In 75 years, the global financial systems haven’t changed much and it has enriched a few while impoverishing so many. A new study has found that people in emerging economies are becoming increasingly worried and are now calling for a change.
How weird does it feel to realise that for all the changes the world has gone through this past few decades, the financial system currently in use is one thing that just seems to never change much?
Yes, today’s world is evolving at some pace. Between the turn of the millennium and this very moment, life has become better in every facet. But somehow that evolution just seems to never reach the global financial system, as though it were a blind spot that is just always outside the view of a sophisticated camera.
And that’s because 75 years have passed since the famous Bretton Woods conference which pretty much created the global financial system still in use to this day, and established all the rules that still govern the economies of today’s world.
How weird is that? Half a century and a quarter have passed and somehow the world still runs on policies established when World War II was underway and Africa was still a colony of the many power-hungry states that existed at that time. Change on that front has, in fact, become imperative. And based on newly-acquired evidence, the time for that change might be now – at least, that’s the feeling in emerging markets.
Global cryptocurrency firm, Luno, recently surveyed 7,000 individuals across Africa, South-East Asia, and Europe and the general feeling among respondents is that the financial system is in need of an overhaul. In fact, most of the respondents from emerging economies feel that the economy of their country is in bad shape and it was now time to abandon the old ways.
Want to know who feels different? You guessed it; those persons whose countries are doing okay, and we are talking about the same countries that influenced the decisions of the said Bretton Woods conference (also known as the United Nations Monetary and Financial Conference) from 1944, as would be expected. But this is not mere banter.
The “Future of Money” survey as Luno calls it analysed seven key markets to analyse the understanding and attitudes that individuals across the globe have developed towards the financial system. The findings indicate that the respondents from emerging markets are seeking a change to the way global money exchange and banking operates today.
As was gathered by the survey, when asked how secure they felt about their current financial situation, respondents from South Africa (36 percent) and Nigeria (35 percent) showed the highest percentage of individuals saying they did not feel very secure.
Individuals from rural areas showed a higher percentage of negativity towards their economy than those in urban areas, this is largely down to the lack of access to the financial system in those areas. (23 percent of respondents in Nigeria and 22 percent of respondents in South Africa said it was very difficult for them to send money overseas).
South Africa (22 percent) and Nigeria (23 percent) also showed the highest percentage of positive attitude towards a single global currency making the current financial system better, whereas only 7 percent of respondents in the U.K. agreed.
Also, the most common answer when asked what the advantages to a single global currency would be, the majority across all markets said better for the global economy; UK (20 percent), France (21 percent), Indonesia (39 percent), Italy (25 percent), Malaysia (25 percent), Nigeria (39 percent) and South Africa (35 percent).
A lot has changed since some of the world’s best minds came together and agreed on a new way of managing and exchanging value between individuals and organisations. Needless to say that the resolutions were primarily based on the needs of developed countries and markets.
In the parts of the developing world, the story these days is that of increased population, changes to distributions and inequality of wealth, and a general regression of the local economy, and this is in spite of the best efforts of past and present administrations.
But one thing we didn’t really have 75 years ago is the frenetic evolution of technology that has become a feature of today’s world. And with that in mind, maybe it’s time for the world’s financial systems to go through yet another Bretton Woods moment.
As per findings from the survey, over 91 percent of respondents in South Africa said they pay for a personal bank account and 75 percent said they use mobile banking. The results also indicate that respondents in South Africa are savvier with their money than those in European markets, as the second-highest percentage of respondents that said they invest in products (i.e mutual funds and stocks) came from those in South Africa.
In contrast, a high percentage of individuals from European markets; France (70 percent), UK (61 percent) and Italy (59 percent) said they do not usually invest with a purpose of increasing their wealth.
When respondents were asked about monthly budgeting and expenditure, only 54 percent of people in the UK said they set a monthly budget for personal spending, a stark contrast to the 73 percent that said they did in South Africa, 80 percent in Malaysia and 65 percent in Nigeria. This indicates that those in emerging markets are more cautious with their personal finances, with 66 percent of respondents in emerging saying the main reason for having funds is to secure their families well-being.
As things stand, individuals in emerging markets can hardly afford to pay extortionate exchange rates, and should not even have to. Neither should they have to bear the brunt of national devaluation or lose out when they simply transfer money between individuals or entities.
It has been identified that access to a more inclusive financial system will enable people everywhere to think of new and better ways of exchanging value and technology can play a key part here. The research appears to support this and maybe it’s time for global financial institutions to find ways to leverage advancements in technology so as to enable emerging markets to have the same access to money and transfer of assets as their counterparts in the developed world.
Featured Image Courtesy: worldbank.org