By Lynn Parramore, a senior editor at Alternet. Cross posted from Alternet
Whatever happened to innovation in America? President Obama told us that our future depends on it. Across the political spectrum, everyone pretty much agrees that innovation is vital to prosperity.
So why aren’t we getting the job done? Clearly, we’re in desperate need of clean technology that won’t poison us. Our information and communications systems are not up to snuff. Our infrastructure is outdated and crumbling before our eyes. We’re not investing enough in these areas, and it shows. Yet they’re necessary not only for America’s economic health, but for stability and prosperity around the globe.
The U.S. used to be the envy of the world when it came to innovation, making things that dazzled the world and enhanced the lives of millions. But the Information Technology & Innovation Foundation, a bipartisan think-tank that ranks 36 countries according to innovation-based competitiveness, tells us we’re getting pushed aside on the global innovation stage. In 2009, to the surprise of those conducting the study, the U.S. ranked #4 in innovation, behind Finland, Sweden and Singapore. In 2011, the U.S. ranking was unchanged. Worse, the U.S. ranked second to last in terms of progress over the last decade.
Research by the Organization for Economic Cooperation and Development (OECD) also shows that the U.S. is not making as many cutting-edge products as it used to, and that other countries with strong investment in the foundations of innovation, like education and research and development, and fewer of the things that hinder it, like income inequality, are making greater strides than we are.
What Went Wrong?
William Lazonick, an expert on the history of the American business corporation, points out that the U.S has enjoyed, over its history, an extremely productive economy. We still have important productive assets, but we’re now taking money out of our productive economy instead of investing in it. The shift has happened over time, but the mechanisms of extraction have become dangerously efficient. A giant financial sector and wealthy class are sucking money, vampire-like, out of the productive sector, where the goods, technologies and services that we want are created.
Financiers may appear to be simply “making money out of money,” but if you look closely, you can see that they are really getting rich on the backs of people producing useful things, like consumer electronics, and capital goods like factories and equipment. Good jobs, the health of the overall economy and society, growing incomes for the poor and middle class—all of these things have been put aside in the quest for more financial profits. The game is unsustainable. And it’s turning out badly.
To get the economy humming, argues Lazonick, you want to fuel the kind of growth that allows people to enjoy higher living standards. You want an economy that is stable and allows everyone to share in prosperity. But nowadays, the executives who are running large industrial corporations like GE, Dupont, Cisco and Microsoft are focused on making as much money as they can in the short-term for shareholders, and more importantly, themselves.
Unsurprisingly, they support the policies that allow them to do this: things like low taxes, risky speculation, sky-high executive pay, and pulling investment out of education and infrastructure. What happens to our economy in the long-term is not really their concern. There’s a motto on Wall Street: “I.B.G.-Y.B.G.” or “I’ll Be Gone, You’ll Be Gone.” As long as you’re making money right now, what happens tomorrow is not your problem.
It’s everyone else’s problem. Witness the decline in the number and quality of jobs, the middle class evaporating, and the financial instability that brought about the Great Recession.
A Look Back
It wasn’t always like this, as Lazonick and Damon Silvers have pointed out. It used to be that Wall Street made its money issuing long-term bonds that governments and corporations could then use to invest in America’s productive assets. Sure, there was trading in stocks and bonds, but you didn’t get huge increases in wealth funneled to Wall Street as a result. There was some speculation involved, but it was expensive for individuals to trade and such trading wasn’t designed to get huge amounts of volume.
The commercial banking system was well regulated, and household savings could be channeled to businesses at fairly good rates of return. Financial institutions were relatively stable and they could help industry to produce technological advances and economic development. Up until the 1960s, most Americans understood and accepted the importance of the federal government in helping to jumpstart innovation through things like defense and aerospace spending. Some of that money got channeled through universities, and some of it was directed to large corporations, which, like GE, could “bring good things to life.”
But in recent decades, several monkey wrenches got thrown into this system, starting in the 1960s with the trend of conglomeration, in which corporate titans built empires that gobbled up scores and even hundreds of companies. In the 1970s, as inflation grew and the Japanese economy took off, Wall Street shifted from investing to trading, and later, in the 1980s, executives came to adopt a harmful ideology known as “shareholder value,” which held that shareholders are the only people who deserve returns from corporations — forget about the taxpayers and the employees without whose support, sweat and risk such companies would not exist. Corporations started focusing on manipulating stock prices to realize short-term gains, and conducting stock buybacks to enrich executives at the expense of research and development or investing in the skills of workers.
