Megatrends The triumph of liberal democracy and the so-called Great Moderation coincided – but neither has been durable.
Francis Fukuyama penned what became the provocative essay "The End of History?" in 1989, following the fall of the Berlin Wall and the end of the Cold War. In this, he argued that the progression of human history as a struggle between ideologies was largely at an end, with the world embracing liberal democracy.
"What," he wrote, "we may be witnessing is not just the end of the Cold War, or the passing of a particular period of post-war history, but the end of history as such . . . That is, the end point of mankind's ideological evolution and the universalisation of Western liberal democracy as the final form of human government."
Looking around the globe today leaves Fukuyama's view of history somewhat tattered. The evolution of Russia and then China away from Marxism and towards capitalism did hold out a skerrick of hope for Fukuyama's thesis. This evaporated with the 9/11 attack on the World Trade Center in New York. The end of history had lasted just 20-odd years.
Fortuitously, this window of global peace coincided with another historical era – the socalled "Great Moderation". Former chairman of the United States Federal Reserve, Ben Bernanke, devoted a speech to this development in 2004.
He pointed out that the variability of quarterly growth in real output in the US had declined by half since the mid-80s. At the same time, the variability of quarterly inflation had declined by about two-thirds.
Similar declines in the volatility of output and inflation occurred in other major countries, with the recent exception of Japan, a country that had faced a distinctive set of economic problems. Japan is still exceptional, though not to the same extent that it was back in 2004 Era ends with Lehman.