6 In a nutshell that is why, over long periods of time and across wide ranges of countries, well-functioning finance has supported wealth-creation and well-being. The other, more obvious, way of capturing why finance matters is to see what happens when it goes wrong. Then it can quickly take large chunks out of the capital our societies have, over time and at great cost, painstakingly accumulated. That crumbling of capital, in its broadest sense, is the reason financial crises have been about as costly as any event societies have ever faced historically, war and revolution excepting. Capital, for these purposes, has more than one face. The collapse of capital during financial crises shows up, most obviously and immediately, in measures of financial capital (the values of bonds and shares) and physical capital (the accumulation of buildings, houses, plant and machinery). And because we assign monetary values to these concepts, and obsess about them in the media, these losses of capital are clear and visible. Yet it is another form of capital that may matter every bit as much to wealth and well-being in society – social capital. There is neither a standard definition, nor a simple means of measuring, social capital. In general, social capital refers to the relationships, trust and  3  Carney (2015). 4  For example, Levine (2005) and Beck (2012). There is also evidence finance fosters entrepreneurship (Guiso et al (2004)) and reduces poverty and inequality (Beck et al (2007).
Trust in banking had, by turns, suffered a double-whammy: first a slow puncture of personalised trust as banks retreated from the high street, then a high-speed blow-out of generalised trust as the crisis broke. That loss of generalised trust is not confined to the financial elite. Many other entities rely on generalised trust on the part of the public, from governments to businesses to the media. They too appear to have suffered a loss of generalised trust over recent years, joining banking at the bottom of the league table. Their crises have been different – from expenses to remuneration to mis-reporting – but the result the same. These trust-busting events have generated, as in finance, a growing perception gap between the elites and the general public. In 2016, the trust gap between the “informed public” and the “mass population” hit a new high of 12 percentage points at a global level. The UK results were even more striking. Not only was the trust gap, at 17 percentage points, higher than in any other country, bar the US. But this gap has widened progressively since 2012, when it stood at only 7 percentage points. 28  26  Sapienza and Zingales (2011). 27  European Central Bank Statistical Warehouse, available at: https://sdw.ecb.europa.eu/  28  2016 Edelman Trust Barometer. For more information, see http://www.edelman.com/insights/intellectualproperty/2016-edelman-trust-barometer/global-results/. 6  BIS central bankers’ speeches  The Bank of England has not been immune to this generalised loss of trust.