Matt Roush summarizes my talk at Detroit’s Creative Cities Summit 2.0 earlier this week:
Florida said the market and economic turmoil today is a “fundamental business shift, two or three or four 80-year waves packed into one. This is a massive realignment of how our society is organized.”
Saying today’s market chaos is reminiscent of the chaos of the 1870s that gave rise to Karl Marx, Florida said that “the economics of financial capital at its end. The era of making billions by trading alone is over. When credit’s hard to get, when people can’t move billions around easily, there’s only one source of capital left, the kind that comes in human beings, in real people, in our communities.”
The core of this transformation, Florida said, is that “for the first time in human history, no longer does the ability to capture natural resources or raw materials, and combine them with physical labor and giant masses of capital, those things are no longer the cornerstone of economic growth. All those things can now be moved around. In the advanced world, the only source of economic growth is human creativity.”
And Florida said he believes bankers and government officials simply haven’t grasped the changes yet. “With all due respect to (U.S. Treasury) Secretary Paulson and the G7, their models are bankrupt. The new models are not in the White House or the parliaments of Europe, they are strategies being conducted on the ground in real communities.”
The rest is here.
I’m working on an essay on the Geographic Implications of the Financial Crisis for a major monthly magazine. I’d appreciate your thoughts, fact, and insights?
October 16th, 2008 at 10:03 am
I agree with your theories that we are undergoing a fundamental shift. But I believe that credit has always been a central facet of economic systems (capitalist and otherwise) and making lots of money on finance is not going away anytime in the near future. I think that Paulson, Browne, etc.. face an immediate crisis of getting liquidity back in the system.
The gap between our current economy and the eventual creative economy that you cover is still large and this current crisis is but one more huge bump in the road.
I think what is missing in the short term is trust (a la fukuyama). The policy makers are trying to guarantee trust and rebuild it in the short term (next 6-24 months)… Hopefully out of this will come new systems/regulations (not over regulation) and norms and behaviors that are ready for the creative economy.
October 16th, 2008 at 12:10 pm
This new model or shift toward human-creativity-centred economic growth works better for the “developed” world than the “developing” world, although the distinctions between the two are getting blurry. North America has some “re-developing” to do as well. But going forward I don’t see it as “either / or”. Both economies are going to be needed:
China and India (to name two places) still need to build the infrastructure (modern cities, homes, workplaces, etc.) to allow more of its people to be creative in all variety of industries. To do this, they need oil, metals, etc.
North America’s cities need major capital investments (i.e. transit infrastructure, among other things) to adapt to a more energy efficient AND human-creativity-centred economy and society.
Also, human creativity these days seems to depend a lot on technology providing a medium for collaboration. Building lap tops and BlackBerrys requires resources.
Thus to quote back from above, we _still need_ “the ability to capture natural resources or raw materials, and combine them with physical labor and giant masses of capital.”
***
Also, a question for global financial system experts: Is it that different to finance or invest in human-creativity in the sense of loaning funds for R&D work?
For example, what if Electronic Arts (world’s biggest video game co.) had this vision for an entirely new gaming system and needed $1 Billion to make it happen? Someone might invest there. (And then aren’t we back at the dot com craze investing in creative visions?)
October 16th, 2008 at 3:00 pm
The strategy necessary to escape total economic meltdown is to continue to invest in our communities, and make them the kind of welcoming place for the creative class that Richard Florida has described in his writings — at least the ones I’ve read.
We need to direct resources into things that make communities strong:
* strong schools;
* a superlative quality of life;
* economic development that provides New Economy jobs;
* good roads, sewers, transit and telecommunications infrastructure;
* a clean environment
* a government that is willing to find the resources to do all of the above, which may require a sea change in public attitudes.
What else should I put on the list? And what should be done to accomplish those goals?
Rich Eggleston
Madison, Wis.
October 17th, 2008 at 10:27 am
The current financial system has reached the limits of its effectiveness. Interest on debt has exceeded the system’s ability to pay it off. But debt is simply a promissory note on future productivity – The only way to increase productivity today is to innovate yesterday, not tomorrow.