Wall Street banks started moving into higher margin businesses. They were no longer regulated utilities, but high-risk, high-return institutions. This destabilized their basic credit intermediation function. Up to the 1970s the productive system dominated the financial system. But from the 1980s on, the balance of power was reversed.
The Financialization Monster
Think about it: what GE product did you recently purchase that enhanced your life? In the era of financialization, big companies like GE have turned their attention to making quick Wall Street profits instead of fabulous products. In the 1980s, for example, GE’s Jack Welch rapidly expanded the company’s business into issuing credit cards, mortgage lending and other financial activities. It wouldn’t be long before financial operations accounted for almost half of the company’s profit.
Eventually we ended up with a situation in which, as my colleague Joshua Holland has noted, a corporate executive will starve the company of needed resources and hinder its ability to be productive in the interest of short-term gains. In his book The Speculation Economy, Lawrence Mitchell of George Washington University points out that a recent survey of CEOs of major American corporations revealed that nearly 80 percent would have “at least moderately mutilated their businesses in order to meet [financial] analysts’ quarterly profit estimates.”
Silvers notes that as financialization fever took over, the U.S. developed a dangerous imbalance between private and public finance, and we promoted public policy founded on the strange idea that there really is no such thing as a public good. We embraced the idea that capital markets are more efficient if regulators step aside, and we subscribed to the faulty notion that deregulation of financial institutions would help the economy prosper.
Without regulation and strong unions to ensure that the U.S. kept steadily and thoughtfully channeling money into productive investments like training workers and creating stable jobs with reasonable incomes, the economy essentially became a casino and the gap between the rich and the rest grew wider. We became known less for innovation that enriched people’s lives than for creating complicated financial instruments that are designed to rip people off. From 2004-2008, for example, when other advanced economies were pouring money into clean technology, the U.S. financial markets were rapidly innovating new financial products that served to extract yet more wealth from the productive parts of our economy.
The Wrong Kind of Innovation
Paul Volcker once famously quipped that the ATM is the only useful financial innovation he’s seen in the last 20 years. It seems that while we haven’t gotten around to things like clean technology, we’ve created lots of innovative ways for ordinary people to lose money—things like lines of credits on homes that tend to thrust people into debt more quickly and force them to bear the burden of Wall Street’s obsession with making bigger returns at any cost.
Jan Kregel and Leonardo Burlamaqui have examined how as the financial sector has grown larger, the U.S. has ceased to be a center for developing new knowledge. Finance is no longer playing the role of the “handmaiden of creative destruction” that allows industry to produce technological advance and economic development.
Kregel and Burlamaqui also observe that the financial services industry has special features which create economic instability in a variety of ways, for example, using things like derivatives packages to shift risk from financial firms onto those less able to bear that risk. Bubbles followed by catastrophic crashes become inevitable: eventually, the weight of financial speculation becomes so great that it overwhelms the system, as we saw in the late 1920s, and in the 2007-08 financial crisis. When these crises occur, speculation decreases for a time, but as we can see now, the financial sector is hell-bent on restoring profits— not for the sake of the economy and jobs, but for the sake of their incomes.
Damon Silvers has also pointed out that the costs of financial bubbles include the effects of the failure to productively invest capital, including the decline of government investment in research and development. Income inequality keeps growing, and Wall Street types push the false idea that any money they make is made fairly and that the government should never intervene. Wages are pressed down and yet wealth keeps on building— but only for the very few.
What to Do?
Bottom line: the U.S. financial sector no longer serves the productive sector—in fact, it may be killing it. But can it be stopped?
Taming the financialization monster won’t happen through volunteerism. Through our increasingly corrupt political system, the titans of the financial sector pull more of the strings in Washington, and they’re not likely to speak out against things like skyrocketing executive pay, one of the forces driving income inequality, vaporizing jobs, and diverting money from more productive channels. According to a report by the Economic Policy Institute, American CEOs now earn 273 times the average worker’s salary. Thirty years ago, the average chief executive of a large public company took in less than 30 times the pay of the typical worker. Have CEOs really become that much more valuable?
