Notwithstanding these reservations, I cannot disagree with Binsted’s encouragement of bankers to learn a history of financial crises. As with many others in my profession, I tend to see the virtue of learning — even if it is only for its own sake. My cynicism about bankers changing their behaviour as a result of learning from history may well be proven wrong – if so, I would be the first to be delighted.
Why, however, limit the study of the history of financial crises to those working in the financial sector? All of us who live in modern, complex and globally integrated societies should be educated in not just the nature of financial crises, but also the nature of the governance of our modern, global economy.
Why? While it would be highly desirable if bankers were to exercise self-restrain in taking risks, it would be better if we also had an informed wider public who can exercise vigilance and contribute to the policy debate in this area. This has for a long time been an Achilles’ heel in the governance of the modern economy.
While there are many NGOs and civil society groups lobbying on a range of issues to do with trade in “real” goods (think fair trade coffee, animal rights in the fashion industry, labour standards in manufacturing), most of us will struggle to identify groups who make similar demands on the financial front.
This absence of social activism on financial issues is attributable in part, I believe, to the lack of knowledge and understanding of the financial sector among the wider public. They in turn have a lower incentive to acquire this knowledge for at least two reasons. The average person does not conduct as many transactions in a variety of financial products as they trade in goods. Second, financial transactions are not as high in the consciousness of the average person as transactions in goods because the former are less visible.
Of course, bankers should know and understand the history of financial crises, but so also should the wider public. In an earlier time, when economies were simpler and less integrated across borders, we might perhaps have been able to dismiss the need to acquire such knowledge. This position is certainly less tenable today. We need only to cast our eyes over the diversity of people and institutions (like local councils) who have been affected by the GFC to see the substance of this point.
Unless more people inform themselves about the nature of the financial system and of its governance, they will not be able to contribute to the policy-making process in an effective manner. Consequently, policy-making on financial issues will only be dominated by others (bankers, business actors) who may not share the same interests as those of the wider community. The result? Well, I think that is self-evident.
Jikon Lai is a lecturer in international relations at University of Melbourne.
