Archive for September, 2010

China, Europe, and the US: Three Approaches to Meeting the Future

Wednesday, September 29th, 2010 | Uncategorized | 4 Comments

Just returned from two interesting events.

The first one was the World Economic Forum in Tianjin, China (“Summer Davos”). It was 22 years ago that I took my first trip to China, on the Trans-Siberian train from Budapest via Moscow to Beijing. It was a weeklong journey into an amazing new world. I went to a conference on future studies and met a whole bunch of young Chinese economists who were working closely with the Chinese leadership to co-pioneer a new economic development strategy. These people radiated an enormous future-driven energy. They told me that China would (once again) become the center of the world economy and that in the 21st century China would surpass first Germany (which it did), then Japan (which it did), and finally the US (which will be the next stop), all in the early part of the century.

There is almost no comparison between the 1988 China and the one in 2010. The magnitude of change is stunning. In just a couple of decades China has not only lifted hundreds of millions of people out of poverty and emerged as the manufacturing mega-hub and new center of gravity of the 21st-century global economy. It is also pioneering innovation in the core technologies of the next industrial wave, such as renewable energy and electric cars that will give rise to new industries in the next economic cycle.

While China is making massive strategic investments in emerging core technologies, Europe and the US are also investing significant public funding in their own economic infrastructures. But unlike in China, where the money is flowing into core technologies of the future, Europe tends to invest in the industries of the past (like coal and conventional forms of agricultural mass production). And in the US we seem to be happy to spend massive amounts of money on subsidizing bankers (without imposing conditions, let alone breaking up the financial oligarchy) and on funding an overextended military machine that is caught up in two unwinnable and ill-conceived wars.

Three world regions—and three different paths.

Together, the world’s three biggest economies (the EU, the US, and China) account for more than 60% of the world economy. China invests in the industries of the future. Europe invests in the industries of the past. And the US invests in the interests of its current oligarchy. So what accounts for these different paths? One word: Leadership.

The Chinese leadership rules the country like good corporate leaders should: they know their system, understand the global context, sense future opportunities, and strategically invest in the infrastructure and capabilities that allow them to move from here (the current reality) to there (the envisioned future).

What do we see in the West? The same thing on both sides of the pond. A largely paralyzed system of political institutions in which the decision-making process is driven by special interests that represent the industries and stakeholder groups of the past, while the emerging future, including the technologies of the future, seem to have little voice in the game.

The situation in the US is worse because of two failed ideas:

(1) An economic strategy that is built on the idea that you can ship industries and real value creation to China while still dominating the world economy with a financial bubble machine that mainly engages in fictional value creation. It’s disastrous to assume that you can separate the primary, secondary, and tertiary economic sectors. Ship one. Keep the other. The real effort should be to differentiate and interweave these sectors, not to separate them. A case in point: Germany, in which almost all industrial jobs are based on linking industrial value creation with the embedded or closely linked knowledge economy.

(2) An empire that is built primarily on military power, or, to put it differently, by going it alone. That road is a dead end. While Obama didn’t start the wars that he inherited from Bush/Cheney, he also hasn’t done much to stop them. And he has done nothing to destroy this second illusionary and equally disastrous idea. That idea, to dominate the world with a military machine, costs us, the US taxpayers, roughly one trillion dollars per year—yes, 1,000 billion dollars per year.

These two failed ideas add up to an economic condition that has put the country in a downward spiral.

The British historian Arnold Toynbee suggested that the rise and fall of empires is a function of their elites: whether or not the ruling elite can find creative responses to deal with the major challenges of their time. Looking at our present time from this angle, what prediction would you come up with? Who of the Big Three will be going down first?

Not China. You may not like its leadership for a number of reasons that Western commentators like to point out (and that on several accounts valid, though often a bit one-sided). But I am impressed by what China’s leaders are doing. If you judge by their results, you can only be impressed.

The West and China after 1978/80: Ideology vs. Pragmatism

Thirty years ago the world moved into an era where a new set of ideas (privatization, markets, entrepreneurialism) started to reshape the political landscape around the world. This set of ideas was promoted in the West as a neoliberal ideology dubbed the “Thatcher-Reagan revolution” (1979/80) and in China as economic reform (1978). Both started roughly around the same time and with the same core principles. But these ideas were carried out in very different ways: as part of a fundamentalist ideology in the West (leading to a 30-year boom-to-bust cycle, ending with a crash and burn in 2008); and as part of an integrative development concept in China that seeks to harmonize entrepreneurial and free-market principles with strategic leadership and the interests of society as a whole. Two weeks ago I heard a speech by Premier Wen Jiabao that basically reconfirms this view: he sounded like a passionate and highly competent CEO who not only accounts for economic but also social and ecological performance indicators.

