The NS Essay - Towards the knowledge society
Markets are too cruel, communities too stifling, third ways too much of a
fudge. Charles Leadbeater offers a fourth and better way
<Picture>I will start with myself. I do not work for a company or a
university. I am neither a business consultant nor a civil servant. I have
no job title nor job description, no office nor expense account and I do not
belong to a clearly defined occupational group. When people ask me, "What do
you do?", I find it hard to come up with a clear, concise answer. I work
from home, sometimes writing books, sometimes reports, often for a
think-tank, sometimes for the government or a company. My father had a
steady, predictable career, which carried him through to a well-earned,
properly funded and enjoyable retirement. In contrast, although I am not yet
40 I have already had several mini-careers, in television and newspapers.
Now I am one of Charles Handy's portfolio workers, armed with a laptop, a
modem and some contacts. Peter Drucker christened people such as me
"knowledge workers". Put it another way: I live on my wits.
At times, I do yearn for the security of a large organisation: something
solid, dependable, with a recognised brand name. But never for more than a
minute. Most large organisations seem pretty soulless, increasingly focused,
driven, lean machines, designed to deliver shareholder value. The lights
never go out these days in modern companies: no sooner have you found a cosy
corner of the organisation in which to settle down than some ambitious
manager points the spotlight at you, questioning your contribution to
profitability. Employees have to live with the threat of downsizing,
reorganisation or merger. They are no more secure than I am.
And that is the dilemma that faces most people. To go it alone is risky,
demanding and stressful. Yet to rely upon larger organisations and
institutions - companies and trade unions - isn't much of an improvement,
because they seem either too cumbersome or too callous. Our societies and
governments have simply failed to develop the institutions that can respond
both to human needs and to the needs of the new economy. We are weighed down
by organisations, laws and cultures largely inherited from the industrial
19th century: joint-stock companies, local authorities, trade unions,
schools and universities. That century was as revolutionary as it was
because technological innovation went hand in hand with institutional
innovation. By contrast, we are scientific radicals but institutional
conservatives. The Victorians had a grand political and social imagination
to match their achievements in science and industry. Our era, thus far, has
failed that test.
To understand the scale of the renewal we need, we must understand the three
forces driving change in the economies of modern societies. The first is
finance capitalism, the most obvious and maligned force, which sends a
shiver down most people's spines. It is the disruptive power of deregulated,
interconnected global financial markets, which swill around the world in
pursuit of shareholder value. This is familiar ground: the recent crisis
that has plunged millions of Asians into poverty and sent commodity prices
plummeting is only the latest in a long line. Since the collapse in 1973 of
the Bretton Woods system, which was set up after the second world war to
regulate world financial markets, there have been 69 banking crises and 87
currency crises. As Martin Wolf, the chief economic commentator at the
Financial Times, put it: "Financial systems are not so much an accident
waiting to happen, as one that is constantly happening."
But a second force driving the new world economy, though just as pervasive
and powerful as financial capitalism, is less well recognised. This is
knowledge capitalism: the drive to generate new ideas and turn them speedily
into commercial products and services. When you buy products today, you
often pay mainly not for the materials used, but for the intelligence
embedded in their software and technology. Radios became smaller as
transistors replaced vacuum tubes. Thin fibre-optic cable has replaced tons
of copper wire. When Henry Ford began mass-manufacturing cars, the miracle
was that all those materials - iron, steel, rubber, glass - could be brought
together in the same place. The steel in the latest luxury cars in the US
costs $1,000; the electronics cost $3,000. The laptop I now use weighs a
little less than the old laptop I bought five years ago. The two machines
have broadly the same ingredients - plastic, copper, gold, silicon and a
variety of other metals. Yet the new machine is ten times more powerful, far
faster and more adaptable than the old machine. None of this extra power
comes from new materials, but from human intelligence, which has allowed the
makers to reorganise the available materials in minutely different ways. And
it is this kind of creativity that now fuels economic advance.
Scientific research is far more productive than in the past, and its results
are being translated into commercial products at a far greater speed. We are
in the early stages of the development of families of entirely new products
and industries: materials that mimic biology; genetic treatments for major
diseases; drugs that can target the specific parts of the brain that produce
emotions; and miniature robots that could work inside the human body. Every
day, we use tools - computers, cars, telephones, microwaves - that embody
the intelligence of thousands of our fellow human beings. Modern economies
are a system for distributing intelligence.
The third driving force - and, again, one that is less widely recognised
than financial capitalism - is social capitalism. The idea behind it is very
simple. Making your living in a market economy involves risk. When you buy a
product in a shop, you run the risk that it may not work. When you invest in
a company, you take the risk that it may go belly up. When you agree to
partner someone in a venture, you run the risk that they may let you down.
Unless you are prepared to take risks, you cannot get much done as a
consumer, investor or producer. But you will be more likely to take risks if
you feel you can depend on other people - or at least on rules, institutions
and procedures - to provide you with guarantees.
In other words, successful economies will help people to collaborate, will
build up social capital. Think of the dense web of relationships between
banks and businesses in Japan and Germany, the co-operative relationships
among craft producers in northern Italy or the social networks that thread
through Silicon Valley in California. An ethic of trust and collaboration is
as important in the new economy as individualism and self-interest.
