This month, there have been several columns about the effects of automation and increased use of electron flow on the economy and its employment levels. The same effects that automation and electron flow control had on farmers, manufacturers, and those in the print/paper industries have also affected bankers and everyone else in financial services.
As the transfer of money could be done electronically, the number of people needed to move money faster and farther decreased with great rapidity. Few in the banking industry realized that, even as larger banks found themselves with the ability to absorb smaller banks with increasing speed.
Successful automation then allowed even bigger banks to ingest what had been considered large banks. Then, like huge sharks who’d run out of smaller fish to eat, they began to devour each other. This had a predictable effect on all the industries who depended on borrowing money and paying it back. As those individual operations in manufacturing and retail similarly streamlined, they needed fewer people in the finance departments in millions of companies around the world. They, and the banks, began to lay off workers in those areas even as they stopped hiring new workers.
The present bank bailouts are an attempt to smooth the transition of no-longer-necessary money handlers into other sections of the economy. The bailouts must continue until the downstream companies have made the adjustments to dealing with fewer banks. Closing too many banks too quickly throws too many companies on the less than tender mercies of the fewer remaining banks. If too many companies that actually make and do real things close, the entire world economy will collapse. So, we have bank bailouts. This, too, shall pass.