And what about the West? While Europe is largely consumed with itself and on a slow downward trajectory, we see the US moving in the same direction, but on a much more steep trajectory (mainly as the result of the two disastrous ideas mentioned above). So while China used the last 30 years to pragmatically integrate the best elements of capitalism and socialism, we used the same period (or even longer) in the West to turn both in a fundamentalism like ideology that crashed and burned in 1989 (socialism) and 2008 (neoliberal capitalism), respectively.

Yet we also know that the US has enormous dormant forces of renewal that could wake up at any moment and turn the country on a dime. And Europe has some of these forces as well. We were optimistic that Obama’s presidency would be the beginning of this movement. But evidently it takes more than one highly gifted and well-intentioned person in the White House. So where do we see the seeds of the future right now?

Seeds of Tomorrow

In Europe and in the US I think the same force is waiting in the wings: it’s a sense of connection, awareness, and co-creation that connects the three main sectors of society: civil society, business, and government. For example, why has Germany weathered the economic crisis so effectively? Why is unemployment in Germany now lower than before the crisis? Because the three sectors worked together effectively. Unions (civil society) gave up old ideas and allowed for more flexible contractual arrangements with companies (e.g., time accounts that give workers more working time flexibility and help employers to better synchronize with business cycles). Government jumped in and helped out with the concept of Kurzarbeit: subsidizing up to 70% of employees’ salaries so that companies didn’t have to fire workers even though current production volume didn’t justify their full-time jobs. As a result, many people kept not only their jobs but also most of their income (which was good for the demand side of the economy). And companies retained skilled employees that they didn’t have to rehire and retrain after the economy picked up steam again. Three sectors, one goal, creating new ways of working together.

Another example from Germany is the birth of the fast-growing renewable energy industry that resulted when a civil society movement formed a political party (The Greens) in 1979, got into parliament (in the ’80s), and spearheaded legislation that forces utilities to pay higher prices to suppliers of renewable energy—which in turn sparked a whole new green industry cluster in and around Germany (in the ’90s and 2000s). Again, the three sectors worked together on technological and systemic innovations.

In the US I see some promising beginnings in the BALLE movement (Business Alliance for Local Living Economies). Founded in 2001, it was built on the belief that the best solutions to our global economic, environmental, and community crises come from the grassroots and are driven by entrepreneurs. The goal is to create an alliance of local business networks committed to enhancing the health and wealth of their own communities and ecosystems. The BALLE network, according to its Director, Michelle Long, has “catalyzed transformational success in small towns, in large cities, and in regions of high unemployment” and has become North America’s fastest growing membership organization of socially responsible businesses with 80 networks comprising 22,000 local, independent businesses in 30 US states and Canadian provinces. Its at least a hopeful beginning that — if linked with similar change initiatives in the other sectors — could grow quickly into a very significant positive force.

The second interesting event that prompts this blog entry was a gathering in Aarhus, Denmark, where I had the occasion to learn about another pregnant field of cross-sector creativity. Nine hundred leaders and change makers from all sectors of that city and other communities across Denmark came together to focusing on how to connect to the field of the future in a way that is more personal, more awareness-based, and more collective. I was amazed to see how an initiative that started with just a handful people a few months ago (who volunteered all their time and dedicated the profit of the event to social enterprises in the region) could catalyze such a huge response: 400 people the first night, 900 the next day, coming from all sectors of society and strands of life. (And amazingly, I learned that in Denmark there are already six published books on how to apply the U Process in institutional and entrepreneurial settings. Too bad that my Danish is so terrible!)

What I took away from this gathering is this: there is a movement in the making. It’s a movement of consciousness-in-action. It’s a movement of waking up to a higher level of awareness, waking up to another level of who we are as human beings—and what we are here for. And it’s a movement that’s all about bringing that type of awareness into our professional and our everyday actions. It’s about how we can make ourselves and the world a better place. That spirit is a deep inspiration that I feel connects me with my own generation (I am 49 now) and also with 20-somethings and some teens. I see it as a deep human awakening—and it is the ultimate source of my optimism.

