Mark Billings, a lecturer in accounting and risk at Nottingham University in the United Kingdom, has spent a number of years studying corporate treasury. His interest was piqued, he says, when he found that the Association for Corporate Treasurers, a UK-based professional group, has only been around since the late 1970s. “That’s not very long for something that’s so important to business,” he says.

To be sure, the corporate treasury function predates that. Billings has found mention of corporate treasury in, for instance, General Electric’s 1899 annual report and U.S. Steel’s 1904 report.

Even so, the relatively late start of the group indicated that the profession had only recently been formalized and gained recognition. To examine why, Billings analyzed the broader economy in which companies operated.

To start, in the 1970s, the fixed exchange rate system broke down, and companies were forced to deal with exchange rates if they wanted to do business across borders. Then, in the 1980s and 1990s came development of the financial markets around the globe, making it easier for companies to raise money in more than one country. At the same time, the derivatives market flourished, allowing companies to use different tools to deal with commodity pricing and interest rate risk, among others.

Billings also found that it wasn’t until the 1990s that the world had returned to the levels of globalization that had existed around the time of World War I. “At that time, there were few trade barriers, and the market dictated the outcome” of business ventures, he says.

This runs counter to conventional wisdom, which assumes that the march of globalization heads in just one direction – forward. Not so, Billings says. “Globalization is not an irreversible process.”

Today’s economic crisis is prompting loud cries from more than a few politicians around the globe for measures that purport to protect domestic industries by making it more difficult for other firms to do business in the country. It’s even led to a number of new rules and regulations that restrict international trade, as I noted in an earlier post. At the same time, banks who have been beneficiaries of their governments’ bailout funding may find it difficult to justify lending those funds outside their home country.

While it’s an easy win for many politicians to play the protectionist game, it would be a shame if their rhetoric held sway. Businesses, as well as consumers, benefit when trade is open. Moreover, protectionist measures fail to get at the cause of most larger economic problems, whether it’s the prevalence of subprime mortgages in the U.S. or the inability of Icelandic banks to refinance their mountains of short-term debt. ###