As the global economy enters uncharted waters, there is an ever greater need to nurture the “can-do” pioneer. Those who will by their vision and energy enable our societies to achieve real and sustainable growth.
Let us briefly cast our minds back to how this amazing growth story was made possible and consider why the future will be one of uncertainty and challenge if we persist with the pre-2008 paradigm, and so why we urgently need to discover and articulate a new way forward.
Arguably the most serendipitous event in recorded history occurred in a quiet rural backwater in north western Pennsylvania 153 years ago when Edwin Drake drilled the first oil well. In the scope of human history the period since is but a nano second, yet it has seen the greatest expansion in industrial infrastructure, global population, living standards and life expectancy.
That unprecedented expansion, notwithstanding two major world wars and economic depressions, has been overwhelmingly driven by petroleum. With the transition from coal to oil came huge leaps in quality of life.
Now that easy oil is rapidly depleting, such as the highly significant, recently reported projected decline in the large Saudi fields, and with the ever rising costs to secure the more inaccessible sources, the global economy faces a ceiling on its consumption of this highest density energy source on which it has become so reliant.
Parallel with this cheap energy source our global monetary architecture is built on the possibility of a limitless, exponential expansion of credit to drive this maximum consumption model, much of which was misallocated to unproductive assets during the credit bubble, hence the current deleveraging in the private sector. Now we see how the credit markets have become incapable of providing capital to enable SME’s to thrive and expand, while start-ups struggle to get off the ideas launch pad.
The present global monetary system is by definition predicated on the future always being bigger than the present, which is why debt is always greater than money. But for the reason given above regarding finite energy sources, the future cannot be bigger. The implications for policymakers are profound and far reaching: how to achieve prosperity in a world that will struggle to achieve real growth.
In a future where cheap energy will be at a premium we need to substitute a growth model based primarily on these rapidly depleting fuels and minerals with one principally driven by a resource which is not limited, namely human capacities of imagination, creativity, ingenuity and innovation. Both the business model and the financial architecture which should service such enterprise need to be re-engineered.
How do the challenges we face going forward compare with the relatively resource-rich 19th century?
With the full tailwind of the industrial revolution behind him, Marcus Samuel was inspired by a visit to the Caspian Sea to export oil to the Far East for lighting lamps. From the efforts of one entrepreneur over 120 years ago to one of the major global energy companies today, we see what can be achieved with the “can-do”, pioneer spirit. Fast forward a century or so and we see Larry Page, Steve Jobs and Bill Gates as names synonymous with online search, computer electronics and operating systems respectively, all starting from a bedroom and with little funding. Now these companies are technology behemoths whose products are part of the global communications and knowledge infrastructure.
So think what can be achieved if government could act as a catalyst to raise the capability of thousands of our people, of the potential Jobs and Gates in the UK, so that such creativity and innovations come about not just by serendipity but as part of a deliberate strategy, driven by a vision of maximising human talent in a world paradigm which changed irretrievably in 2008.
This is in the nature of the creative and productive endeavour, where the first is essential for the second to be achieved on a sustainable basis. Imagination and knowledge is disbursed across our world, after all just look at a project such as Wikipedia to illustrate the benefits of co-operation and aggregation of disbursed knowledge from millions in the age of the internet.
The 2012 Global Innovation Index compiled by INSEAD and the World Intellectual Property Organisation (WIPO), which considers both the enabling environment for innovation as well as a measure of its achievements, placed the UK in 5th position overall, behind Switzerland (1st) and Singapore (3rd). Britain scored well on credit provision and investment in financial markets, both areas important for supporting growth of nascent innovation enterprises, despite the numerous ethical and regulatory failures which have afflicted the system, such as the LIBOR scandal.
Where the UK is a long way behind (in 57th place) is in trade and competition, and so exports need to be emphasized in the new model. We could do worse than look to emulate Singapore, the city-state shinning in first place in this category.
And yet even if we overcome the trade and competitive issues, as well as make progress on how we innovate and develop established ideas, there is an even more significant challenge, and that is one of bridging the “creativity gap”, the main post-2008 paradigm challenge.
The “State of Create” report by Adobe Inc. earlier this year looked at the role of creativity in society, the workplace, in education and the economy in general. Among the findings were that eight out of ten feel creativity is critical to economic growth, but only 1 in 4 believe they are living up to their own creative potential.
Revealingly, 59% felt their creativity is being stifled by the education system, while 3 out of 4 say they are under pressure to be productive rather than creative. In many organisations there is a “play it safe” strategy because of risk aversion, and so those with entrepreneurial and innovative abilities are being stifled by the less creative.
The way forward is to re-engineer our system from early education right through to a view of the firm where productivity and creativity are seen as reinforcing, a form of synergy, and not as mutually exclusive. Just look at how Google allows employees a day a week to focus on their own projects, an initiative which has resulted in creating half of the company’s new products and services.
We need the creative culture to be embedded throughout society, so that all are empowered to become “entrepreneurs”. Our national curriculum needs to be revamped to include creativity as a core pillar, with lateral thinking playing a major role in building a society where all can aspire to, and build the capability for, fulfilling their potential.
Unlike the past 150 years, we are now entering a world where the key resources underpinning the “growth” we seek to rediscover are rapidly diminishing. This is where small businesses the breadth of the UK can overcome this apparent constraint by filling the “creativity gap”. What is more, we can transcend the perceived difficulty over redistribution as the state grapples with funding challenges in these difficult times.
Rather than view the problem as a pre-distribution from the firm to the worker, we could picture the solution as one in which it is the relationship itself which changes. That is to say, as individuals in society we become “creative entrepreneurs” and so develop a new concept of stakeholding, sharing our income both in the form of wages and profits.
Add in new models of responsible, accountable and sustainable banking services for new businesses, such as crowd funding or peer-to-peer lending, and it is possible to move away from the pre-2008 resource and financial constraints referred to above, which are now holding back recovery.
As we look forward to meeting these challenges and seizing the opportunities, let’s ensure it is Labour that builds the capacity of our people and the supporting structures to create new enterprises in this new epoch.
David Phillips runs a small digital publishing business and was a former research chemist with Shell as well as being a candidate for Parliamentary and Welsh Assembly elections. He is a contributing editor for LFIG.