As Lazonick points out, social norms have to change. In Japan, stratospheric executive pay is considered unacceptable because there’s an understanding that making a company work is a collective endeavor. That’s an important social value. In Europe, there’s a movement to curb executive pay at bailed-out banks. Senior staff at banks that enjoy state funding would only be able to earn 15 times the national average salary or 10 times the wages of the average worker at the bank. Bonuses would be capped at twice fixed salary.
That’s a good idea, and something we need to be discussing in the U.S., where executive pay is not only extremely high compared to the rest of the world, but often arbitrary and shockingly detached from performance.
Lazonick thinks what we really need is a whole new mindset about the economy. He recommends several things that would help get us back on track:
• Understand that markets don’t create value, but that organizations investing in productive capabilities, like business, governments, and households do.
• Ban stock repurchases by U.S. corporations so corporate financial resources can be channeled to innovation and job creation instead of wasted for the purpose of jacking up companies’ stock prices.
• Realize that the shareholder value ideology is destructive and will cause us to lag behind other countries that don’t subscribe to it.
• Regulate employment contracts to ensure that workers who contribute to the innovation process get to share in the gains from innovation.
• Create work programs that make use of and enhance the productive capabilities of educated and experienced workers whose human capital would otherwise deteriorate through lack of other relevant employment.
• Move toward a tax system that channels some of the money made on the gains from innovation toward government agencies that can invest in the public knowledge base needed for the next round of innovation.
We’ve still got plenty of innovation left in us, but we have to change our priorities and make the financial economy subordinate to the productive economy. That would go a long way toward getting Wall Street off our backs and allowing America to once again be a place where energetic people thrive and work together to produce great things.
At a conference in Rio de Janeiro, “Financial Institutions for Innovation and Development,” sponsored by the Ford Foundation Initiative on Reforming Global Finance, the Multidisciplinary Institute for Development and Strategies (MINDS) and the Brazilian Development Bank (BNDES), economists discussed innovation and how financial markets, business enterprises and the state interact with and invest in the process of creating and producing useful things. This post is based on papers presented and remarks made during a panel I moderated featuring William Lazonick of U Mass-Lowell, Jan Kregel of the Levy Institute and Damon Silvers of the AFL-CIO.
• Ban stock repurchases by U.S. corporations … Lynn Parramore
Especially if they are financed by the government-backed counterfeiting cartel, the banks. Better, abolish government backing for the banks.
• Regulate employment contracts to ensure that workers who contribute to the innovation process get to share in the gains from innovation. Lynn Parramore [bold added]
Without the counterfeiting cartel, what choice would business have EXCEPT to share* with the employees? Pay high real interest rates for their savings? Maybe. Either way, the workers are better off.
PS. The noose is tightening around the counterfeiting cartel but ever so slowly. Progressives and liberals should start to take literally the words “equity” and “share.”
*By paying them with common stock, at least partly.
“..We embraced the idea that capital markets are more efficient if regulators step aside, and we subscribed to the faulty notion that deregulation of financial institutions would help the economy prosper.”
‘We’ certainly did not. Robert Rubin and his bunch of shyster money changers with crony politicians did. Democrats are more to blame here than the GOPers. This is because Wall Street has traditionally been the cash cow for Democrats. Like I have said before, we need a ‘Final’ Solution in America for the greedy class. We need a tumbril with Robert Rubin, Bill Clinton, Phil Gramm and Wendy Gramm in it trundling to a shiny Guillotine. We should have 30 days or more of public executions in which a special week should be reserved for Wall Street crooks starting with Pete Peterson and another week for Corporate Crooks starting with Jack Welch. The final week should be reserved for Right Wing Economists and Hayek and Ayn Rand fanatics. At the end of this we can start America anew.
Make no martyrs of an unjust system.
Rather, let them be humiliated that they did not reform the system and allow the the US to prosper.
This has been tried for past 40 years…they have no shame.
Even your local banker is a thief because the system is set up that way.
We pay bankers for the “privileged” of stealing from each other. We can do better than that.
make that “privilege”, please.
Just make them fly coach.
The semiconductor company I used to work for spends $2B a year of cash flow buying back their own stock, essentially funneling it into the pockets of a few hundred people. That’s enough to build a wafer fab every other year, and this has been going on for a decade.
