The financial crisis was not kind to Alan Greenspan, former Chairman of the Federal Reserve. It exposed much of his macroeconomic theory as severely, devastatingly inadequate. But in one key observation, he would prove eerily prescient: “the number one problem in today’s generation and economy is the lack of financial literacy.”
From 2007 onwards, the topics once confined to the hallways of the Square Mile’s office blocks and the back pages of the Financial Times, became front page fodder for national newspapers. Suddenly, the impact of finance on our day-to-day lives was all too palpable. And impossible to ignore.
Yet, a decade on from the financial crisis, the gulf between finance and society is as wide as ever.
It is tempting to blame both parties.
Society, and its citizens, could stand accused of ignorance. With a vocabulary full of exotic-sounding words like unitranche or products with names such as Contingent Convertible (CoCo) bonds, that bear more resemblance to cereal types, finance is oft-dismissed as a domain for the geeky, informed few.
Financial services firms, and investment banks in particular, have many indictments laid before them. Condemned with wreaking havoc on the world’s economies while profiting from excessive salaries and bonuses, banks have long been labelled the bad guys.
But the finger pointing disguises, and detracts from, issues that run much deeper.
In a recent book, Harvard professor Mihir Desai argues that one of the great failings of our modern world is a chasm between finance and humanities. He believes this inhibits bankers from understanding the social context in which they operate, while non-bankers fail to grasp how finance fuels our world.
Desai could not be more right. Working in the City, I have experienced first-hand how easy it is for financial services professionals to get lost in the lingo of their day jobs. It is not about maliciously excluding others, hiding things or anything close to defrauding the public. Bankers can simply forget the chain that links them with society: the ultimate benefactors of their work.
Investment banks sell ideas to institutional investors. In doing so, bankers may spend their days dreaming up innovative new ways to structure an asset-backed security and speaking in alphabet soup language amongst colleagues. But that end product could drive the returns of people’s pension or ensure they can claim life insurance.
For consumers who do not understand that finance feeds not only their existence but enables them to lead better lives, it is about starting to ask questions about seemingly inalienable things. What makes the lights turn on? Banks provide finance to construct wind farms or solar grids, which powers our homes. How do airlines provide planes for your summer trip to Spain? Banks lease those planes to them. Ditto mobile phone providers.
All of this may sound simplistic – but in a world of dizzying complexity, a dose of clarity should be savoured.
As communicators, we have a great opportunity, and responsibility, to bridge the gap between society and finance. We must encourage financiers to rediscover society. Through simple storytelling, we can place emphasis on highlighting the value they bring to the world. Finally, we must inspire everyday citizens to challenge knowledge siloes and counteract social silence on issues of fundamental importance, like finance.