A Manifesto for the Next Industrial Revolution

The invisible hand is crippled, argues Umair Haque, and what the world economy needs is a helping hand to organize it

by Umair Haque

Posted on Edge Economy: June 17, 2008 5:47 PM

This is one of my favorite times of the year—because the Supernova conference is on. There are few conferences that combine so much big-picture insight, tons of fresh ideas, and real-world problem solving. It was awesome to be invited to speak there again this year (here's a video of my session from last year).

Unfortunately, because my mom is ill, I couldn't make it (I'm really sorry, Kevin). That sucks massively—because I've been looking forward to it all year.

So here's a short summary of the talk I was going to give instead. To get the most out of it, I suggest reading my guest post at Leading Green on new DNA first.

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21st century capitalism needs a revolution. How does growth happen—from a strategic point of view? The great Joseph Schumpeter argued that growth happens through a process of creative destruction. There's a simpler word for that: turbulence.

I think there's a problem with this thesis. In an interconnected world, there are more and more players creating and destroying—as a simple example, the pool of workers in export-oriented industries has tripled, from 300 million to about 900, over the last 20 years. And so, today, turbulence is intensifying.

Creative destruction has two sides—the costs of destruction as well as the benefits of creation. And as creative destruction intensifies, the costs of this great tradeoff are going to sharpen. The price of growth, it seems, is a world that's always riskier, more uncertain, and more brutal at the margin.

I think that accepting this tradeoff, perhaps, is the single most toxic orthodoxy that holds boardrooms back today. Why? The problem is that value creation isn't just about productivity gains: it's also about human welfare.

Consider this. When the last bubble was in internet technology, welfare was minimally affected—jobs were lost. When it shifted to housing and credit, welfare was affected more—houses and saving were lost.

Today, it's shifting in large part to energy and food. What happens when hypercapitalism causes a food bubble? What happens when the masters of the universe in Greenwich bid up the price of food for India, China, and Africa's huddled masses?

Here's the answer: marginal starvation. Lives are lost.

That's the very real toll that creative destruction extracts. It's the price that a better food industry tomorrow demands of us today.

If that's 21st century capitalism—maybe it's time for a revolution. One where the price of a dynamic economy isn't relentless damage to everything and everyone else.

The invisible hand is crippled. What's going on here? Wasn't the invisible hand supposed to raise everyone into prosperity and well-being?

Yes—but it's not. The world is getting phenomenally richer—but the costs of that wealth seem to be endemic poverty for vast swathes of the world's population, the poisoning of the water we drink, the pollution of the air we breathe, and the fraying of the social and cultural fabric that binds us together.

We're richer, but that wealth doesn't reflect durable, authentic economic value—which is hitting fast diminishing returns. The growth that we're pursuing is neither sustainable—nor is it, in many ways, real growth at all. Boardrooms from finance to autos to energy to pharma to fashion have learned that the hard way.

Growth is in the DNA. So how do we begin rethinking economic growth? With the understanding that technology alone isn't enough—and in fact, it's not the harder part of sustainable growth.