I admit I only scanned through the article above, so I am going to write my response in the scope of the two following words: “Innovation” and ” Information Technology & Innovation Foundation”. If the so called innovation is about inventing new stuff in the IT realm, then I can’t see how good old Uncle Sam can fall behind countries like …. Singapore. Heck, I can’t imagine any notable software achievement ever coming out of Singapore. Heck, Steve Wozniak famously claimed that Apple can’t happen in Singapore.
I am not trying to demean Singapore since it does a number of things well, but first of all the article needs a better definition of what innovation means. Doing infrastructure well is simply good policy, it’s not something new so I am not sure how that can be called innovation. If passing a good infrastructure bill without the related pork passes as good innovation, then let’s talk about this bridge ….
Here are 3 things that Singapore does well:
0. The rule of law is enforced (as long as you don’t touch the ruling party).
1. Constantly reinventing the place with new tourist attractions like Garden by the Bays, etc. This is indeed very notable in my view. Creating a place where rich expats want to move to (Saverin, Rogers, etc) is good policy in the coming world upheaval that’s sure to happen. Heck, not a month ago, they even managed to attract an Australian billionaire to move there.
2. Finding new ways of hiding ill gotten gains of the regional tycoons i.e. money laundering. (not only my words, but also the words of a former Morgan Stanley Chief Economist in Asia who was forced to resign when he made the same observation).
I don’t know enough about Finland and Norway to make observations.
The other innovation over the last 3 decades has been in global telecom… needed to better manage overseas production.
The financial sector has shown no true ability to allocated capital efficiently, therefore it should be treated as a utility with compensation to reflect this.
If investment bankers want to bet the farm, they should do it with their own money.
The monetary sovereign itself is the ONLY proper issuer of fiat and that fiat should be spent*, not lent into existence.
Why? Because when it comes to our neighbors’ purchasing power, NO ONE is so-called creditworthy.
*Or given away equally to every adult citizen.
“Innovation” is a word that never gets out of marketing presentations and staff pep rallies. Five+ years in on this crash, and we’re still talking marketing buzzwords? This is where we are? Baffle the plebes with more bullshit about the brave new world we’re heading into where no one will have to clean the toilets anymore?
I remember the 70s when all of this started coming out of the Harvard MBA program. As a new manager, I even subscribed to the HBR, wanting everyone to notice I was “in” with what the big boys were saying. … Nothing has changed, and a Harvard degree still looks nice in a frame, but doesn’t play well on the shop floor.
Just remembering (fondly) …
We had this two-page guide back then. Some of you probably recall it. It was 3-colunm; phrases to start a sentence with, phrases for the middle, and phrases for the end, about a dozen of each. Whenever you got stuck in a status report or whatever, you could literally pick three numbers, and use the sentence that popped out. Really fine stuff; meaningless, of course, put really fine, and a way to catch the bosses’ eyes. Nothing has changed.
Yes! The Buzzword generator! There’s an app for that now btw…you can still use it quite effectively.
I find the economic analysis coming out of folks like Michael Hudson, Stephan Schulmeister, and Franz Hörmann, elaborated within a Marxist or Keynesian framework, to be much more informative. What purpose do these pie in the sky panaceas serve that hold out the hope of some silver bullet that will somehow, as if by magic, allow us to escape the difficult political quesitons? On the contrary, here’s an example of the type of dissident analysis I’d like to see more of:
Neoliberalism is, first and foremost, a doctrine of deindustrialization, as Paul Cooney explains here:
What purpose do these pie in the sky panaceas serve that hold out the hope of some silver bullet that will somehow, as if by magic, allow us to escape the difficult political quesitons? from Mexico
Why do you assume that solutions must be painful or zero sum? You give the Devil way too much credit.
What is needed is mostly new fiat given to the population plus reforms to keep the banks from blowing bubbles with it. Is that so hard?
What amazes me is that World War II was caused by governments who did not understand money. That’s disgraceful.
If anything further were required to complete the self-destruction of modern optimism we have it in the tragic events of modern history. They have negated practically every presupposition upon which modern culture was built. History does not move forward without catastrophe, happiness is not guaranteed by the multiplication of physical comforts, social harmony is not easily created by more intelligence, and human nature is not as good or as harmless as had been supposed. We are thus living in a period in which either the optimism of yesterday has given way to despair, or in which some of the less sophisticated moderns try desperately to avoid the abyss of despair by holding to credos which all of the facts have disproved.
