A good deal of political rhetoric and market confusion from the Global Financial Crisis (GFC) has recently culminated overseas at the annual world-leader-talkfestWorld Economic Forum (WEF) in Davos, Switzerland.
You know the drill: Bono, Gordon Brown, Important Central Bankers and members of the IMF, WTO, USA and any other organisation with an acronym that could muster an invitation. Whilst the topics discussed normally range from health, the environment, diplomacy et al all eyes were firmly planted on economics and reforming the global financial system.
As the WEF is a giant committee with more languages and complications than you could poke a stick at, one could be forgiven for being a tad cynical on what practical outcomes might arise from such an event. Difficult circumstances often breed the greatest innovations however.
One idea reported by Jeff Jarvis for the Huffington Post who attended Davos caught my eye:
I ran a session in mass innovation in which we charged groups to pick an industry and bring the benefits of open collaboration to find an opportunity or repair a problem. One group took on the toughest assignment they could today: banking.
They proposed the Open Bank. It would feature radical transparency: full disclosure of performance and compensation. The group decided that a banker should not sell a product unless he could pass a test about it. They even decided that there had to be a means to confirm that customers understood what they were buying. They proposed collective risk assessment, creating a means for its constituents to select and perhaps vote on investments. They explored how to offer transparency on each product and customers’ performance with them so that you could compare your returns with fellow customers. And they argued that bankers should be compensated on profit. It wouldn’t be an easy business to run; being answerable is hard. I said later that its slogan should be, “the only bank you can trust.” That is what would make it successful. When I asked, most in the room said they would be such a bank’s customers; many said they’d work for it; almost everyone said they’d invest in it.
It all sounds quite simple. Often the best ideas are; proponents of radical transparency such as myself have been crowing on some time about the potential benefits of such an attitude; beneficial to those inside and outside of the organisation that adopts them. Now resistance to ideas like an open and 100% transparent central bank are going to be common if the feasibility of such a project is to take place. But that is only natural. Technology always has it’s cynics or non-participants.
It could be that such a bank is first started by a small private entrepreneur (as is often the case, when cynicism abounds) and then mimicked on a mass scale potentially by a state or Pan-regional group like EU. There is nothing wrong with this, as this has been the way of the world and the free market for so long. However what is different this time is that time is of the essence, and it is times like this that States need to intervene in order to prevent a greater negative outcome to their economies.
As a liberal in the Menzies tradition I am happy to rely as less as possible on governmental bureaucracies to solve systemic challenges, however the current situation surely is a just cause - deserving of only the brightest ideas such as these.
What do you think? Would you have more trust in an open banking system?
Notes:
* Jeff Jarvis blogs at Buzz Machine
* Header image hosted via World Economic Forum on Flickr.
