Welcome to the ‘Mark I Plus’ Economy where creativity and work are identical

May 11, 2014 by
Filed under: Adam Lent 

It is not widely known that John Maynard Keynes and E.F.Schumacher – author of Small is Beautiful and originator of Buddhist Economics – were colleagues.  The two worked together on Keynes’s plans for a reshaped international economic order to follow the Second World War and it was reported by one reputable source that Keynes even saw Schumacher as his natural successor.

However, by the time Schumacher came to publish Small is Beautiful in 1973 he was deeply critical of Keynes’s perspective. The point of difference was over the purpose of work and employment.

For Keynes, work is a necessary evil to provide for our basic wants after which we could enjoy the good things in life most notably being creative (which for the deeply cultured Keynes often meant enjoyment of artistic activity). In fact, Keynes looked forward to an era when productive technologies had advanced far enough that all wants were met and everyone could get on with being a full human being after they had completed their daily toil. Such a time was at least a century away, Keynes reckoned, while the sordid business of making money out of capital investment and improving production processes continued,  but until then …

… we must pretend to ourselves and to others that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little while still, for only they can lead us out of the tunnel of economic necessity into light.

Schumacher detested this. The notion that we could live with moral turpitude until some magical moment in the future was the “antithesis of wisdom”. For Schumacher, inspired by the insights of Buddhism, work had to be made a truly creative act which led inherently to human fulfilment – such creative fulfilment could be deferred neither to clocking off time nor to some distant utopia. But making such a change meant challenging the obsession with profit above all else that defined capitalism and which meant workers were treated as no more than production units to be worked half to death in a mind-numbing function and then discarded. (There’s more detail on Schumacher and Keynes’s differing perspectives here.)

Were Keynes and Schumacher both wrong about work?

It may be possible, however, given relatively recent economic developments to recognise that both Keynes and Schumacher were wrong. We may now be just entering an era where creativity far from being separate from work (as Keynes believed) can become absolutely integral to it not because the underlying principles of capitalism have been overturned (as Schumacher expected) but because such creativity is becoming central to the next phase of capitalist development.

Possibly the best way to approach this is to consider the two different models of commercial innovation proposed by a third great economist of the last century: Joseph Schumpeter. Schumpeter is best known for his claim that capitalism was characterised by “creative destruction” where a constant flow of innovations, usually generated by young companies, undermines the market position of incumbent firms until the upstart becomes the incumbent and then, ultimately, gets dislodged itself.

But this was only one side of Schumpeter – what is often called ‘Schumpeter Mark I’. He also believed that it was possible, under the right conditions, for innovation to occur primarily within incumbent, large companies and for that innovation to actually reinforce the hold those firms have over their markets. This model is called, you guessed it, Schumpeter Mark II. Later in his career, Schumpeter seemed to have come to the conclusion that mid-century capitalism was far more like the Mark II than the Mark I model.

A Mark I model, I would argue, is more likely to generate the type of work where creativity is possible. Mark I is a world where entrepreneurs are able to challenge incumbents because the barriers to being innovative are so much lower. As the economists who followed Schumpeter (the so-called evolutionary school) have argued, Mark I happens when large firms find it harder to use law to maintain a monopoly over their innovations, where the knowledge that is needed to innovate is easily accessible, and where there are lots of opportunities to innovate. In essence, it becomes far easier for more companies to be creative with existing resources and to use that creativity to find themselves a commercially viable position.

The good news, at least for those who share Schumacher’s ideal, is that we do seem to be moving back to a Mark I model. We all know how the rapid growth of the internet has increased accessibility to technical and non-technical knowledge enormously and how open source principles have underpinned so much recent innovation in ICT. It seems likely that the equally rapid spread of the ‘internet of things‘ will create the same accessibility for knowledge in tangible areas such as energy generation, manufacturing and logistics.

Both of these developments mean that the climate for IP protection by large firms is becoming ever more difficult with business models having to shift rapidly in some sectors – such as the music industry – to generate income in ways that don’t rely on revenues from control of IP.

And the opportunities to innovate are expanding rapidly. Sectors such as energy, where innovation has been historically limited to a handful of very large companies because of the high capital investment required, are already being transformed as individuals and small organisations are empowered to develop their own energy sources by new developments on the internet.

We could already be seeing the outcomes of this shift back to a Mark I economy. The unstoppable growth in the number of micro-businesses may be one. The fact that, as Diego Comin and Thomas Philippon discovered in their 2005 study, the length of time a leading firm stays leading in any one industry has “declined dramatically” since the 1980s is another.

Mark I Plus?

Both Schumacher and Keynes may have argued that even if we are moving back to an economy closer to Schumpeter’s earlier analysis, it still restricts creativity to a select band. Maybe innovation has moved out of the rarefied world of corporate R&D departments but it is still central only to the work of the most driven and well-resourced individuals in the form of company founders and entrepreneurs.  The majority still have to slug away in jobs that provide little room for imagination or creative autonomy.

However, there is an important shift occurring in this new economy that such a claim fails to acknowledge. For Keynes and Schumacher, work was, to coin a phrase, ‘structurally dull’. Keynes seemed to feel work was always like this (a fact of life maybe) while Schumacher believed that the types of technological, legal and ethical choices made by capitalism condemned billions to dullness. The difference today is that we may increasingly be able to argue that work lacks creative autonomy not because of its very nature but because of resistance to change and a failure to accept the potential of new ways of working by management, trade unions, policy makers and others.

This is because Schumpeter’s focus on the entrepreneur as the driver of innovation looks increasingly outdated. The economy seems to moving more towards a ‘Mark I Plus’ model where creative destruction is indeed the order of the day but where that innovation is driven by workers, consumers, citizens, charities, communities and networks and not just by the conventional entrepreneur.  This results from the fact that the conditions for Mark I have become so much more fluid than Schumpeter could ever have imagined. It is not so much that the information and opportunity for innovation has become a bit more accessible, we all now swim in a vast undulating sea of that information and opportunity that anyone can access and use if they so wish. As writers like Jeremy Rifkin and Steven Johnson show this can mean not just an explosion of creativity and innovation but also the creation of new and unexpected economic and business arrangements which transform the nature of and the rewards from work.

Unlike Rifkin I don’t think conventional work and employment will disappear quite as much as he claims but as new opportunities for creative work open up in new sectors and as innovation becomes more and more the preserve of the masses and hence more intensive and complex, even conventional companies will have no choice but to allow staff greater freedom to innovate autonomously. Indeed such shifts are already underway with the rising emphasis on employee engagement as a key factor in productivity, the rush to open innovation and the emergence of more fragmented and responsive models for large companies (£) .

 

So Keynes and Schumacher may both be proven wrong. The potential to make work a source of creative fulfilment for far larger numbers of people is neither impossible nor something that requires a fundamental revolution in capitalist principles. Foul could yet become fair but in ways neither of these great economists expected.

 

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Comments

  • ghost

    If Napolean had turned Britain into a nation of shopkeepers ,he would have done more damage than any army could achieve,I maybe missing a point here

    • Adam Lent

      Napolean thought we already were a nation of shopkeepers and some believe he meant it as a compliment. Even if he didn’t mean it that way, we should take it as one.