The qualified optimism of an adequate religion will never satisfy the immature minds who have found some superficial harmony in the world in which the evils and threats to meaning are not taken into account. Nor will it satisfy those who think that every ill from which man suffers can be eliminated in some proximate future. It will nerve men to exhaust all their resources in building a better world, in overcoming human strife, in mitigating the fury of man’s injustice to man, and in establishing a society in which some minimal security for all can be achieved. But in an adequate religion there will be a recognition of the fact that nothing accomplished along the horizontal line of history can eliminate the depth of life which is revealed at every point of history.
These paradoxes are in the spirit of a great religion… The tragedy of life is recognized, but faith prevents tragedy from being pure tragedy. Perplexity remains, but there is no perplexity unto despair. Evil is neither accepted as inevitable nor regarded as proof of the meaninglessness of life. Gratitude and contrition are mingled, which means that life is both appreciated and challenged. To such faith the generations are bound to return after they have pursued the mirages in the desert to which they are tempted from time to time by the illusions of particular eras.
–REINHOLD NIEBUHR, “Optimism, Pessimism, and Religious Faith”
@ Down Mexico,
Much as I admire reading your considerable output on these boards – which impacts me with ‘shock and awe’ in equal measure, as well as highlighting my own ignorance in many subject matters; I’m still at a loss as to why you waste – for want of a better word – your talents and knowledge on this particular website?
One does not wish to appear intrusive, nor ungrateful, but it worries me much that you are not teaching/instructing our young impressionable future generations – obviously, I rather hope you keep away from the offspring of the elite, and perhaps share your knowledge with those that actually require assistance and mental stimuli – and, if this is actually what you do in your redoubt in Mexico, I warmly applaud you for it, but its a great loss to your own nation and young who require all the assistance they can muster to oppose the future our masters the world over have in mind for us.
Please accept an apology for my intrusion, but needed to get that off my chest – and do keep up the positive work, it really is a pleasure to read your own posts and many on this ‘commons’ shall I say.
That final sentence should read:
“Please accept an apology for my intrusion, but needed to get that off my chest – and do keep up the positive work, it really is a pleasure to read your own posts and many other comments on this ‘commons’ shall I say.”
An apology to all for that and breaking this thread a little.
“American CEOs now earn 273 times the average worker’s salary. Thirty years ago, the average chief executive of a large public company took in less than 30 times the pay of the typical worker. Have CEOs really become that much more valuable?”
I wonder if you’re aware of the new International standard called Wagemark which will be given to companies whose CEOs make less than eight times the income of the lowest paid worker in their employ.
The reason for being of American business today is to make money for the top managers. That’s it.
The American people have been persuaded that this is a good thing through a decades-long campaign of mind-control. The oligarchs provide the entertainment, cheap goods, e-z credit and false narratives and the people are confused and passive. This has nothing to do with economics–it is just a policy of realpolitik by the ruling elites.
I had a long conversation lately with the owner of a mid size German car parts manufacturer and his sales manager. They manufacture coils to an incredible perfection and have about 2000 employees. The company was founded in the sixties but got its break through in the eighties. How come? Their biggest and strongest competitor was a company from the Midwest. Today that company is gone and there isn´t a single competitor left in the US. How come? Very, very, very simple. They didn´t invest anymore. That is all that my interlocutors said and that is all that was needed to be said. In industrial production innovation and capital investment is everything. Typically you roll out a new assembly line at least every decade. Then you immediately get huge productivity increases. 30% are not unusual. Your competition will need to either lower the wages of their employees by these 30% or fold. But capital goods are hugely expensive. You are talking here about outlays of millions and millions and millions and many thousand man hours. And you can´t buy all of it of the shelf. A specialised manufacturer needs in-house knowledge to adapt let´s say a laser cutting machine by Trumpf to its needs. These people are proud and expensive. Get rid of them and your bottom line improves.
Neither are the capital outlays good for the bottom line. Especially as it takes years before you have any return on your investment.
If you don´t care though you can save all this investment – have a number of very good years – pocket your bonuses and then head off to some nice place in the sun when the inevitable happens and your competitors new assembly line comes on stream. Then your company is finished of course. For whatever reasons that is what happened in the US. And not only once but a thousand times.
