The Riskless Society Reexamined: An Address

Wriston, Walter B.


It is difficult to think of a more appropriate place for bankers to host a dinner than in Goldsmiths' Hall on the corner of Gresham Street. This magnificent hall first became the home of the goldsmiths in the 14th century when groups of artisans were forming guilds to protect and promote their interests. The guilds were largely a response to the emergence of new technologies. This is especially true if technology is defined in the modern sense, not parochially as tools or techniques, however intricate, but simply as the organization of knowledge for practical purposes.

The response to the exploding technology in the 20th century can be that of the goldsmiths who did and do their best to preserve yesterday a few days longer. This type of response is futile, and ranks just behind the Dutch in the midst of the Industrial Revolution who threw their wooden shoes in the machinery to hold back the tide of mechanization. Many years ago, an American philosopher pointed out that "What looks like stability is a relatively slow process of atrophied decay. The stable universe is slipping away from under us." This is a hard doctrine. It is doubly hard to accept with the signs of chaos all around us. Student riots have become a way of life, the world has had serious crises affecting one or more of its currencies with disheartening regularity, the urban crisis deepens, and the guns are not yet silent. You can make the list as long as you like and as topical as today's newspaper. But listing of the world's ills does little to advance the science of managing change except to show the moving picture of a crying need to reexamine our life and the ways of dealing with it.

Although the computer gives man the capacity for the first time to solve the technical problems of putting a man on the moon, it does nothing for the moral problems of the world. Along with radio and television, the computer has produced massive side effects far more difficult to deal with than technology itself.

It is doubtful, for example, that more than a few hundred people learned immediately of Guy Fawkes' great gunpowder plot to blow up Parliament in the opening years of the 17th century, and less than a handful of men actually saw the thirty-six barrels of gun-powder. Today, however, you can sit in your living room and watch a war in full color some nine thousand miles away. The largest and smallest event is now instantly intruded into your life and mine with a dramatic force that may be all out of proportion to the significance of the happening, since most news media have no editor in charge of good news. What we get is an endless procession of bad news.

Because men everywhere see with their own eyes the apparent inability of various segments of society to run their own affairs, faith in any system is being eroded. The voice that urges the long view, competes with demagogs of all stripes who would make capital out of the moment. The intellectuals who dwell on the campuses of the world give stark evidence of their own inability to run their own universities, the business sector is attacked for turning out shoddy merchandise, and the ability of the public sector to solve our problems is visibly and painfully inadequate to the task. In short, the great gains in the technology of communication, instead of tying the world together as we had been told they would do, have in fact done just the opposite. The English Channel can now be crossed before the great engines of your Concorde airplane are barely warmed up, but the political gap has widened in recent years.

As news spreads about the inequality in the world, what has been called "our passionate love affair with government" has cooled. In the days of the great depression, all of us turned to government to solve the problems that were too big for us to cope with. It was not just your Fabians or our New Dealers, but all over the world on both sides of the Iron Curtain men looked to government for the solutions. In this world of instant communication it becomes painfully clear that government as a manager of the new technology is a failure. Government as a manager of our future is a failure. The poor know it--the massive programs to relieve their misery have not worked. The young know it, and they daily articulate it. Bankers and businessmen know it and the billions in the developing countries know it. If this seems like a harsh indictment, we have only to repeat some of the questions that are being asked.

Who believes any more that a simple change in administration will make foreign aid successful anywhere?

Who in the United States believes that another administration foray in the so-called "War on Poverty" will eliminate poverty?

Who believes that another ground-nuts scheme is the answer to the use of backward agricultural methods?

Who in Russia believes that another five-year plan will make wheat grow on the collective farms?

Who here believes that another turn of the interest rates will solve your monetary problem?

Who believes that another slogan or, in the bureaucrats' language, that another governmental scenario will achieve these objectives?

The answer, of course, is "no one," simply because performance has been missing. Many explanations have been offered for this state of affairs. Government, it is said, is not innovative. It chokes on forms, is bureaucratic in that term's worst sense, cannot abandon anything it starts. It does not run the risk of bankruptcy.

By its very nature government is sterile when it tries to do the job that we in the private sector have neglected for so long. In my country, for example, we have watched our government Social Security pension system erode the private pension schemes partly because the private sector did not respond to the social needs of our people. Our government pension lays a tax on the worker and management, only to invest it to increase the government debt, adding little to the means of production. A private pension fund, on the other hand, collects the same money from the same sources, but invests it in the means of production, earning not only a return with which to pay the pensions, but also creating new plants and equipment which give more and better employment to an expanding work force.

If this sounds like a voice from the dead past calling for the return of laissez-faire with its too rough adjustment in human affairs, it is not. The American dream of individual freedom was predicated upon a government which sticks to governing and eschews management. Where we have gone wrong is to expect government to manage in order to build a riskless society. What the people of the world are really asking for is a return to risk. They want the education and opportunity to take risks. They want to participate in a system that is built on risks. With 90 per cent of all the scientists who ever lived being alive today, the predictability of technological advances is as certain as any forecast can be in an uncertain world. How are we going to meet this problem?

