Sunday, November 16, 2008

"Building the next economy and a new republic"

Richard Florida offers his take on our era of transformation and what it will take to build a new system for a 21st century America.

Today is much more like the mid-19th century and the time of Lincoln - the rise of a wholly new economic system and the large-scale class divides it produced. It is very difficult to even imagine the broad infrastructure or system architecture required to propel this emergent system of idea-driven, creative capitalism.

One thing is for certain: The old era will have to give way before the new era can take shape. The rise of industrial capitalism required a revolution in agricultural productivity and the mass shrinkage of farm-based employment. Remember Herbert Hoover’s mantra - “a chicken in every pot and a car in every garage.” Food had to become cheap to free up consumption and demand for cars and industrial products. The revolution in agriculture freed up capital and labor that could be redeployed in then expanding industrial economy.  The rise of single-family home ownership and the auto-oriented suburb then closed the consumption circuit of Fordism.

Building the next economy and a new republic will require a similarly fundamental transformation of the core sectors of Fordism. This is more than creating new technology and building a new green infrastructure. We will need to massively shrink the cost for consumption of houses and cars.

The new system will be unable to emerge if people are spending the overwhelming amount of their incomes on housing (mortgages plus maintenance, utilities, taxes) and auto-expenses. To do so, we will need to make the housing system much more flexible, massively increase the productivity and efficiency of housing production (I’ll be writing more on this soon), and enable people to become far less dependent on cars. Only this kind of massive shift in the underlying architecture of society will free up sufficient income and demand for the next new things and enable us to begin to build the new infrastructure which can set innovation and economic growth on a new trajectory. Who in the Obama administration is even thinking along these lines?

The clock of history is always ticking. Eventually, the place or places that can set in motion this shift will accure first-mover advantages similar to those that the U.S. gained in the late 19th and 20th centuries. Can this happen in the U.S.? Can Obama help catalyze this broad shift, or are we still too early in the historical process? What about entrenched U.S. interests - the insitutional rigidities the late Mancur Olson wrote about - can they be overcome and recast? Washington remains locked in a conversation which entails propping up the Fordist economy - a housing finance bailout, an auto bailout, a homewner bailout - when instead what is needed is to free up capital from these sectors and massively redeploy it into others. And if not the U.S., where and when might this happen? How long will it take?

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