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• Background– Long Finance, long term thinking

• Global 2050– What we can forecast

• Uncertainties– What paradigm changes can we envisage?– Forecasts and scenarios

• Four scenarios– How might the world be?

• Financial services– What institutions will there be and what will they provide?

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• Initiative set up in 2007– Supported by Z/Yen and Gresham College

• Aim: improve society’s understanding and use of finance over the long term• Tackled specific issues such as the future of mortgages, systems view

of the credit crunch, history of money -----

• Long Finance Forum of Futurists (L3F)– Project to develop rounded views of the future of financial services (FS)

– Supported by Z/Yen, Gresham College and SAMI

– Considering our next project: contact me of you would like to be involved

Banking crisis remain chronic, as does state intervention

The economic situation is completely predicated on the banking crisis

Economic situation develops independently

of the banking crisis

Banking crisis is settled relatively quickly

Japan

India

UK US

Middle income industrialising

©Beyond Crisis, Ringland, Sparrow, Lustig, John Wiley 2010

China

Euro zone

18/04/23 4

Prolonged depression,

growing statist environment

Slow grind to expunge debt;

some deliberate use of monetary

inflation

Business grows as

before

Slow return to health; US consumer

stage centre

TIME

PROMINENCE OF DRIVER

NOW LOOKING AHEAD DISTANT FUTURE

Horizon 1:Analysis

Horizon 3:Imagination

Horizon 2:Exploration

5

2030 2050

6

19881998

2008

AfricaS America

AsiaOceania

N AmericaEurope

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Ratio of people under 16 years to

people over 45

Time

7©Beyond Crisis, Ringland, Sparrow, Lustig, John Wiley 2010

Purity

Authority

Affiliation

Fairness

Harm

Relevance to a moral decision

Decreasing traditionalism

8©Beyond Crisis, Ringland, Sparrow, Lustig, John Wiley 2010

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The logarithm of the ratio of the current situation to the probable long term sustainable limit: those in italics have been breached already

0

Carbon dioxide

Species extinction rate

Nitrogen cycle

Phosphorus cycle

Stratospheric ozone depletion

Ocean acidification

Freshwater use

Change in land use

Sustainable limit

10©Beyond Crisis, Ringland, Sparrow, Lustig, John Wiley 2010

• Global population will grow to 9 BN and get older– Most of the additional people in Africa and Asia

– Turbulence as the world rebalances to new centres of economic power

• New centres may not share the value systems of the West, or the Washington consensus– Washington consensus describes economic policy prescriptions for a

market economy

• Technology (info, cogno, bio, nano) will continue to introduce changes in personal capacity and lifestyles

• Ecological, energy and environmental limits tested or breached– Population increases

– Population lives in cities (70% by 2050)

– New middle class uses electricity, travel, eats meat

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• Will our economy and society be similar to now,– Will it implicitly follow the Washington consensus – or – Will there be a new paradigm?

• Does geography matter? – If geography does matter, what sort of new paradigm might there

be? City states?– or– If geography does not matter, will markets be global and so

largely virtual? Based on affinity groups?

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Today Trends

Scenarios explore the range

ofuncertainties

Timing ?

Forecasts are over-precise

Community based

Washington consensus

Virtual connectionsGeography matters

Long HandMany Hands

Second Hand Visible Hand

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• Capitalism, nation states, democracy and western value systems still dominant as concepts, – though not all countries/regions are moving to embrace these

• Nearest to current paradigm but– Degradation of state capability– Technology has fed the population

• Systems in constant crisis– But no new ways forward– International institutions stagger on

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• Capitalism, democracy and western values still dominant– Significant stand-outs and international tensions– Global markets– National governments in retreat

• Evolution of Washington consensus– Rethinking of taxation & pensions– Food revolution successful– ICT underpins all

• Lack of diversity leads to break down by 2030– Inability to handle systemic volatility– Break down of international institutions

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• A crisis has caused the breakdown of the Washington consensus

• Society has re-formed around affinity groups– Multiple value systems accommodated

– Democracy not seen as universal good

– Complex arrangements of nation states and communities of affinity groups

• How do international issues get addressed– eg regulation

– eg systemic challenges?

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• A crisis has caused the breakdown of the Washington consensus

• Society has re-formed around city states– Cities as wealth clusters “brands”

– Failure of nation states

– Democracy, capitalism and western values competing with other organising concepts, UN etc disappear

• Global commons abandoned– Conflicts in values, fewer implicit norms

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• Older population– Risk averse

• Changing balance of power– Globally away from West

– From country to cities

• Impact of ICT– Reduce size of FS sector

– Insurance declines

– Retail banking automated

– Digital money

• Environmental and natural resources– FS sought to shelter from volatility of natural systems

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• Ecology of FS more diverse than in 2012• Investment across regions to shelter from volatility• Ageing society means

– Pensions and security an emphasis

– Private insurance sought but often impractical

• Commodities and equity trading reduced – Fewer larger corporates

• Singapore the most powerful FS hub

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• Has disappeared by 2050: replaced by– Long Hand if military and civil insecurity the main driver

– Many Hands if cyber-security the main perceived threat

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• 50 or so loosely coupled transnational systems with diverse regulatory regimes

• Investment outside “home” group discouraged– Implications for traders

• Affinity groups across geographies– Retail banking through “intelligent Financial Advisors”

• Trust within affinity group• London and New York pre-eminent FS hubs due to diverse resident

communities

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• 50 or so loosely coupled city states with diverse regulatory regimes• Investment outside “home” city state discouraged

– Implications for traders

• Concern in wealthy city states around – pensions and security of supply of resources

• Trust within geography– Retail banking between individuals within city states

• No mechanism for handling global risk• 5 pre-eminent FS hubs including Istanbul

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• By 2050– Shrinkage of FS sector due to ICT

– Insurance basis in question due to ICT

– FS role in dealing with resources shortages

• Second Hand– It may be as good as it gets!

• Visible Hand– Homogeneity cause of volatility and break down

• Long Hand– Best for London as FS hub

• Many Hands– How real this one feels.

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The full Report “In Safe Hands? The Future of Financial Services” is available in pdf on

• the Long Finance web site www.longfinance.net• and the SAMI web site www.samiconsulting.co.uk.

Members of L3F are happy to work with organisations to explore the implications of the future. For this, or any other query, contact us at l3f@samiconsulting.co.uk.

Please give me your business card if you would like•SAMI’s monthly e-newsletter •a hard copy of the report•more about L3F