ANTHONY KILA
Anthony Kila is a Jean Monnet professor of Strategy and Development. He is currently Institute Director at the Commonwealth Institute of Advanced and Professional Studies, CIAPS, Lagos, Nigeria. He is a regular commentator on the BBC and he works with various organisations on International Development projects across Europe, Africa and the USA. He tweets @anthonykila, and can be reached at anthonykila@ciaps.org
The market hummed, a steady beat,
A bull run strong, a winning feat.
Then whispers rose, a chilling sound,
As fear took hold, on hallowed ground.
October’s chill, a fateful day,
Black Monday dawned, and swept away
The confidence, the hopes, the dreams,
A market crash, it brightly gleams.
The Dow plunged down, a dizzying fall,
A record drop, beyond recall.
The ticker tape, a frantic dance,
A losing game, a final chance.
Panic surged, a tidal wave,
As fortunes lost, were quickly grave.
The world watched on, in stunned dismay,
As Black Monday took its toll that day.
I am willing to bet you will not find the lines above in any economics textbook; while at it, let me know if you can uncover the poem’s author.
Yes, the poem refers to the economic crisis that began when the global financial markets crashed on Monday, October 19, 1987. That day is known as “Black Monday”. A few other facts you are unlikely to find in economics textbooks, and that general education rarely mentions, are that on Black Monday, many finance firms halted planned meetings, conferences, and internal events to focus on crisis management and liquidity issues. Several companies delayed major financial disclosures or investment announcements due to market uncertainty. Some investor roadshows and IPO-related events were postponed or cancelled as markets froze and risk appetite collapsed. On a personal note, my meeting in the City of London was postponed, and I did not need to be told why.
Outside the markets worldwide, TV and radio news programmes were rescheduled or restructured segments to focus on the crash; they quickly shelved planned interviews or lighter segments. Universities and think tanks postponed economic forums to reassess discussion topics in light of the crash. Government monetary and financial policy meetings were urgently summoned to address the fallout, but here, too, scheduled events were swiftly shelved.
Speeches or events by central bank officials were either radically amended or wholly set aside to allow technical deliberated emergency responses behind the scenes. The Monday’s, now called Black’s, claim to fame stems from the severity of the damage it caused and the mode in which the crash appeared: Monday, October 19, 1987, gave us the first truly global financial crisis triggered by electronic and psychological contagion rather than underlying economic fundamentals, in which stock markets worldwide plunged simultaneously.
In the USA, where it all began, the Dow Jones Industrial Average (DJIA) plunged 508 points, setting a grim record with a 22.6 percent decline, marking the worst single-day percentage drop in U.S. history. The S&P 500 fell by 20.4 percent, and the Nasdaq experienced significant losses as electronic trading systems were overwhelmed. In the UK, the FTSE 100 Index dropped 10.8 percent on Black Monday at the London Stock Exchange and saw a further decline of 26 percent over the following days. Many firms faced insolvency. The Toronto Stock Exchange (TSE) lost more than 11 percent of its value in Canada.
Crashes and crises transcend language barriers and time zones and do not require visas, so the markets in France tumbled on Black Monday, and the French Stock Exchange, then known as the Paris Bourse, experienced double-digit losses. The DAX Index fell by approximately nine percent (9%) in Germany on Black Monday. Meanwhile, the Tokyo Stock Exchange opened later in Japan due to the time zone difference, yet the Nikkei 225 lost around 14.9 percent when it finally opened. In Hong Kong, they closed their market for four days, and when it reopened, the Hang Seng Index dropped 33 percent in a single day.
There is a consensus in classrooms, boardrooms and councils that the most direct and tangible causes of Black Monday include five major interrelated factors:
One factor is the automated, computer-based trading strategies that triggered massive sell-offs; this element is called Computer Trading. Another factor is the technology-driven global interconnectedness that has enabled the markets to become more linked through technology and international capital flows, which in turn has caused the crash to spread rapidly. The third element is what has been explained as Market Overvaluation. I have expressed my reservation over this factor in other forums. The theory of Market Overvaluation states that markets were seen as overpriced, and fears of interest rate hikes added pressure and led to the crash. A fourth factor is the hedging strategies that backfired as they flooded markets with sell orders. A fifth factor is market psychology, manifested as fear of loss that caused contagion worldwide. The lack of liquidity exposed by the rapid sell-offs led to a shortage of buyers in a class of its own.
To overcome the crisis, the Fed chairman (at that time, Alan Greenspan), in one of his first major actions, issued a statement affirming the Fed’s readiness to “serve as a source of liquidity to support the economic and financial system.” This statement helped calm panic and restore some investor confidence. Similarly, central banks worldwide, including those in the UK, Japan, and Germany, coordinated efforts to provide liquidity and stabilise their financial systems.
Actions and inactions have consequences; countries like New Zealand suffered the same crash as others but did not respond in the same way, resulting in a different and worse fate. Unlike other nations that swiftly reacted by injecting liquidity and supporting their systems, New Zealand, influenced by “Rogernomics” – a set of economic policies, including financial deregulation, removal of subsidies, and aspects of monetary nationalism such as the floating of the NZ dollar, named after finance minister Roger Douglas – experienced a loss of over 60 percent. It took more than a decade for New Zealand to recover from the effects of the crash. For more details, see my work, “The Peculiar Case of New Zealand” by Anthony Kila.
Regulations were tightened on programme trading and portfolio insurance to address the technological issues that led to massive sell-offs and extensive hedging at the origin of the crash. The psychological factors that prompted panic selling were addressed with the introduction of Circuit Breakers, which will automatically pause trading during extreme drops in the future, to curb panic selling.
Most countries recovered from the crash within two years, mainly because they adopted similar and collaborative responses to the market alongside the USA, but that was long ago. In our time (April 2025), the market is crashing again, but this time, the USA is not leading the response; instead, its policies are causing the crashes, and solutions seem to lie not with the USA but without and against it. How will this end? Those who live shall see.
Join me @anthonykila, if you can, to continue these conversations.
- business a.m. commits to publishing a diversity of views, opinions and comments. It, therefore, welcomes your reaction to this and any of our articles via email: comment@businessamlive.com
