The problem with the economy in the Western world

StephensonWhat is the problem with the economy in the Western world? Jobs are disappearing and exclusion is increasing.

The past weeks backward economic development in Europe and America is observed both by researchers and journalists. Stefan Fölster wrote a debate article in the Swedish newspaper Dagens Industri (Today’s industry) on 10 September arguing that the Swedish industrial production fell by 10 percent in the past five years. The day after, this was discussed in the editorial “Defensive Large Companies Suffocate Innovation” of the same newspaper. The editorial makes references to, for instance, an article in The New York Review of Books called What is Wrong with the West’s Economies? by Edmund Phelps.

In the past I have written about the problems of the Swedish industry in, for instance, Sweden Loses Export Shares and The Decrease of Innovation. In the latter, I discuss a study by Karolin Sjöö about the decline in innovations in Sweden from the 1980s. In the article What’s Wrong… Phelps discusses the same issue, but applied to the Western world as a whole. Briefly, Phelps is of the opinion that our attitude towards innovations and changes has gone through a major transformation lately. In particular, during the nineteenth century there was a great deal of enthusiasm for finding new solutions to old problems. In those days, entrepreneurs and engineers, such as George Stephenson, could develop entirely new transport solutions (the railway) that essentially changed the world.

Stephenson was born of poor parents and all lacked education. But he was a proficient inventor who soon received support from investors and politicians. His biggest achievement was perhaps that he succeeded in building the first railway line in the world. The double lined railway between Liverpool and Manchester. Stephenson, as well as many other entrepreneurs and engineers, was able to achieve huge changes, despite the fact that he was not part of the elite. Many were not even able to read. But, of course, there were also well-trained individuals who achieved a lot. The mathematician and statistician Florence Nightingale fundamentally changed health care through her research. Her proposals were accepted despite the fact that she was woman in a society dominated by men.

As Phelps points out, this type of innovations and changes are uncommon today. Today’s society and the way it is described is based on the perception of the human being as a machine, a robot acting according to a program. They are cogs in the machinery. When these robots are on vacation they are expected to be “recharging the batteries”. To imagine new solutions is almost considered improper. Phelps shows, by using statistics, that in the 1960s America started to decline from the innovation peak. Europe followed a few decades later. This is entirely in accordance with Karolin Sjöö’s results.

The problem with a decaying economy is that exclusion increases, Phelps points out. Unskilled jobs disappear through globalisation and productivity improvements. No new jobs are developed. It is therefore the lack of innovations and changes that lead to the lack of unskilled jobs The frequently acclaimed Silicon Valley is only responsible for 3 percent of America’s economy. It is not too much of Silicon Valley, but too little. Despite the lack of innovations and change, many are nevertheless disturbed by “all” the new products from companies such as Apple. So what is causing this reluctance to change? Phelps does not have the answer. Ken Robinson, on the other hand, proposed an answer. We need creativity and imagination to imagine new things, says Robinson. We all have this as children. But where does the creativity go after that? Adults seem not to have it, says Robinson, and Phelps agrees. We are trained to lose it, says Robinson. It is interesting to note that countries with major investments in science, technology and mathematics do not have more innovations.

I believe we are a product of the same society we are creating. This applies both when we speak about Sweden as a society or an enterprise. We see society as a machine. The many machines we use every day have made us believe that the whole world is a machinery in which we all have predefined tasks, like cogwheels. In order for us to break free from this view, we need to accept that social systems should be dynamic (agile) in order to be able to adapt to changing circumstances. To remain idle is not an eligible possibility. The lack of adaptation in the form of innovations leads to an economy in decline. This leads to exclusion which in turn leads to crime and social unrest.

It is time for innovations and changes in the way we organize society and companies.

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