The global populist rise is a bigger global shift than 9/11. Economic development must reinvent itself or wither away.
You’ve probably thought to yourself at some point that it seems like the world gets more complicated every time you open the newspaper. You’re not wrong; science, it turns out, agrees with you. In his new book From Eternity to Here, cosmologist Sean Carroll explores the role that entropy, which in rough terms is the measure of a system's disorder or lack of predictability, plays in our past and future. The level of disorder in our universe, as dictated by the second law of thermodynamics, creeps up over time. According to the theory, the moment of the birth of our universe- the Big Bang- was a period of extraordinarily low entropy, and cosmic disorder and chaos have underpinned the expansion of the universe ever since.
The universe is literally less predictable and more chaotic tomorrow than it was today, and there’s a lesson there about the future of prosperity back down here on earth.
Note: This originally appeared in the Des Moines Business Record on March 24, 2017
The international populist rise which began in earnest with Brexit and continued with the election of Donald Trump in 2016 is the biggest global change phenomenon since 9/11. The terrorist attacks on the U.S. sparked enormous shifts in global trade and geopolitical alliances, priorities and institutions, from the Iraq War to the Arab Spring to increased regulatory scrutiny on foreign business transactions. But for all the handwringing about challenging new asymmetrical enemies and unending and ill-defined conflict, 9/11 was a relatively sequestered incident which produced conflict with clear protagonists and antagonists.
Today’s change is different. The populist wave underway now is unlike 9/11 not only in violent substance, but in participant scale and capacity for disruption. Today, the primary Western confrontation is not with a small cadre of extremists with nascent globally disruptive capabilities. The West is confronting itself.
As populist leaders take power around the world, the post-WWII institutions which have been credited with influencing and protecting global prosperity like NATO, the World Bank, and the United Nations face a reckoning in the face of increasing global inequality and cultural segregation.
This all has tremendous implications for the future of economic development everywhere. Economic developers today are faced with an urgent choice: whether to to fundamentally reform our methods and objectives in order to be responsive to an increasingly complex set of growth and prosperity problems, or to keep chasing only jobs and capital expenditures to justify our existence.
The problem for so many of us in the economic development field is we have done an historically woeful job of reinventing ourselves and our profession in response to seismic global shifts when, arguably, we should be changing the most- and the fastest. Our industry, which traces its roots to local industrial development corporations which popped up in the early 1970’s across America, today is largely doing and measuring the same thing it was doing then. Such change intractability is acceptable if your industry is producing a product whose inputs haven’t changed in five decades- like SPAM, or instance. But in economic development, where our inputs- economic trends, labor force participation, public-sector budgets, political sentiments, etc.- change more frequently and with less predictability than virtually any other industry.
When it comes to strategically reinventing our industry in response to global shifts since 1970, we economic developers have whiffed on the fall of communism, the emergence of the Internet, 9/11 and the Great Recession. The populist revolt of today offers economic development perhaps one last best chance to recast and reaffirm our crucial role in local, national and global prosperity in the 21st century.
The Economic Development Change Dilemma
Inside ten years, a confluence of factors will fundamentally change the rules for what constitutes economic development in the West. Consider:
- AI & the Job Market: McKinsey & Co. estimates that in coming years as much as $16 trillion worth of human wage earnings could be automated away using existing technologies available today. Even the rosiest estimate I’ve found suggests that by 2037, somewhere between 9% and 47% of today’s jobs will be replaced by artificial intelligence. Will economic development officials- at the behest of panicked electeds- race to strategize about ‘replacing’ those jobs with similar new ones like we always have- likely by poaching from each other’s regions and states- for the millions of people affected? Or will we exercise collective national leadership and drive discovery of what the appropriate definition of efficient and productive work and labor is in a highly-automated economy?
- Accelerating Income Inequality: When we consider issues of economic inequality in the U.S., we tend to veer rather immediately into moralistic debates about our obligations to those at the bottom of the income scale. While the question of the rights of the poor is extraordinarily important, a moral focus on inequality crowds out questions of much broader importance to inclusive national prosperity. The blistering reality is this: despite the fact that poverty has fallen off a cliff since the 1960’s, the median male wage in America was higher in 1969 than it is today. Economist Tyler Cowen suggests the reason for such dramatic wage growth failure is a massive decline in per capita productivity, which has led to flat-at-best income mobility. Will economic developers recognize that income inequality is neither a ‘we are the 99%’ smokescreen, nor is it caused by a complacent class of jobless economic parasites, but a decades-long, productivity-driven problem? Will we work to support a technology-empowered workforce which can outperform previous generations on net productivity and deliver to itself real national wage growth for the first time since the Nixon Administration?
- Hyperlocal Partisanship: Americans are increasingly clustering in communities full of people like them, have natural confirmation biases which are being enabled by technology in ways we’ve never seen before, and have seen their political discourse perversely gutted by identity politics. Thanks to these and myriad other factors, we are witnessing the shift of ferocious partisanship from Washington, D.C. to everyday life our local and digital communities. The introduction of political bias into traditionally nonpartisan local proceedings like school board meetings makes getting things done locally much more complicated, time-consuming and expensive. Will economic developers find ways to promote civil discourse on local nonpartisan issues in regions and communities which are seething in disagreement about national issues? This is only going to get harder.
- Not to Mention: Trade, cyber-security and corruption.
Every profession demands that its practitioners regularly improve and occasionally reinvent themselves and the profession to meet the challenges of a new day. Consider that in order to simply qualify for the Boston Marathon today, a male in the 18- to 34-year-old group has to have run a 3 hour, 5-minute qualifying marathon. That’s six minutes slower than the winner of the marathon in the first modern Olympics, 1896. Or that Warren Buffet’s $264 billion Berkshire Hathaway started in the now-dead American textile industry, and American Express started as a courier service.
Cosmologist Carroll asks we consider entropy's unrelenting growth by thinking about breakfast. You can't unscramble an egg, he points out, and you can't unstir the milk out of your coffee; they are events that work in only one temporal direction. The rise in populism and a feeling of general unsettling in the world today reminds us that the world will march toward more disorder- galactic, biological, political, economic- tomorrow than today, instability which can only be offset and managed by rational leaders who are willing to dispense with the goals and tactics of yesterday and recognize that tomorrow demands a wholly new approach.
Faced with a confluence of headwinds like our industry has never seen, economic developers are at another inflection point demanding a change in our business model. It is both a tremendously exciting and unsettling time to be in the field. All we know for sure is that counting jobs and dollar investments isn’t going to cut it for the rest of this century.