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

Wednesday, September 29th, 2010 | Uncategorized

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.

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

Shayna Harris
September 29, 2010

Dear Otto, I see that “movement in the making,” too. After years of working with family farmers around the world, very small, often isolated farms, and linking the stories and products of those farmers to US consumers, I am hopeful. People in the states care more and more about where their products are coming from, and farmers are gaining more income so that they might be able to control their choices and the future of their families. Attending an MBA program at MIT and identifying with so many students who have similar aspirations and visions for a more equitable world has also given me hope. There is no excuse, now is the time to act, and I thank you for providing a safe space in your class and through your writings.

Chidum Ayeni
September 30, 2010

Interesting. I’m also a believer in the urgent need for changes in the global situation as we find it now, especially on issues related to sustainability. It’s interesting to note that in certain countries – Germany – the civil society, government and busiess are already collaborating to bring about changes.
It takes a ‘will’.
I’m a great believer that the social entrepreneurs though the key, cannot go it alone. They have to collaborate or form an alliance with the corporate world. And together these 2 can drive the government to work together to make meaningful impact in the world.

Asif Q
September 30, 2010

Quite an interesting insight. I feel that democracy has its issues too. China apart from having a dedicated leadership also has a governance system in which enforcement of ideology is far simpler than what exists in the consensus based west.

I feel that what Andrew Lo (in purely economic terms though)states as ‘wisdom of the crowd’ turns into ‘madness of the mobs’ and ‘one highly gifted and well-intentioned person in the White House’ can only do so much till his voice gets drowned in the mob.

And as per Prof Arnolodo Hax that in 1974, Vannevar Bush at the MIT Orientation session said and i paraphrase ‘It is not the teacher, buildings, management, administration, ….etc etc that makes MIT great, it is its undying Spirit of Success’, and as i resonate with this thought I cannot help but wish that the leadership of the world’s most influential nation gains that moving spirit of success to address this urgent need to make this world a better place.

Augusto
October 12, 2010

As an European, I would like to say that in spite of many people saying that the “empire” of US will finish by 2050, the History is saying that a culture is destroyed only when the “brains” flew away to others part of the world.
Since US has hosted thousands of “brains” around the world like Yourself!!!, those same “brains” will keep US on the Top of our current modern civilization.
US has its last internal war about in the 19th century, so keeping peace since then, contrasting with the wars of Europe, Africa and Asia in the last 20th century.
So unless US would fallout in an internal war, US will be a safe place for the “brains” worldwide and so them power and values over the world.

About China, well, from my experience when speaking the locals in Shanghai, they didn’t feel very happy of being separated from them families in the province and just being able to see them after each six years or more.

About Europe, we are in a process of still taking care about the wounds of the 20th Century which are not easy to clear-up.

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