supplied

XI. Tasks for thought.

1. Which of the following statements are normative, and which are positive?

a) The price of oil more than tripled between 1973 and 1974.

b) In the early 1990s, the poor countries of the world received less than their fair share of world income.

c) The world distribution of income is too unjust, with poor countries having 58 per cent of the world population, but receiving only 4 per cent of world income.

d) One of the goals of the structural economy reforms in Russia is to raise the consumption level of society.

e) Since the 1970s inflation has fallen in most Western economies, but the

unemployment rate has increased.

f) Our government ought to introduce policies to reduce the unemployment rate.

g) Smoking is antisocial and should be discouraged.

h) The imposition of higher taxes on tobacco will discourage smoking.

2. Which of the following statements would not bе true for а pure “command economy"?

а) Firms choose how much labour to employ.

b) The distribution of income is government-controlled.

с) The government decides what should bе produced.

d) Production techniques are not determined by firms.

е) А government planning office decides what will bе produced, and for whom it will bе produced.

3. Figure 1 shows society's choice between social services and private goods in the fопn of а production possibility frontier. The three points А, В, С represent economies in which the government plays а more or less active role. Match each of the points with the most appropriate of the descriptions of hypothetical economies:

а) An economy in which the government intervenes as little as possible, providing only the minimumnecessary amounts of essential services.

b) An economy in which the government takes а great deal of responsibility, taxing at а high level and providing considerable social services.

с) An economy in which the government provides morethan the minimum necessary amounts of social services, but leaves room for a private sector.

25 A

•

• B

• C

5 10 15 20 25

XII. Speaking.

1. Discuss advantages and disadvantages of each of the three types of economies.

2. The ‘cold war' era has vanished and countries - members of NATO are withdrawing their military bases from а number of poor countries. Discuss роssiblе consequences for these countries' economies.

3. Canada has a mainly market economy, but there are also some sectors, such as public education, that are set up along socialist lines of public ownership and control.

a) Can you think of three other such sectors?

b) Why do you think these semi-socialist sectors were created? What benefits do they offer? Why were Canadians not content just to leave them to the market?

c) What characteristic problems do these socialist sectors face? That is, are there recurrent patterns in the complaints that people make about them?