A strategic foresight practitioner like myself cannot help but be mesmerized by the extent of disruption being caused today by the breakdown of the competitive, machine-like, model of human enterprise - especially when, even in its death throes, it still traps us in paralytic fear of alternative, more humane, possibilities.
The endgame of the industrial paradigm, typified by linear thinking, exhausted systems and wasteful practices, is rapidly giving way to a networked society. Here abundance will have ousted scarcity, distributed knowledge (shared in peer-to-peer networks and used collaboratively) will have liberated innovation far more effectively than the clumsy legal frameworks of the past, and a new literacy, networked intelligence, will have helped us surmount most of the limitations inherent within the old model.
Yet many of us, including elected leaders and their King Canute-like courts, vainly cling to a myth: namely that the industrial model of “free market” capitalism, braced by certain democratic principles, is the definitive peak of human achievement. In other words that better options are impossible to imagine and that we must therefore do everything in our power to prevent a collapse of the old order. Of course this is to deny the inevitability of evolution as well as the rules of nature.
Although I am no financial expert we can find a good example of predictable collapse in the way economic theory, typically favouring either “free” market principles or centralised government control, is applied. Regardless of the politics, what remain constant in today’s world are:
- a monetary scheme founded on compounded debt
- an economic orthodoxy increasingly driven by selfishness that limits the nature of value (and the value of nature) to mere utility while ignoring some costs as being relatively unimportant
- a global reserve fixed on a single currency thereby biasing the system in favour of that currency
- a limited range of fiscal responses nations are able to adopt in order to out-compete each other while maintaining social cohesion (through security, employment, education & welfare for example)
- a banking system overtly manipulating regulatory mechanisms to generate wealth for a surprisingly small number of individuals and corporations.
This is just one example of why systems that are supposed to support humanity are failing us. It is clearly unsustainable. Any structure with such intrinsic constraints is ultimately going to fail. We are witness to that inevitabilty right now in Greece. As the grand experiment we call the European Union staggers from one crisis to another, with past mistakes rationalised rather than resolved, the Greek economy is being allowed to fall into even more of a chaotic mess. Greece will run out of money in six weeks. So what is actually going on?
In early 2010, we discovered that successive Greek governments had been consistently and calculatingly misreporting the country's official economic statistics so as to keep within the EU's guidelines. Subterfuge had enabled Greek governments to spend well beyond their means, while hiding the actual deficit from Brussels. In May of that year the deficit was estimated to be 13.6 per cent for the year, which was one of the highest in the world relative to GDP. Total public debt was forecast to hit 120 per cent of GDP during 2010, again one of the highest rates in the world.
Now, after two bailouts (totalling €240 billion) Greece is indebted to other nations, mostly France, Germany and the UK, to the tune of €0.45 trillion. This is small in comparison to some European economies, and direct damage of it defaulting on its debts could probably be absorbed by the eurozone. However, the fear is that an Athenian default could trigger a financial catastrophe for other, larger economies, such as Italy. The ripples will be felt around the world.
Actually a default (accompanied by Greece's exit from the EU) is probably just a matter of time. There are good reasons for this, not least of which is Greece’s history in such matters. Whatever happens, the current debt (as well as some of the irresponsible commentary accompanying it) is causing a deep cultural malaise in Greek society and overwhelming the ability of other systems to cope. Unemployment figures are stuck at 21.7 per cent, including an incredible 50 per cent of all young people. Over the past two years public service salaries have plunged by 40 per cent and suicides have risen by 22 per cent. In Athens alone there are over 13,000 homeless people. The health system is in turmoil since there is no cash to pay pharmacies for prescriptions. Corruption is rife, the bureaucracy is bloated, competitiveness is poor and evasion of tax is estimated at 47 per cent. If all of that wasn’t crippling enough the country now faces increasing political turmoil and parliamentary dysfunctionality afer an inconclusive general election in which both mainstream pro-Europe parties saw a dramatic colllapse in support. It is highly likely fresh elections will have to be called.
As always there is an upside to be considered. After the most recent bailout the European Commission, European Central Bank and International Monetary Fund all insisted Greece find ways to make its economy more competitive - principally by cutting the cost of doing business in the country. That is undoubtedly a sensible call as it should attract overseas investment and international visitors. Since the early 1990s until fairly recently the nation’s growth has been higher than the EU average. In terms of economic complexity the nation is strong with a diverse range of embedded productive knowledge. Nor can the Greek work ethic be criticised: the labor force, which totals approximately 5 million, works the second highest number of hours per year on average among OECD countries.
If the drachma was still a valid currency this situation might not have arisen. Or at least, if it did, it would be within Greece’s jurisdiction to introduce measures to deal with the problem. Over the past century the Greek economy has often owed more than it produces. But now Greece is being intimidated by its European partners to repay loans faster than it can possibly manage and with no amnesty being offered.
At this point austerity measures, it is claimed, are vital. Austerity (the cutting of public spending to the bone) is the new global economic medicine prescribed for dealing with sovereign debt. Proclaimed with frenzied zeal by almost all the world’s leading financial institutions, austerity is being demanded of Greece by its eurozone partners, as if it were the panacea to everything. This is quite a dangerous strategy – not least because the chances of Greece defaulting are already quite high and more pain might simply push the country over the edge.
