The challenges facing the UK’s coalition government, and many other governments around the world, point to potentially catastrophic failure of the ways we have thought about problems in the past, with an obvious need to adopt new problem-solving methods going forward.
One cause of the financial crisis, for instance, can be seen as the too-tightly coupled nature of the financial system, so problems in one area were almost immediately exported to other areas; tightly coupled systems mean in effect that you have no redundancy capabilities, but also that no area can easily be insulated from the pernicious contagion from another area. You want more loosely coupled financial systems. Is that what we see going forward? To some extent, efforts to decouple high-street banking from riskier investment banking suggest some understanding here, but the continuing dominance of large highly integrated banks is not promising. Corporate behaviour being what it is, banks will try to recouple in order to ensure that no money is left on the table, as some might say. In the end, it may come done to a combination of loose coupling of systems, real, not Chinese, walls, and different compensation and incentive systems. It also might help if the business schools taught business for the real world, not an idealised fantasy world of private jets and personal fortunes.
Other areas have become tightly wound together too, with one aspect of social benefits creating dependencies on others, so benefits from one area implicate benefits from another. Separating the two and not calibrated criteria might help.
It is the logic of linking together what really needs to be linked, and keeping apart that which should be separate that is important.
The analogy I draw is what I do when my computer malfunctions — I turn it off and then on again — I reboot it. I also get rid of software than has the effect of making my system work less well.
What would it mean to reboot a whole economy? What would it mean to reboot Britain?
It would mean identifying areas where systems are too tightly coupled. An example has recently been addressed whereby people have difficulty moving to take up employment because of the problems with housing and often social welfare benefits which lock people in.
But we can obviously go further. Re-booting Britain also means ensuring economic capacity is not concentrated in one or two centres, indeed, in London and no where else. The US has highly regionalised economies, and a fairly mobile labour force, with strong regional universities, and labour markets, and excellent transportation infrastructure. This creates redundancy capabilities which can be exploited to avoid the ‘eggs in one basket’ approach to planning. Developing high-speed rail would help regionalise the UK economically and ensure easy movement of goods and services. Ensuring a strong regional infrastructure breaks down the tightly coupling of systems, so that alternatives become economically viable. As one area falls into economic decline or slump, other areas can respond with capabilities, knowing that infrastructure can accommodate in terms of housing, transportation, schooling and universities. Contrast this with, say, France, where virtually all biomedical research is done in and around Paris, so that none of the regional hubs have any significant impact in this area and so lack the necessary infrastructure. Lyon, Bordeaux are regional centres but of little research significance and cannot therefore cannot generate economic growth through entrepreneurial activity — Britain is avoiding this in the main on research, but it is useful to see the consequences of getting in wrong.
In the end, the trick is to avoid over-engineering solutions to create systems that are highly interconnected and locked together to form rigid, stable systems — this presents us with a paradox. From a policy perspective, a key goal will be to ensure that solutions are not “one size fits all”, that consumers have choices, even with public services, and that public services need to be more flexible and less formalised procedurally so that they can respond to changing conditions in the real-world. It means differentiated local economies, incentives which enable clustering, and dissuade economic concentration which rigidifies the ability of systems to respond to shocks.
In the end, the route to social and economic stability may ultimately rest on counter-intuitive factors as flexibility, instability, responsiveness, change. The world after all may be just one giant complex adaptive system, and we as humans aren’t yet smart enough to understand this.
Want to know more?
Thomas Homer-Dixon’s The Upside of Down addresses the problems of tightly/loosely coupled systems. His work is in the same vein as Jared Diamond on the reasons why some societies succeed and some collapse (link to TED video presentation). Annalee Saxenian’s work on regional economic advantage is also worth considering.