We are in an era of global economic reconstruction. The assumptions of ancient economic theories of a month ago need to be upgraded and that will require mid-flight refueling skills.
So many things that we said a month ago are absurdly irrelevant in this new climate and clearly some brilliant mostly younger people will emerge who are on accelerated processing of the changes. Good honest public servants desperately pushed at the existing policy protocols (interest rates, tax adjustment) because that was the only playbook they knew. When alerted to the fact that bankrupt businesses cannot pay taxes and markets don’t respond to zero interest-rate economies when there is no economic activity, they grudgingly concede “ but what else can we do?”
This is an attempt to answer, “What else can we do?” By answering the question of what a new global economy should look like.
First we have to generate democratic consensus for a reconstruction. The rules of market regulation (avoiding price gauging, no monopoly on medical services, creating collective value in essential services) apply more than ever. It is unfortunate that in the three leading English-speaking democracies, voters distracted by the rapid growth of Tik Tok and presciently concerned about the apocalyptic decline of rhinoceroses and pangolins in the wild, neglected to focus on what was required to redesign government institutions that had not succeeded in managing globalization. Then when a crisis hit, there was no credible management in public institutions.
We now live in a world where real leadership will come from people who understand and know how to communicate what a supply chain is. Conversations that seemed relevant a month ago are now quaint or worryingly delusional. I still hear journalists ask whether or not there will be a recession. Concerns about Huawei and security issues seem delusional when no Canadian feels secure. By thinking the threats to the world order came from traditional sources (spy drones replacing spy satellites), western democracies allowed for the Internet to become populated by trolls, agents of ransomware and other threats that were very real and consequential. We were beginning to focus the debate about CHANNELLING TECHNOLOGY THROUGH PUBLIC POLICY when the coronavirus crisis hit. We have to accelerate that debate in the first stage of the reconstruction.
Then we have to make sure that (in countless like Canada or Nordic zone at least) our scientific and creative industries focus on the next generation of businesses: (a) hot zone detection of disease on mobile devices will be a trillion dollar business which needs a Manhattan Project; (b) the new environmental technologies discussed above require their own concentration of expertise and (c) food security requires not only advanced logistics in supply-chain management but a breakthrough in protein development which requires its own Manhattan Project. A friend of mine calls this AIM, algae, insects and mushrooms but he knows it just begins there. It also requires blockchain-enabled oceans cleanup so fisheries provide local capacity for food security.
We will get through this but it is a reconstruction not a recession management with traditional tools. Countries that are not part of the China-US rivalry should stop taking sides in that and even an economically fragile Eurozone has players like NOVARTIS, NOKIA, and SIEMENS who are going to be part of the future. The growth-and-inequality strategies of the US and the growth-without-personal-freedom strategies of China were never acceptable but neither can function in the new global order and the task of the next decade is to make sure that globalization is built on real institutional structures.
For Canada, this means that the focus has to be on the universities where brilliant scientific researchers coexist with legacy expenditures that contribute little to the public good. Without a mandate to finance the first and remove the latter, we will fail and be a resource economy hoping to sell to China, the US and whoever else has capacity to need our resources. Deluded by our resource-wealth, we have not streamlined our innovation economy for a long time. We have to get it right the moment the reconstruction starts. This problem of investing in the new is not unique to us.
A very smart person said to me this week that we need to avoid policy triumphalism. It is an important warning (your parents told you that “I told you so” is a very weak response). But I have also realized this week that while avoiding policy triumphalism, it is equally vital to make sure people understand that this is a new era. Before the last month, I frequently chastised people for talking about inequality when the real problem was unearned wealth (financial engineering is its most visible form). I still believe that, but inequality is unacceptable and the reason that some form of basic income has been advocated by so many people.
Semantics is important and I always preferred “data dividend” to basic income. The difference is we are all data producers and should be rewarded for our contributions to economic growth. Whatever we call it, economic management has to be guided by the principle that everyone has a stake in a successful political economy. That may not have been obvious in out interconnected but politically isolated world of January 2020, but it is a given in March 2020.
Policy triumphalism or not, there will be a basic income from now on. The reconstruction will success like any project if we recruit and reward talent, expose grifters and rent-seekers and celebrate the freedoms and joys that come with living in a society with honest government and openness to new ideas.
We need to concentrate on the dynamics of a Global Marshall Plan to stimulate demand but we also need Global Manhattan projects, or NASA infrastructure to ensure strategic capital is dedicated to the companies of the future.
These should be initiated by the G20 because they are important in themselves but also because and because these kinds of concentrated investment allow entrepreneurs to build the companies of the future around meaningful innovation.
Even more importantly, pursuing these objectives will show we have confidence in the future, a vision for implementing that confidence and a strategy for developing new techniques of collaboration to make them viable. That is the most important reason for starting to talk about them today when there is so much else we also need to be attending to.
Jim de Wilde is a venture capitalist who divides his time between Montreal and Toronto. This article is based on the closing lecture in the 2020 version of a course on GLOBAL CAPITAL MARKETS AND NEW TRENDS IN INTERNTIONAL POLITICAL ECONOMY he gives at the Rotman School of Business at the University of Toronto.