The Bankwatch

Tracking the consumer evolution of financial services

“The Future of History” (Fukuyama) and what does it mean for the design of banks

There is a brilliant collection of essays in the Jan/Feb issue of Foreign Affairs.  There is one lead piece from Francis Fukuyama entitled the Future of History (premium) which borrows from the title of his earlier book The End of History

The broad theme is the failure of politics and the problem with the rise of economics over politics that has led (his words) to the end of left wing idealism as a counterweight to the right. 

Foreign Affairs:  He closes with this statement on what is needed:

It would have to have at least two components, political and economic. Politically, the new ideology would need to reassert the supremacy of democratic politics over economics and legitimate anew government as an expression of the public interest. But the agenda it put forward to protect middle-class life could not simply rely on the existing mechanisms of the welfare state. The ideology would need to somehow redesign the public sector, freeing it from its dependence on existing stakeholders and using new, technology-empowered approaches to delivering services. It would have to argue forthrightly for more redistribution and present a realistic route to ending interest groups’ domination of politics.

He got there by reviewing a host of historic movements and how they arrived. 

  • the introduction of the rights of property owners
  • the concept that government can only tax when voters agree
  • the power to vote for non property owners (an American invention – Andrew Jackson)
  • that technology carries some of the blame for driving efficiency that requires fewer workers and provides for greater income generation for well educated, something that supported the growth of middle class.

He moves us quickly through the history of democratic movements which he notes fall out of demographic movements.

  • socialism and rise of unions
  • communism and its failure
  • rise of middle class which through passing of relative wealth to people in large numbers that displaced the earlier two movements
  • latterly the flattening of middle class incomes over the past 40 years, and finally
  • more recently the rise of a new group of culturally disenfranchised (immigrants, gay, less/uneducated, etc) which has itself displaced the power of the middle class, and further displacing the worker power of unions, by creation of a large third franchise.

Even the Arab Spring he notes can be rooted in a new Arab group that is better off, better educated, that can clearly comprehend the Dictators are firmly between them and a better life.  See this in Russia too now.

But he ends on a note of pessimism that with inequality and friction between these broad groups, each of whose opposing needs broadens, the solutions and endgame are not clear.  In the US, the top 1% of families take home 23.5% of income he notes.

Relevance to Bankwatch:

With this backdrop, we can see clues in the political quagmires we see in the Euro zone and in the US.  The governments are torn about which franchise to follow because it is just not clear.  In fact the structures of governments was designed for a different time and place with much different citizen structure.

We have the additional shift from demographic aging in western countries.

These factors exacerbate the mismatch of the structure of government to the requirements of the population.

This blog is not about politics, but I believe requirements for the design of banks is as dependent on the requirements of the population.  One thing we can see from the last 4 years, is that banks’ design are based on a different set of requirements and not around making them inherently useful and of value to the broad base of people.  Unfortunately, all people cannot successfully claim to be in the top 1% that make 23.5% of income.

Written by Colin Henderson

December 25, 2011 at 14:29

Posted in Uncategorized

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