You and I, the organizations which we serve, and the nations in which we live, can respond to exploding technology in a variety of different ways. Since the means do in fact shape the ends, it is critical for the future of world trade and the world economy that we concentrate in the public and the private sector all the intelligence we can bring to bear, not only on surviving in a changing world, but in improving the lot of our fellow man. Peter Drucker in his brilliant book, , has pointed out that "A major industry will rarely put its best brains to work on basic changes. It will rather tend to fritter away its energy on desperate efforts to keep yesterday going a little longer." History bears out Mr. Drucker when you consider that the major leap forward in computer technology did not come out of the established electronic companies, but came from people like IBM who had few electronic engineers as recently as the end of the 2nd World War. The breakthrough in new drugs and pharmaceuticals generally did not come from the great chemical companies with well established markets, but rather from innovative new companies who produced and marketed the wonder drugs of today. Some of the so-called new economics have tended to put a premium upon retaining old and decaying industries as against encouraging the new ones, perhaps on the mistaken belief that we somehow built a riskless society in the 1930's.

The fundamental prerequisites that permit your countries and mine to continue to raise the standard of living of our citizens hang fundamentally on creating a climate hospitable to the free movement of men and money and ideas from one industry to another, from one area to another and across national boundaries with the least hindrance possible.

A great Englishman, Thomas Macaulay, once wrote that "Free trade, one of the greatest blessings which a government can confer on a people, is in almost every country unpopular." What I suggest to you gentlemen today is that there is a tide running in the world which, if permitted to continue, will destroy everything that patient and skillful men have built on the ruins of the 2nd World War. Day after day, in meetings without number, the barriers to the movement of men and goods and technology have been patiently disassembled. As the walls came down, world trade doubled.

From the front row seat that we in Citibank occupy in observing world trade and monetary trends, we detect the beginning of a movement back to protectionism, back to nationalism and back to the jungle of exchange controls, back if you will to the search for a riskless life. We have to say this despite the very real forward steps taken at the Kennedy Round negotiations. The veneer of this liberalism is not thick enough to stand much monetary strain. Last May when the riots in France escalated into a national problem, the French Government almost immediately reactivated exchange controls. The situation in the United Kingdom was not dissimilar when temporary import deposits were imposed in 1968.

In my own country, as we watched our balance-of-payments deficit deepen, we invented the Interest Equalization Tax which still stands on our books long after our interest rates have climbed above many other nations.

The new dimension in the picture is that technology is exceedingly portable. The Japanese, who now have the second largest gross national product in the free world and the most protectionist mentality, understood first how to import technology and translate it into goods and services which could be exported. It is possible that the export and import of technology in the future may become as important as the export or import of goods and services.

To be sure, we can go on like this easily. We can belabor government and we can repeat endlessly what has become obvious across the whole political spectrum to liberal and conservative alike. But what we ought to understand first is that government has failed us because we engaged in what was an essentially futile search for the riskless society. And secondly, the increasing demand for the centralizers to decentralize and to turn back to the private sector to get things done is nothing less than a belated, still sparse recognition that risk cannot be eliminated from the affairs of men.

No one knows better than a banker that there is little profit in avoiding risk. The bank that prides itself on no losses has made a minimum contribution to growth and innovation, and so it is with all those who participate in the management of society. The safest course of action can sometimes be the most dangerous and the decision which contains the least risk can sometimes prove to have the highest cost.

In addition to exploding technology, we must also focus our attention today on the fact that we have a world consumer market. The concept of a huge market is not new, but the means by which we arrive at it are. In the United States the wagon trains pushed west and took with them political sovereignty long before we developed a continental market. In the world market today quite the reverse is true. Economically there is a world market with consumers in every country demanding consumer products which they have seen on television or read about in the magazines or seen displayed at trade fairs. This world market has grown up in spite of political fragmentation and could furnish a bridge to closer political union.

It is lamentably still the fact that the only organizations which are truly international are those in the private sector. It therefore behoves us to stand up and be counted in the fight to continue to liberalize the movement of capital, labor, goods and services across international boundaries. This is just another way of saying that we must take the risk of reviewing yesterday and planning for tomorrow.

Above all we must keep our sense of perspective. Some forty years ago Alfred North Whitehead wrote, "It is the first step in wisdom to recognize that the major advances in civilization are processes which all but wreck the society in which they occur. The art of free society consists first in the maintenance of the symbolic code; and secondly in the fearlessness of revision to secure that the code serves those purposes which satisfy and enlighten reason."

In this spirit we have to question whether our society is properly organized. We have to question whether the price of gold is a fixed number like the speed of light, or whether it might be usefully changed. We have to question whether the drift to let government manage should not be reversed. We have to question whether the brilliant 19th century invention called bureaucracy can cope any longer with the 20th century complexities either in government or in business. Most of all we must question whether a riskless society is one which can produce the goods and services to fulfil the social needs of our time.

  • The document was created from the speech, "The Riskless Society Reexamined: An Address," written by Walter B. Wriston for the First National City Bank's first combined Board and Trust Board meeting outside the American Continent on 28 May 1969. The original speech is located in MS134.001.002.00006.
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