The logic of austerity is being driven by the custodians of the old industrial system - in whose opinion productive efficiency matters far more than social wellbeing or commonsense. Austerity means people suffer because many essential public services are reduced, or eliminated altogether. This undermines self-reliance and unravels the fabric of society still further. Economic shock therapy of this kind does not work because it destroys cultural cohesion. We have seen that before in pre-revolutionary Chile and in Cuba - where it was the US weapon of choice – as well as in Thatcher’s Britain and Reagan’s US - where it was a doctrine of faith. Yet we still blindly insist that it must work in Europe for there are no other “economically rational” solutions.
And here my economic naivety comes to the fore as I cannot for the life of me see the rationality in such partial, linear solutions. Of course economic austerity makes sense in theory, especially in terms of trimming what has become a bloated and inefficient public sector. But to rely just on austerity measures to save Greece is to wilfully ignore morale, motivation and empathy within the community – the very things that breathe vitality and meaning into innovation and entrepreneurship.
Greece actually has all the resources needed to be a thriving and prosperous nation. Unfortunately ordinary men and women in Greece are not sufficiently connected and their politicians, bullied by France and Germany, are mere slaves to their European partners. So while trimming the fat from government spending is wise, enduring solutions are going to come from elsewhere. But where should we be looking?
Once more an appreciation of context is important. As the world transitions to a more openly transparent, networked world, and systemic failures caused by the industrial paradigm continue to crop up, almost on a daily basis, the acquisition of new literacies becomes a critical factor in society’s renewal. Paradoxically the disruptive conditions enveloping Greece are now inviting an incomparable opportunity to seize the future by creating and adopting new literacies, and new values, that are already re-casting the basic patterns of human production and consumption.
Because a renewal strategy of such a wide-ranging nature will need to be multidimensional, strategically relevant and systemically viable, it will require imagination, foresight, courage and a commitment to the extraordinary cultural ethos for invention that Greece bequeathed the Western world ages ago – qualities that appear to have gone missing from today’s political leadership scene.
But if this leadership were to emerge, phoenix-like from the current disorder, what might a viable strategy for the future of Greece actually comprise? If the design challenge is to create the greatest benefit for the greatest numbers of people then the following points would at least need to be seriously considered:
1. People have lost faith in brand politics and celebrity politicians – particularly the three major families that have dominated politics in Greece for decades. Here is an opportunity to instigate far–reaching reforms to the system of political governance by adopting diversity and inclusion within an overtly egalitarian society. Greece, once the cradle of democracy could actually reconceive what demos means in an age of online interconnectedness. Greater participation from citizens, even in the form of new political coalitions and governance models, might also do a great deal to stamp out the nepotism and corruption that still haunts political life in Greece.
2. Governments cannot create wealth. But they are responsible for generating the conditions wherein wealth can be generated and shared. As we transition from the failed mode of fossil-fuelled industrial economism to a cleaner, more sustainable world of global business ecosystems, enabled by digital and bio-technologies and featuring community collaboration, open-source design and peer-to-peer relationships, new purpose and new wealth will be created by people being given encouragement to trade and use their talents and natural resources more effectively. Four things are evident in this context. Greece must:
- invest in a reliable and speedy online infrastructure that allows all citizens to connect at any time and for any reason – or risk innovation being smothered
- increase economic complexity by supporting knowledge economy ventures and cleantech startups as well as providing targeted support for traditional industries such as tourism, merchant shipping, agriculture and fisheries
- encourage companies to grow around community - acquiring new knowledge and capabilities for the way goods and services are made, shared and consumed
- optimise an abundance of assets that are being ignored in the current context – assets such as sunshine, ancient sites, beautiful islands, good food and wine, etc.
3. There is no denying the Greek bureacracy has become bloated, costly and inefficient. But it needs to be trimmed slowly (through natural attrition and the suspension of obsolete programs, for example) in order to avoid an even bigger crisis. Unfortunately, institutions that sell credit are generally impatient. Not giving Greece the time it needs to repay and rebuild could result in an upsurge of corruption that quickly spins out of control – as occurred in Russia when Mikhail Gorbachev was denied adequate time to develop a post-soviet economy by the World Bank and IMF.
4. As adaptiveness to contextual volatilility becomes essential for investors, entrepreneurs, corporate strategists and government policy makers alike, we need to use new information and communications technologies, including the new social media, to speed up the learning metabolism within society. As proven by Stafford Beer in pre-revolutionary Chile, but mostly forgotten today, equality and responsiveness to shifting realities can be transformed through instituting an "electronic nervous system" that links voters, workplaces and agencies in a single interactive national communications network. Such an investment would serve Greece well at this juncture as well as providing a prototype for Europe as a whole.
5. Liberating the untapped wealth of the people while avoiding unnecessary hardship must be part of any strategy going forward. That probably required Brussels and other creditors to give Greece some slack, including allowing extra time for the debt to be repaid. If Europe declines then Greece should simply default and find new trading partners. As my colleague Ivor Kellock recently reminded me - there are always people willing to do deals….