Many see the staggering profits of investment banks and assume they’re parasites on society, but without them stock markets couldn’t exist. In this episode of Johan Norberg’s New and Improved, Norberg explains the inner workings of investment banks and illustrates how they keep our world running.
Investment banking gained momentum in the 17th century when the Dutch established global trade and had to find ways to establish trust between strangers. Today, they are sought whenever market actors need a go-between to negotiate understanding between rivalrous powers.
Investment banks serve as impartial diplomats making crucial business deals possible. As economist Robert Schiller explains of today’s financial markets: In the corporate world, investment bankers are, in the final analysis, keepers of the peace and promoters of progress.