The system has been gamed by managers and investors with insider information through a variety of fraudulent practices of every kind. Companies, particularly in computer hardware, would get wonderful reputations in quality and support then, at the height of their sales they’d suddenly cut costs and coast on the reputation until people realized they were getting inferior goods–the management team all the while speculating on their own stock would leave and a new one would start the same cycle.
We are a culture of hustlers and grifters not producers–at least not at this point in history–we have to learn to live with it.
I’d quibble with the timeline in the main post — the problems you describe started happening in major U.S. car companies during the 1950s at least. Engineers would beg for money to bring out new models, the accountants would explain how the company would make more money just sticking fins or something on last years’ cars. The accountants generally won. Then along came Toyota etc. and there went the Big Three.
another reason innovation has stalled is consolidation within productive sectors. every industry, controlled by a handful of companies, with rights over key technologies. not exactly conducive to flourishing innovation.
this piece details it well: http://www.washingtonmonthly.com/magazine/july_august_2013/features/estates_of_mind045639.php
I agree that the bloated financial industry is much of the reason for reduced economic growth and innovation.
However, there is also the issue of an out-of-control IP system, with patent trolls, etc. which makes it increasingly difficult for disruptive technologies to make it to market.
It is the intention of the oligarchs to pursue a policy of stability not innovation. The U.S. role in the international imperial order is to provide security and be the primary regulators of global finance. Innovation clearly disturbs political stability. The U.S. was the home of innovation when power was more distributed and decentralized–now that the power-elite have a much more robust network that is international in scope innovation can be more strictly regulated so only elites benefit. This is a crude description but I believe it is accurate.
All this is, in my view, a result of globalization and “free” trade agreements that real leftists and conservatives like Pat Buchanan warned us about a few decades ago. The population of the United States was seduced by lower priced goods and toys and now we are paying the price as we move inexorably, as a result of globalization, into a neofeudal future. As I have said, it’s probably too late now to do anything substantial about it or other issues like climate change–the oligarchs call the tune and we march to it and we have voluntarily given the power that should have been ours to these people. Those of us that have the skills to serve these masters will prosper as long as we don’t color outside the lines and do as we’re told.
I saw this coming when I saw the result of all these management seminars on “flat” organizations and “communication” and speaking up with new ideas within organization for which organizations spent huge amounts of money on in the 90s. The result? What I saw was more not less rigidity, more focus on the bosses and their power needs and less innovation. I saw authoritarianism increase not decrease–not in all organizations but certainly in mature and larger organizations.
Or as St. Ronnie should have said, “Hey, guys. Let’s get fat eating our seed corn. The following generations deserve to starve anyway.”
The wrong kind of innovation indeed.
We need to totally re-create transportation, i.e. move towards mass transit. Say bye-bye to cars.
Re-create our living spaces/neighborhoods, i.e. move towards walkable, bikeable living arrangements.
Re-create our health care system, i.e. remove the vampires and serve humanity, not profits.
That’s just a start. There’s enough there to keep the economy roaring for decades. I know, childish dreams but reality just sucks so bad now, what else is there?
About 5 months ago, my patent for a unique health insurance product was approved.
I was thrilled, of course, but also saddened that not one person out of 300 million had conjured up such a basic, effective, win-win plan for insurer and insured, especially over the long term.
3 partners and I are looking forward to working with one of the country’s largest TPAs for our initial rollout: to large employers who self insure.
We hope to have the product on the Exchanges in 49 states by the end of next year.
SillyCON Valley happened…enabling the latest and greatest bait and switch…mad as hell and taking it again…they lost opensource when they first uttered ‘dc controllers’..
If you are an embezzler, San Jose has a product for you.
Yup, and thank you for that Santa Clara County emphasis, I get truly sick of Gawker (Nick Denton knows much better than that) never refering to the vicinity around San Jose and Santa Clara County, versus the consistent reference to San Francisco, as the gut of Sly Con Valley (not to at all condone the bipartisan, deadly and stunning elitism of San Francisco).
(and speaking of Sly Con Valley, I have a post, re Technology!!!!!™, directly after kevinearick’s 1:55PM EDT post above and before Chris’ post, stuck in spam)
It’s released now, thank you!
I would edit that title, as follows:
The Depressing Tale of How Greedy Financial and Militarily Funded Tech Titans Crushed Destroyed Our Economy …IN FACT, Destroyed any semblance of Human Society.
