The Stewardship of Wealth: Successful Private Wealth Management for Investors and Their Advisors, + Website

The End of History (Again)

In his 1989 essay,³ and more fully in his later book,⁴ Francis Fukuyama famously proclaimed “the end of history.” What Fukuyama meant was that with the demise of the Soviet Union and the end of the Cold War, Western liberal democracies represented the end point of mankind's sociocultural evolution, “the universalization of Western liberal democracy as the final form of human government.”⁵

I'd like to suggest, instead, that the West has reached the end of its own socioeconomic evolution and is now faced with the gargantuan task of reinventing itself. Thus, the West must create new cultures, new governing mechanisms, and new theories for how governments can support themselves. Needless to say, the investment implications of this are large and complex.

I'll begin with the proposition that the West is in a permanent financial crisis. By “permanent,” I mean a period of years that is meaningful even for long-term investors. Specifically, I will consider the possibility that recent events – the credit crunch, stock market collapse, and banking crisis in the United States, and the sovereign debt problem, banking crisis, and stock market collapse in Europe—are merely symptoms of a deeper and far more complex problem that will require decades to sort out. I will also consider how investors might position themselves to avoid the destruction of their capital over an extended period of crisis.