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Conduct Risk in Financial Services Forum

06/05/2015 - 07/05/2015, London

Conduct, culture and your customer

Innovation: What the US election should be about

It’s a tragedy that both sides in the American election campaign have missed glaring opportunities to break from the past, argues Jon Entine

But for what?

Yes, the industrialised countries are in dire economic straits. From Japan to Europe to the United States, there is no clear path to robust recovery. What can be done?

The answer is to grow our way out of the malaise. But how do we do that? Don’t ask the two candidates vying for America’s top job.

Mitt Romney stumbled badly by framing the election with the silly question: are you better off than you were four years ago? Well, we’re not in a depression. Americans may not love the job Barack Obama has done, but no one with an ounce of honesty believes the Democrats caused worldwide sluggishness or that the Republican solution – less government at every turn and tax cuts for everybody – is much more than cheap sloganeering. But neither American political party has offered even a faint blueprint for sustainable growth.

The crux of the problem? The sclerotic industrialised economies (note to smug Europeans: it’s even worse in your countries) are dragged down by an entitlement and dependency mentality. We are literally scared to take risks. We are enmeshed in what might be called the “innovation paradox” and both the left and the right are to blame.

Almost everyone says they welcome constructive change, but many people are knee-jerk opposed unless they can be guaranteed there will be few consequences and even if the disruptive changes brings benefits to most people. It’s an intellectual version of nimby – not in my back yard.

We know where dramatic, job-creating innovation will not come from. Futurists used to blather on about ascendency of the “information and service age”. As the collapse of the internet economy in 2001 and the worldwide financial crisis of 2008 should have taught us, we can’t build change on idea-shuffling alone. You have to actually make something.

History has taught us that we can’t sustain growth without hard goods. That’s why energy extraction and the assembly line became central components of growth over the past few centuries. We can thank coal, oil, chemicals and other “messy” technologies for our modern comforts.

What are the future innovation sectors? Revolutionary technologies can transform natural resource extraction, industrial products (such as chemicals, which are the backbone of most products), sustainable foods on a global scale, nanotechnology, synthetic biology, personalised genomics and cutting edge medical goods and pharmaceuticals that leverage the latest advances in science and genetics.

Yes, it can be scary

Like the industrial revolution of the early 1800s, disruptions lie ahead. All “revolutions” have collateral consequences. Two hundred years ago, the budding of the industrial revolution looked both promising and scary. Rural life was threatened. Landscapes were altered. Traditional family bonds were modified. These were challenging and in some cases wrenching times.

Let’s not forget that those who opposed the industrial revolution considered themselves progressives and on the cutting edge of science exercising proper precaution against the ravages of progress. History calls them Luddites – those who cannot look beyond their limited interests and therefore oppose “disruptive” technical or technological change.

We face a similar situation today in the US and Europe. We have in our grasp game-changing technologies not unlike those that drove previous revolutions. None of them come without trade-offs. But how do we recover the lust for change without abandoning reasonable social and environmental protections?

The innovation paradox could have been, should have been front and centre in the American campaign. It’s hard to figure out who’s worse: liberals or conservatives. Neither Obama nor Romney seems remotely visionary.

For Republicans, the American election should have been like shooting trout in a barrel – if they had remained true to the classic conservative values of Britain’s Edmund Burke or the American thinker Russell Kirk. In the good old days – as recently as the Reagan administration – conservatism meant traditionalism, which embraced the balancing role of government. Today’s Republican orthodoxy sees society as a war between “evil” government and the “inherently good” private sector. No wonder modern Luddites invoke precautionary politics.

But modern liberalism – the governing mentality of the current Democratic party in the US and the dominant political sensibility in Europe – is no better. Bureaucratic, risk-averse, enviro-romantic liberals are entrenched. Much like the liberal Soviet bureaucrats who joined the government in its early, idealistic days to bring about reform, they have evolved into apparatchiks. Like the Soviet Union of the 1950s and 1960s, through micro-managed controls and pre-emptive legislation, the most progressive western countries are in danger of suffocating the very technologies that could help revive our moribund economies.

The current US election looks like a political “battle of the nabobs”. If neither hard-core liberals nor hard-edged conservatives can break from their recent past, we may yet kill the innovation wave.

Jon Entine, founder of the sustainability consultancy ESG MediaMetrics, is senior fellow at the Center for Risk and Health Communication and the Statistical Assessment Service at George Mason University.

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