There is plenty of Innovation™ going on when one can be bothered to remember that innovation just means a new method of doing something. It could have, in fact and historically did, meant more efficient Gas Chambers for the Lone Wolfers and Undesireables™
I do believe that much of what Sergei Morozov (note: not Evgeny Morozov (though Sergei brought Evegny somewhat to my mind), I do believe both of them are very well aware of the ghastly dehumanizing side of technology, due to their place of birth) wrote here, belongs on this thread .
07/23/13 Sergei Morozov The Postinformational
1 Perhaps not all of it (I don’t even know yet myself), as I don’t even have the time to thoroughly digest his commentary in order to post on this thread before this thread becomes totally irrelevant and long forgotten in the tsunami of separated and loosed from a whole, [INFOMATIONAL] Threads™
My little contribution for what its worth on the other side of the pond.
Lynn Parramore’s observations on the USA can be equally applied to the United Kingdom – the first nation to industrialise, it would seem we have been in a downwards spiral since the 1870’s – for despite much innovation, technical breakthroughs and pure ‘true grit’ exhibited by many – surprisingly for a small island nation on the fringes of Europe – all has seemed to be abandoned in favour of east money and an easy ride by sections of the elite.
Indeed, having studied my nation’s decline, I’ve always been struck by the ineptitude of our managerial class and its unwillingness to invest in the most innovative sectors of our manufacturing industry.
As an example, two scientists at a provincial University, Manchester, stubbled upon a great discovery of our age, namely graphene, which opens many imaginative ways to change the world, particularly in electronics, but in other areas too -m our masters and the money men ignore this great breakthrough though, to the extent, that a small Asian City State, Singapore, is now spending more money on R&D to exploit this new wonder material, than the nation that actually discovered it.
Its a sad reflection on my society, that those in power would rather commit our nations future to the gamblers in the City of London, rather than support our scientists and the exploiters of grapheme, which offers so much potential down the road, for both the UK and the world.
It does make me sad and angry in equal measure, sad that a great opportunity is being thrown away, and angry that the short term economic return cycle that our financial whizz kids focus on will drive my nation further into the mire of despair, all so a few greedy souls can enjoy the good life, or what they presume to be the good life – one that actually is ripping the heart out of what remains of the nation.
Such a tragic waste!
I suspect privatisation will accelerate Western decline as we find everything privatised will resist investment, insist on quick profits and let the country’s infrastructure fall into disuse.
The moneymen seem to be scraping the barrel for the last bits of the economy they have not yet spoiled. They appear to think ‘growth’ has ended so they’re taking what they can. I wonder what use they think it will have soon.
“The executives who are running large industrial corporations like GE, Dupont, Cisco and Microsoft are focused on making as much money as they can in the short-term for shareholders, and more importantly, themselves.”
Add Oracle and a bunch of other IT firms, and there greatest skill is making sure checks are getting written to them by a large amount of Gov’mint customers. Who else you gonna get your info tech from? TINA
Sure, there’s incremental “improvements”, and the cost is passed right onto society at large, generally not the company, or public utility, or government agency that is cutting these enormous checks. The grunt level jobs are god awful as well, technicians who simply make sure Expensive Vendor Products are running, in toxic, hostile work environments.
Get creative and you get fired most of the time.
I used to attend similar shindigs on innovation and project managed some attempts at the same. The weird thing is that flat, organic management produced more authoritarianism as Banger notes (tons of literature on the move from pluralism to a unitary framework – from IR to the evil HR). As we downsized, right-sized, automated and went lean one would have expected all the workers ‘freed’ to have moved into newly created industries and vast improvements for all (ho ho ho) or a restandardisation of work hours so we could do much less work and enjoy creative leisure, better health and not burning the planet.
In the UK we were to copy and then leap frog the always more industrious USA, then Germany (rejected because of the industrial politics – works councils, sensible still powerful unions), then Japan. It might all be summed-up in the word kwality, the intentional misspelling indicating the quality. I found myself amongst colleagues teaching In Search of Excellence with no idea none of its chosen companies were on the list of the best 100 companies to work for in America and all but two not excellent on the book’s own criteria 6 months after the thing was published. I couldn’t tell Tom Peters apart from Billy Graham.
