Sunday, July 13, 2008

Global strategic framework entrepreneurship

The transition period we are in right now offers us a unique opportunity to reform our institutions. We have the opportunity to contribute to the founding of the next liberal order, both domestically and internationally. This will require us to free ourselves from old ways of thinking and to imagine new possibilities. There are some people who see the old institutions and conceptual frameworks being challenged by new forces and perceive only some dystopian dissolution of the existing order and imagine all kinds of nightmare scenarios. But I look at our time and see endless opportunities for creativity. This is why I am drawn to entrepreneurship. Entrepreneurs are the creators of institutions. They are innovators. Their vision of the world is one that is optimistic, one that is intentionally seeking out opportunities because they know there are opportunities to be found. In a recent post Stephen DeAngelis linked to an op-ed of his from a couple of years ago that is worth reading. One of the reasons I like reading Barnett even though I don't always agree with him is that he thinks about grand strategy like an entrepreneur and not as some bureaucrat. Perhaps we can think of DeAngelis and Barnett as "global strategic framework" entrepreneurs:

Liberal democracy, thought to be on an unobstructed roll across the globe, is under assault across a large swath of territory that stretches from Afghanistan across Africa and into Central and South America...
These are all extraordinarily complex issues, but the underlying cause for each can be traced to the same failure: lack of vision and leadership following the collapse of the global strategic framework established after the Second World War.

What we need is a new framework for an entirely different era, a vision like that provided by the Wise Men - Dean Acheson, George Kennan and others - in the late 1940s. These leaders promulgated a governing framework for dealing with the postwar "third wave" of globalization, one that led to the development of institutions (the United Nations, the World Bank, etc.) and concepts (such as mutually assured destruction) that helped establish and maintain global stability for more than 50 years. That framework and those institutions, however, no longer address today's global environment.

Today, few organizations - and this includes everything from companies to nation-states - understand how to align themselves with the times. No governing framework exists to help organizations array their resources properly. As the fourth wave of globalization unfolds, new Wise People have not yet stepped forward to create a next-generation grand ordering set of principles. Instead, today's leaders are trying to adapt old concepts and institutions to emerging challenges - which is why Western liberal democratic principles seem to be in retreat on so many fronts.

Aligning ourselves with the times requires that we recognize the unique qualities of the times. As Carl Schramm and Robert E. Litan write we are transitioning from the era of "big-firm" capitalism to the era of "entrepreneurial" capitalism. The old "third-wave" was an era of big firms, big institutions and the old "concepts and institutions" were aligned with the times resulting in the big-firm style institutions like the UN, World Bank, IMF, NATO etc. But our time, the "fourth-wave" era of globalization, is an era characterized by entrepreneurship, decentralized, bottom-up institution building and so aligning ourselves with our time will yield very different kinds of "concepts and institutions" both globally and domestically.

The central task for policymakers is to ensure that our entrepreneurial revolution continues, and that we do not revert to anything like the Big Firm economy we once had.
Of course, government does not generate growth. But the private sector’s success, and thus the pace at which the economy advances, depends heavily on the rules, incentives, and basic infrastructure that government sets and provides.
None of our long-run challenges or the opportunities afforded by faster growth will be achieved in the future without continued innovation—new products, services, technologies, and ways of doing things. Indeed, given the challenges ahead, we submit that in each case radical innovation is called for.
A quick look back through American history reveals that many of the most important radical innovations in the past—the telegraph, telephone, radio, television, automobiles, airplanes, computers and the software that operates them, and many of our current Internet-based successes (Google, Amazon, eBay)—have been introduced and commercialized first by entrepreneurs. What all of us, regardless of our political affiliation, should want in our next presidents and in our other governmental officials, therefore, is an understanding of the need to promote policies that will best foster the entrepreneurial spirit that drives radical innovation.
The answers that immediately come to mind are companies like Microsoft, Apple, Sun Microsystems, Intel, Oracle, and Google, firms that did not exist or were in their infancy as recently as 30 years ago. But the success of these entrepreneurial enterprises made it possible for the rest of us to change the way we live and for the firms we work for, or run, to churn out more products and services with ever fewer people.
It has not always been this way. Coming out of World War II and continuing through the late 1970s or early 1980s, the U.S. economy was very much driven by the success of large firms—Big Steel, the “Big Three” auto companies, and the old AT&T. Ours was a system of “Big Firm” or “managerial” capitalism, much like the capitalisms of Western Europe and Japan even today.
For the first quarter century after the war, managerial capitalism worked: the economy advanced, with ups and downs to be sure, at a relatively rapid annual rate of 3.5 percent. But then the economy began to run out of gas—figuratively, if not literally—once the oil shock hit. The strength of large firms, their efficiencies in mass production and enviable records in continued innovation, became their weaknesses. In a new economic environment of higher energy costs and increasing globalization, large firm bureaucracies had difficulty adapting. The Big Firms here lost ground to their overseas competitors.
We were told by some that unless we copied the industrial policies that favored large firm growth in Western Europe and Japan, we would soon lose our economic preeminence.
The pessimists were wrong. They completely missed the rise of entrepreneurial capitalism, which renewed America’s strength by ushering in the innovations that have transformed our economy. Meanwhile, the economies we were told to copy struggled.

The next generation of "Wise Men" whose ideas will establish the new institutional framework will be those who have recognized the opportunity and have taken the time to develop detailed plans and to champion them so that they are "in the air". The forces that are transforming our current order are challenging every aspect of our society. Government will probably be the last institution to change. The champions of the status quo will resist as long as they can but eventually the incompatibility of the old institutions with the needs of the times will create a crisis situation and at that point whoever is on the scene with a plan will establish the new institutions. If you want those new institutions to be aligned with your ideas and worldview, then you have become involved in their development now. Will Wilkinson:

In a complex system with countervailing interest groups, the status quo is generally a kind of relatively stable equilibrium. So more than super-marginal policy change is exceedingly difficult. However, every now and then, some kind of salient failure or breakdown in the system breaks the stalemate and people around look for new answers. The coalition that wins is going to be one that has some well-thought-out answers prepared and ready for the airwaves. That’s why it’s important to do serious work on possible policy reforms that aren’t politically feasible in the current climate. A brief “policy window” just might open up, and if you’re ready with a good idea, you might be the first one to jump through.

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