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Designing an Innovation Economy: Shifting From Consumption to Creation.

Posted by: Bruce Nussbaum on October 28, 2008

My good friend and brilliant economist Mike Mandel has an interesting piece up online on why we need to redesign the US economy away from consumption to production. The key is the collapse of cheap credit that kept US consumers buying from China and every other country even as their real income stagnated and they ran up huge debts.

My own personal take on this is that the benefits of the huge rise in productivity in recent years, thanks to new information technologies and the spread of design thinking methods (i.e. innovation), did not accrue to the mass of middle class professionals who used them to create value but to a tiny number of upper managers and speculative financiers (hedge fund and Wall Street folks). Income inequality rose to 1920’s levels in recent years because the benefits of innovation and technology went to a few, not the many. That is why consumers went into debt and the financial system went bust.

We need a reform of the tax system that rewards users and producers of technology and the goods and services they create. We need a reform of the accounting system that recognizes and promotes R&D, education and human capital. Perhaps most important, we need reform of the corporate culture that rewards the mass of employees creating value, not the few managers at the top who capture an enormous share of that value. This means changing the winner-take-all mentality of business leaders.

We now need to redesign a system based on innovation that produces more than it consumes and exports more than it imports. Clearly, building a green tech economy is where we need to go. But to get there, we need to implement a new kind of economics that rewards and incentivizes innovation, not debt or financial speculation (hedge funds were based on incredibly low tax rates thanks to big spending on lobbying).

Check out what Sami Mahroum has to say on this.

Reader Comments


October 29, 2008 9:09 PM

The Innovation Economy will have factors of production: social capital, creative capital, and intellectual capital. No other country on Earth has these three magic components in such proportions as the US - it is a natural for us to take that next step up the evolutionary scale.

As such, our most valuable trend today are Social Networks. They have an extraordinary opportunity in front of them if they can only do as you say - shift from consumption to creation.

Social Networks need to understand the role that they can play as vetting mechanisms in markets. Any way that they can provide information TO a market (not just take information FROM a market) is the degree that markets will become more efficient. This dynamic will set up the transformations that will induce an Innovation Economy. Social Networks will become the Corporations of the future.

The Ingenesist Project ( is an open source economic development project focused on inducing an Innovation Economy.

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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