One of the conferences I presented at was in Brazil (1996 on memory – it was so dull I only remember the soccer world cup was on in France). Much the same ‘criteria for change’ as here came out. I got drunk with some locals and they got me access to Semco and some community groups. There was at least much sharper awareness that the needed changes were political. These days I start my lecture series on innovation with ‘The Pope’s Toilet’, a brilliant comic-tragedy.
The ATM is not much of an innovation (though I applaud it because it means I don’t have to go into banks) as it automates jobs away and is only a stop gap before complete electronic money. Devices like this are common in lean production and the embodiment of knowledge in machines. This is continuous improvement, not innovation.
That financial services should grow just as agriculture and manufacturing have been going lean is inexplicable in terms of efficiency – they should be costs to be driven down. That’s before we look at the criminality of what is essentially a control fraud that steals tax and leads to both resource and financial curses.
Academics shy away from the question ‘what would you do as a government tomorrow’? I’d want to go for much tongorad suggests, but when I look at history I’m not sure governments have ever changed much and it is likely at least a few people better than us have been in them. I’d suggest the needed innovation is the collapse of the legal-commercial paradigm – but this is easy hot air. The current paradigm is massively resistant to innovation the situation is like trying to do experiments in dirty test-tubes it and phlogiston theory.
The issue is always power and it is trite to say this – yet whatever this is it is as key a variable and influence as temperature or pressure in chemistry. Does yet another paper ‘discovering’ money is power help? Or another bunch of academics repeating 1996, itself a repeat of the 1960’s?
The financial sector doesn’t innovate. It doesn’t have to because it has the money. What if we created another, workable and ethical form of money? That would be innovation.
We live in a kleptocracy, of course research, education, and infrastructure were going to be looted. The important point though is that everyone else has a kleptocracy as well. They just manifest in different ways. So the idea that some countries are doing better or worse on this or that metric is a lot like saying that some boats are better kept than others when all of them are being sailed straight on to a reef.
The professional class has completely sold-out allowing the elite to steal everything not nailed down.
It’s that simple.
That’s my take too. Thanks.
The 1% employ the professional class as its army in the seizure of assets. They invade anything valuable, plunder it and permit a bit of prize-taking to the soldiers.
At least the 1% go for the biggies; these unscrupulous professionals sell out for much less. Whatever happened to ‘true and fair’ views, to justice and equity?
Think how the folks who brought computers to our homes got investors to take a risk. Really, every home with a computer? Must have been a hard sell. But they did it. That was the late 70’s, early 80’s. Remember during that time, inflation, high interest loans, increased gas prices etc.
I don’t believe the only problem for the decrease in innovation is an inefficient financial system based on short term gains. We have not been able to cultivate the innovators, partly due to our people getting poorly educated. Could we not see this coming, with every report we received about our broken education system? So, its not just lack of investment in innovation, but also a lack of innovators.
I think it has gone a step further.
Shareholders no longer get the returns they should because low interest rates have devalued them and allowed companies to creatively set dividends at minimal levals.
The guys calling the shots these days are the Directors and they are winning hands down. The IBG – YBG mantra is quite despicable – screw the kids, screw the country. I’m OK.
Not that it really matters at this point, but “shareholder” has taken on a completely different meaning from what it had prior to the 70s. Even if you think of ownership as parasitism, the earlier era at least had owners who thought in terms of the longterm growth of the firms they invested in. When “investors” instead have time horizons of milliseconds to months, and benefit from volatility because then they can get out at each top and in at each bottom, stable, well-run companies are actually an impediment to making money in finance.
I believe that if the Central Banks were abolished most of the issues would eventually resolve themselves.
The level of risk would tend to reflect the norms of the pre-Greenspan put era.
The big banks would last only as long as the next crisis for which they were not prepared to weather and to them reality would soon represent an actual existential threat. Should they fail to modify the behaviors that have brought us serial crisis’s, such as the housing crisis, then forget them too. That is as it should have been. Instead they have not only been held harmless, but actually profited from the shameless “innovations” that have caused such instability in the system.
So here we are now engaged in serial currency wars against whom? Not the other nations engaged in like behaviors but collectively against those who used to be thought of as the backbone of free market economies; those who believed enough in the system to save scraps of paper with pictures of dead “leaders” and numbers on them in the belief that these scraps represented the possibility of a better, safer future. Thanks to modern economic theory we now know that these people are actually the enemy who must be destroyed. And, who better to administer the poison than the central bankers of the world.