That is why we need to reinvigorate and revive organisations capable of
creating social solidarity. Any society that writes off a third of its
people, through poor schooling, family breakdown, poverty and unemployment,
is throwing away precious assets: brainpower, intelligence and creativity.
Our tolerance of this social failure is akin to the Victorians choosing to
dump millions of tons of coal at sea, or to Henry Ford leaving machinery to
rust out in the rain.
The goal of social solidarity is all the more important because the forces
promoting inequality are so powerful. Inequalities have increased as
knowledge has become more important in economic growth. This is true both
internationally (in The Wealth and Poverty of Nations, David Landes
estimates that the income per head in the richest nations is now bigger than
that in the poorest nations by a factor of 400, compared with a factor of
five in the mid-18th century) and domestically. In almost every profession,
an elite is pulling away from the middle and leaving the bottom trailing.
Markets for many goods - computer games, books, films and legal services -
are becoming more international. Larger markets mean larger rewards for the
people that win. Being the winner in a local market - a school sports day -
may bring you a small cup; winning in a global market - the Olympics -
brings you vast rewards. As more markets internationalise, there will be a
few very big winners.
But there is a creative as well as a defensive case for social capital.
Ideas for new products usually emerge from teams of people, drawing together
different types of expertise. Few companies have the resources to make
global products that combine several different technologies. That is why
partnerships and alliances are proliferating. Cities such as London and Los
Angeles, where ideas and people circulate at great velocity, will be at the
heart of the knowledge economy. Collaboration is driving progress in
science. The great innovations of the 19th century often came from an
isolated stroke of inventive genius. The development of the microprocessor
and the computer chip took the combined work of hundreds of researchers.
Now, argues Sir Alec Broers, the vice- chancellor of Cambridge University,
researchers, no matter how good their ideas, are unlikely to succeed unless
they are part of a world network. In scientific research, Broers has
written, "this is perhaps the area of greatest change over the last 100
years".
It is no coincidence that all the three forces I have identified are
intangible: they cannot be weighed or touched, they do not travel in railway
wagons and cannot be stockpiled in ports. The critical factors of production
in this new economy are not oil, raw materials, armies of cheap labour or
physical plants and equipment. Those traditional assets still matter but
they are a source of competitive advantage only when they are vehicles for
ideas and intelligence.
When the three forces of modern economic growth work together, the economy
hums, and society seems strong and creative. When they are at odds, as they
have seemed to be for much of the past 20 years, society seems in danger of
fragmentation. The challenge is to combine financial, knowledge and social
capital in a virtuous circle of innovation, growth and social progress.
The argument of the new right was that this was best done through the
market. Self-interest, in that view, was the best motive force. The more
people looked after their income, housing, welfare, education and health,
the better off we would all be. That argument has run its course. A
free-market society puts us at the mercy of the financial markets, widens
inequalities and underinvests in the public goods on which we all rely.
Many on the left, by contrast, have argued that society should be organised
to maximise a sense of community. Stakeholder economists, such as Will
Hutton, say that companies should be forced to recognise obligations to
communities and employees, as well as to shareholders. Communitarians, such
as Amitai Etzioni, say that individuals can realise themselves only within a
strong, supportive community.
That critique of market capitalism is superficially appealing but ultimately
disappointing. Strong communities can be pockets of intolerance and
prejudice. Settled, stable communities are the enemies of innovation,
talent, creativity, diversity and experimentation. They are often hostile to
outsiders, dissenters, young upstarts and immigrants. They can easily, in
short, become the enemies of knowledge creation.
This battle between market and community has been central to the politics of
the 1990s. The clash between market and community encouraged a string of
attempts, none entirely convincing, to reconcile them: Tony Blair's and Bill
Clinton's Third Way, Gerhard Schroder's radical centre, Lionel Jospin's hope
to create a market economy but not a market society, George Bush Jnr's
compassionate conservatism. Governments of the right and the left have
continued with broadly pro-market policies while strengthening social
institutions. This middle way is better than the market extremism that went
before. But it is essentially a compromise and it leads to piecemeal,
cautious reform: one step forward, half a step back. It does not produce a
new vision of how society should be organised nor a radically new kind of
politics.
The way ahead, I believe, is not to navigate a middle course between the old
left and the new right, the community and the market. The way ahead is to
adopt a different destination altogether. The goal of politics in the 21st
century should be to create societies that maximise knowledge, the
wellspring of economic growth and democratic self-governance. Markets and
communities, companies and social institutions should be devoted to that
larger goal. Financial and social capital should be harnessed to the goal of
advancing and spreading knowledge. That will make us better off, more in
charge of our lives and better able to look after ourselves.
The goal of becoming a knowledge-driven society, however, is radical and
emancipatory. It has far-reaching implications for how companies are owned,
organised and managed; for the ways in which rewards are distributed to
match talent, creativity and contribution; for how learning and research are
organised; and for the constitution of the welfare state and the political
system.
Knowledge is our most precious resource: we should organise society to
maximise its creation and use. Our aim should not be a third way, to balance
the demands of the market against those of the community. Our aim should be
to harness the power of both markets and community to the more fundamental
goal of creating and spreading knowledge.
This article is an edited extract from Charles Leadbeater's "Living on Thin
Air: the new economy", published this month by Viking, £17.99
> http://www.newstatesman.co.uk/199907120019.htm
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