October 22, 2012
This week, after yet another downbeat European summit – the 22nd since the crisis began – it would be easy to write about the interminable wrangling behind closed doors in Brussels and what measly crumbs we might be getting from the European table.
But no, the column is not going to do that. Instead, let’s look at the wider, more optimistic world that I engaged with last week while travelling extensively. We are going to talk about a world where money is not in short supply, where people say what they think and act rather than prevaricate, where inspiration and hard graft are available in equal measure and where innovation and risk-taking are the norm. In short, a world which is the polar opposite of Ireland right now.
This is a world that has dealt with its financial crisis and is moving on – and one thing is sure: it is moving ahead and not waiting for Ireland or Europe to sort out its financial house.
Last week, I flew to Arizona to speak at Google’s Zeitgeist conference. This was an extraordinary experience because on show was the best of America’s new economy, where the economics of abundance, rather than scarcity, dominate the discussions.
Flying home via New York, I met investors who argued that they had never been more confident about the state of the world.
Then last Friday, back in Dublin hosting a conversation with Bono about the One campaign, we spoke about how technology is changing the world of charity. This event in the Mansion House was at the wonderful F.ounders’ tech conference, established by Paddy Cosgrove. Cosgrove has managed to get the finest minds in the global tech world to come each year to Dublin, where investors and start-up companies looking for funds can network with each other and do business.
This is the new world where the only legacies are hangovers from the past, which are little or no impediment to growth in the future. The opportunities in this new world for Ireland will be there, whether we get a bank deal or not.
Given that we will have to default if we don’t get a bank deal with the EU, this is a good thing to be aware of. Legacy debts in this new world are an accounting, rather than an economic, problem. They are ‘notional’ problems on a balance sheet – and if we can’t do a deal with the EU, we have to restructure our debts. And that’s all there will be.
The people at F.ounders and Google Zeitgeist are interested in real economics, and real economics is driven by people, brainpower, innovation and enterprise – not whether a bank that didn’t deserve to get paid back has a plus or minus sign on its balance sheet or whether its debt ratio is sustainable or not.
Think about the following great periods of social and economic innovation that occurred when the debts and state of the innovative country couldn’t have been worse. Consider the amazing construction of the British welfare state equipped with the NHS and universal free education. This happened in the immediate post-war period when the national debt-to-GDP ratio of Britain was 170 per cent.
Or how do we explain that the greatest boom in German history came in the early 1950s when the country had defaulted on all its international debts and was using several different currencies?
Or think about the amazing innovations in Japanese technology in the past 20 years, when the country’s debt-to-GDP ratio was moving towards 200 per cent, its banks bust and its property market in freefall.
Or consider the explosive growth in Nokia which occurred after Finland devalued its currency – an act which, according to the present EU bosses, would have no long-term impact on the fortunes of a country. But it does.
These are some of the many examples of innovation occurring in times of great economic stress where mainstream thinking and conventional wisdom would suggest that economies can’t grow. If economies were run by accountants, then that might be the case, but thankfully economies are not run by accountants.
Economies make great leaps forward through technology, not banking and finance. When it comes to growth, only three things matter: availability of people, availability of capital and total factor productivity, which is the productivity of those people and that capital combined. The magic, the alchemy is the technology.
Ok, so we wasted billions of euro of capital on unproductive houses and land rather than productive technology, but the money is gone. Are we telling ourselves that whatever capital we have left, we are going to waste by paying back debt which is dead money, rather than deploying it in new technology and education? Ask yourself that.
This should be the government’s response on the bank debt and the deal. Enda Kenny should map this out and say: “Angela, do you really think we will spend our money on a promissory note when we know that total factor productivity is what makes an economy grow?”
At its most basic, technology is ‘resource-liberating’. It can make scarce things abundant. Think about the cost of telephony. Years ago trunk calls were expensive and now Viber makes communication free.
Years ago, access to information was a huge impediment to innovation because it was expensive to know how to do things. Now information is virtually free, downloadable and everywhere. The poorest farmer in Zimbabwe with a mobile smart phone has more access to information now than the head of the CIA had ten years ago.
And all this access to technology is spreading. At Google, engineer Peter Diamandis outlined that, today, there are two billion people on the net, connected with each other, talking, exchanging information.
But in eight years’ time, by 2020, there will be five billion people. This is three billion new minds, new ways of doing things and new ways of looking at the world which will come online and start making a difference. The possibilities through technology are truly vast.
At the F.ounders conference, Bono spoke about an anti-corruption website called ipaidabribe.com, which is a website used to expose petty corruption at source. Truck drivers and others who are forced to pay a bribe can register it anonymously and snare the corrupt official.
In the years ahead, these technologies will proliferate and undoubtedly change the world we live in. Now, just before you start to think I have gone all soft and infatuated with the elixir of the new and have forgotten the difficulties facing us, I have not.
But what I appreciated last week is that life has to go on. If we can’t pay the bank debts, we won’t. If we can’t get the ESM to pay them, we will default on this bank debt and life will go on.
More to the point, as we waste time and resources worrying about this, the world is moving ahead without us. We’d be better going to Europe with a note, saying something like this: “This is our bottom-line position. Please come back to us if you can do a deal. In the meantime, we’d like to go to work on the future, but you have our number if you want to call. We’ve been at 22 summits in four years, but nothing is sorted out. We just don’t have the time for this any more. The world is waiting; it’s not hanging about – and nor can we. Take it or leave it. All the best now, Ireland.”