Believe it or Not a Great Economy is On Its Way
We all know the drill by now: stubborn unemployment, huge deficits, stagnant growth, unstable Eurozone. Up close, things certainly look grim. Up close, particularly for those on the sharp end of this crisis, they certainly are. But sometimes it is worth taking a step back to get a sense of perspective.
A very big step as it happens. The last 250 years of economic development have been truly astounding. In that time, we’ve had recessions, depressions and financial collapses just as serious as the current affliction. In every case, however, the economy has not just bounced back but actually powered ever larger parts of the world to unforeseen improvements in living standards and quality of life.
Great statisticians like Angus Maddison have estimated that average real income per head has grown ten-fold in the last two and a half centuries. In the most advanced economies, it’s closer to a twenty times increase. All the more remarkable when you consider that throughout the whole of human existence prior to that incomes probably multiplied by no more than three times.
It is the innovation and entrepreneurial spirit kick-started by the Industrial Revolution that has driven this positive change. Great entrepreneurs like Richard Arkwright, Andrew Carnegie, Henry Ford and Eiji Toyoda came up with new ways of producing things that got consumers, investors and other entrepreneurs very excited. In effect, they gave a long-term stimulus to the global economy that would leave today’s benighted policy-makers drooling.
The good news is that far from this spirit of innovation and enterprise being dead or dormant, it is more alive and kicking than ever.
As I explain in a new pamphlet published today, a whole new exciting way of doing business is emerging. No longer do consumers have to rely on the entrepreneur’s often unreliable interpretation of their desires to get what they desire. Millions can now download products when, where and how they want them. Consumers now make their own stuff and share it on-line much to the chagrin of the creative industries. Marketing is increasingly led by consumer run networks.
This ‘self-generated value’ revolution is every bit as profound as the mass production and flexible production transformations launched by Ford and Toyoda.
But none of this means the entrepreneur is dead. In fact, a new wave of entrepreneurialism has been unleashed particularly amongst the younger generation who are most engaged with the web and its possibilities.
The reason is simple: if you can use the web to create things of value for yourself, you can also use it to create things of value for others. The very websites and networks that have given the consumer so much more power are also empowering entrepreneurs. As a result, product development, distribution, marketing and even financing have become much easier and cheaper.
Survey this vibrant shift and you begin to realise that the coming spirit of the age might not be debt and deprivation but entrepreneurial dynamism.
We shouldn’t be too surprised. This has happened before. Both Ford’s mass production and Toyoda’s flexible production played fundamental roles in delivering the long booms of the post-war period and the 1990s/2000s respectively. But much of the groundwork for their techniques was carried out during the economically troubled period between the wars and during the 1970s.
Joseph Schumpeter said that pessimism always appears more profound than optimism. So at the risk of appearing criminally shallow, maybe it is time to accept we will not only escape the current mess within the next few years but exit it, in fact, with rockets strapped to the back of our economy.