The Ingenesist Progect (www.ingenesist.com) has specified 3 web applications and authored a Patent which if developed and applied to Social Networks will allow knowledge to become tangible outside the construct of Wall Street and corporations. This mirror economy will have currency backed by innovation, not debt. The factors of production for the innovation economy are social capital, creative capital, and intellectual capital.
The great Social reorganization that Dr Florida mentions is about to happen. Knowledge assets will disassociate with corporations and reassociate in social networks – released from the shackles of debt economics.
The work is deeply inspired by Richard Florida so obviously we would love to have him review and comment.
Thanks
October 17th, 2008 at 10:37 am
There are two current stories that are currently being told; one deals with the short term effects of the financial crisis the other with the long term macro trends that will shape this century. This point is often overlooked and understated but has a profound effect on our ability to navigate these times. It is easy to succumb to fear and panic, but such irrational emotion only leads to bad choices and bad decisions. We live in an age where the speed of transactions, the constant influx of information and the pressures to compete in a globally integrated economy combined with the mass consumerism of “new” has caused a myopic focus on the horizon, the short term. Recognizing that this short sightedness is rooted in our natural instincts, I cannot help but feel that this instinct has been heightened since the emergence of capitalism. Capitalism as a totalizing system of control directs our wants and desires as we are forced to continuously produce and reproduce the commodity form. As a totalizing ideology Capitalism, subsumes all thought under its rationality of exchange. This system has for the most allowed people in the Western world to move beyond subsistence living, into a world where constantly gorge and over consume.
Know I started by saying that there is the second story at play here not spoken of, ignored, and that is the long run. Adam Smith in the Wealth of Nations outlines the relationship between the short run and the long run in capitalism. Our current financial crisis is a drastic change in what he called effectual demand changing the market price of goods and service. Over time though the market functions properly adjusting price either up or down towards the “natural price”. No single person understands this better than the Oracle of Omaha, Warren Buffet. His view of the long term and belief in value has never wilted or waned and has made him a very, very rich yet humble man. In his NY Times article today he advocates this belief and it is a belief that applies not only to financial markets. It is invoked in the current presidential race by Barrack Obama’s in his constant reference to the importance of a better life for our children.
The creative economy if it is to realize its full potential must figure this out. The entrepreneurs and innovators that Prof. Florida talks about in his work are shining examples of the type of people that look beyond the horizon to what is possible. Regions that are able to provide the basic institutional requirement that focus the creativity of people for future sustainability are going to be the most prosperous.
The new paradigms have yet to be posited and the financial crisis can be a game changer, no doubt, allowing us to move resources and capital into solving the major political, environmental social problems that face the world. Or the crisis could just be flatulence, before we get ready to go back and gorge ourselves at the buffet.
What part does the creative class have to play in this global shift?
How do we make these enormous choices, recognizing the possibility that we might get it wrong?
October 19th, 2008 at 3:18 pm
I wonder what will happen, after all the dust has settled down, if nothing will change? I mean, in these last few months we’ve been reading almost any imaginable scenario – the collapse of the US, the collapse of capitalism, the collapse of global economy. Sure, as Stiglitz put it, Globalization has brought its discontent, and so did American hegemony and capitalism.
But what if the sums and risks of our global game will be lower, yet the fundamental equation remains the same? Where will this lead us? what if we’re still on a path to environmental meltdown, increasing gaps between rich and poor, nations and region, despair and depleting resources? what if the price of this crisis, like those of the past, will be mostly financial?
It seems that in times of crisis there’s a global whisper, perhaps a prayer, on every would-be social reformer’s lips – dear god of history, please let this crisis sway the pendulum in my direction. less greed, less cynicism, less short-term narrowmlndness. and still we find ourselves, almost two decades after the last financial crisis (in Asia only one decade), back in square one – greedy, cynical, narrow-minded.
You don’t have to be a cynical pessimist in order to question HOW do we want things to change. Indeed many of us want a change, but an all-inclusive, immediate, epic change? a Copernican change of the magnitude we’re talking about here, one that shatters every convention out there may sounds good for some, yet too intimidating for others. and they will resist in all means necessary to defend what they think they are about to lose.
may be we should therefore aspire for slow, painful, piecemeal reforms. perhaps they’re not as less visionary, less inspiring and not as motivating. Still many of those ill-conceived overnight revolutions, as history taught us, left even greater despair than whatever preceded them.