I see it every year in the wonderful constellation of people who show up in my classes at MIT. I see it in the year-long tri-sector leadership capacity-building programs that I run at MIT and the Presencing Institute. I see it across cultures, generations, and sectors. I see it rising in civil society organizations and in entrepreneurial start-ups—even in large global companies. I also see it in government organizations, even among politicians. It’s a movement without ideology or leaders. It’s a movement that doesn’t (yet) always recognize itself. The worldwide awakening of that movement is the reason why I am more hopeful than ever that we actually can turn things around. What we need is a global field of inspired connections that helps us to work more effectively and more intentionally toward the future that is seeking to emerge.

What do you see going on as you contemplate this bigger picture that we all are a part of?

Links and inspirations for this blog entry:
A column by Tom Friedman.
A new summary presentation of Theory U: Deep Innovation.

The Fall of the US Empire – and Then What?

Sunday, September 5th, 2010 | Uncategorized | 21 Comments

When I returned to the US after two months of travels this summer I couldn’t help noticing the significant signs of decay. Compared with the vibrant energy of places like Brazil, China, South Africa, and Indonesia, the US feels like a country in decline. Even the so-called old Europe—usually referred to in terms of Eurosclerosis—seems to be more innovative these days. Germany’s current unemployment rate is below its pre-crisis figure (compared with a record-high 9.5% in the US, that in reality is more like 17% if you include people that gave up looking for a job or survive with low pay part time jobs) and its second-quarter growth of 9% compares favorably with the 1.6% rate in the US. But what’s worse is the negative social impact: about 50 million Americans temporarily have not enough to eat; and one in eight Americans—and one in four (!!) children—are living on food stamps. Schools are closing. Roads are not being repaired. Bridges are crumbling. Inner cities are still in a downward spiral. Although the stimulus projects have been doing some good, the physical, social, and educational infrastructure of the country continues to be in steep decline. Yet, the US continues to spend its powerful resources to the wrong ends: fighting two wars that can’t be won (with more than $1 trillion spent to date, and 1.2 million people killed in Iraq alone after the invasion), maintaining more than 760 military bases outside the US in about 150 countries (for comparison, at the height of the Roman Empire, the Romans had an estimated 37 major military bases, at the height of the British Empire, the British had 36 of them planetwide). Currently, almost half of the $ 1.5 trillion world military spending is accounted for by one single country: the US.

Over the past 30 years, the average income of men in the US has not changed (about $45k, inflation adjusted). Yet over the same period, GDP grew by 110%. So where did the surplus go? To the top. In 1950, the earning ratio between CEO and shop floor worker was 30:1. Currently, that ratio is at 300:1. Today, the top 1% of the population owns 37% of all assets, while the bottom 80% share no more than 12%. This gap continues to widen. The Bush tax cuts were another $1.7 trillion expense that contributed to widening this gap.

In 1980, the peace researcher Johan Galtung predicted the fall of the Soviet empire within a decade. In early 1989 I heard him bet publicly that the Berlin Wall would crumble “before the end of the year” (which it did on November 9, pretty much on schedule, as we all know).

In 2000, Galtung predicted the fall of the US empire by 2025—but then, when George W. Bush was elected, he revised his prediction by 5 years to 2020 (based on the assumption that Bush would significantly accelerate the process of decline, which of course he did). The fall of the US empire, according to Galtung, could possibly benefit US citizens and lead to a blossoming of the republic. Or, in another scenario, it might lead to a more fascist reaction to the current crisis (for more detail see Galtung’s most recent book, The Fall of the US Empire—And Then What?).

So, looking at how the US shows more and more symptoms of a third world country, and looking at the paralysis of the current political system and how the financial oligarchy is tightening its grip on our beautiful country, the question on the table is what keeps us from changing this? Why do we continue to move trillions of dollars to bankers, billionaires, and ill-conceived wars? Why not redirect the same streams of money to areas with where it could have a profoundly positive social impact: conditional cash transfers to poor people and communities (which Brazil has used with major success), massive investments in education, green technologies (which China does with great success), and hybrid social and business entrepreneurship, which could move urban and rural communities from despair to social, economic, and ecological well-being. What’s holding us back?