Chapter+2


 * Chapter 2: Living on Thin Air, Charles Leadbeater** pp22-30

__Introduction__ (pp. 22-23) “Where can we turn to find greater security in an environment as hostile as the modern global economy?” (Analogy) ‘We’re Going On A Bear Hunt’: One of his family’s favourite children’s books, “in which a family sets out to find a bear, only to meet a series of daunting obstacles: deep mud, a cold river, a dark forest, a violent storm. At each the family chants ‘we can’t go under it. We can’t go over it. We’ll have to go through it.’ “That is the challenge that most of us face in the precarious economy on which our livings now depend. We have to steel ourselves to press on, not really sure what lies ahead, but knowing that retreat is no alternative. We have to go forward because if we retreat we end up with gridlock. “Our societies and governments often seem paralysed, or at best enfeebled, in the face of economic and technological change that outstrips their capacity to respond, We are weighed down by institutions, laws and cultures largely inherited from the industrial nineteenth century; yet we confront a global economy driven by an accelerating flow of new ideas and technologies which are impervious to reform, parliamentary systems which are recognisably Victorian and schools which still resemble their nineteenth-century forebears. “Imagine fighting a modern war using cavalry: that is the position we are in. Yet as soon as our institutions become unblocked, everything threatens to spiral out of control. As soon as outmoded old institutions are shunted out of the way, nothing stable replaces them. Nowhere is this more evident than in the world’s highly strung financial markets. “Few people feel their lives, particularly their work lives, are more secure and under control. Instead, most people feel ensnared by the impersonal forces sweeping the global economy. It is difficult to be convinced that this is progress”.


 * TAKE-HOME MESSAGE:** “THE ARGUMENT OF THIS BOOK IS THAT __GLOBALIZATION IS GOOD__” (p.24)


 * Thesis** (p.24)**:** “To understand the scale of the renewal we need, we must first understand the three forces driving change in the economies of modern societies: finance capitalism, knowledge capitalism and social capitalism.”

__Finance Capitalism__ (pp.24-25) “The most obvious and maligned force is the disruptive power of deregulated, interconnected global financial markets, which swill around the world in pursuit of shareholder value. “This crisis has a simple cause: the world’s financial system is able to switch vast resources around the globe in an instant. “As global financial markets have liberalized since the 1970s, this system has become prone to even larger accidents... “Global trade and investment, in the long run, will make the world stronger and more peaceful than nationalism and protectionism.” (p.25)
 * TAKE-HOME MESSAGE:** “a retreat into defensive, inward-looking, nationalistic economic policies would not be progress. One of the few good things to come out of the [financial] crisis may be a more integrated global financial system.”

__Knowledge Capitalism__ (pp.25-26) “If we were to turn our backs on the global economy, we would also leave behind the huge creative power of the knowledge economy. “The spectacular growth of organized science, the consequent acceleration of technological change and the speed at which new ideas are translated into commercial products distinguish our era from previous ones. “Across a wide range of products, intelligence embedded in software and technology has become more important than materials. “The keys to economic advance are the recipes we use to combine physical ingredients in more intelligent and creative ways. Better recipes drive economic growth. “The knowledge drive economy is not made up of a set of knowledge-intensive industries fed by science. This new economy is driven by new factors of production and sources of competitive advantage – innovation, design, branding, know-how – which are at work in all industries from retailing and agriculture to banking and software. Downsides: “innovation threatens familiar routines, institutions and occupations. Tech, particularly IT, is full of false promises…
 * Defn**: “the drive to generate new ideas and turn them into commercial products and services which consumers want. This proves of creating, disseminating and exploiting new knowledge is the dynamo behind rising living standards and economic growth.


 * TAKE HOME MSG**: “The potential of the knowledge economy will not be unlocked by defensive measures to regulate financial capitalism. Instead, we need to redesign our economies to release their potential for creating and spreading knowledge throughout our populations.” (p.26)

Social Capitalism (pp.26-28) Making your living in a market economy involves risk. The more you can depend on people you can trust, the less risk you take. So it’s easier to take risks when you have relationships with a range of ppl you can depend upon or if you can rely upon rules, institutions and procedures to provide you with guarantees. “The more an economy promotes this capacity for sharing risks, info and rewards, the more able it will be to bring ppl together to back investment in new products or enter new markets. Successful economies are underpinned by social relationships which help ppl to collaborate. Eg: banks and businesses in Japan and Germany; the co-op relationships among craft producers in northern Italy; the social networks which thread through Silicon Valley.

“[Since] collaboration is the driving force behind creativity, an ethic of trust and collaboration is as important as individualism and self-interest in the new economy. “Ideas for new products usually emerge from teams of ppl drawing together different expertise…That is why joint-ventures, partnerships, and alliances are proliferating…Collaborative networks, not companies are fast becoming the basic units of innovation and production in the new economy. “Any society that writes off 30 percent of its ppl through poor schooling, family breakdown, poverty, and unemployment is throwing away precious assets: brainpower, intelligence, and creativity. “An innovative society must be socially inclusive to realise its full potential.

__Welcome to the Knowledge Society__ (pp.28-30) “It is no coincidence that [the three forces driving modern economies] are all intangible. The critical factors of production in this new economy are not oil, raw materials, armies of cheap labour, or physical plant and equipment. These traditional assets still matter, but they are a source of competitive advantage only when they are vehicles for ideas and intelligence which give them value. “When the three forces 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 last twenty years, society seems in danger of fragmenting and becoming more volatile.

“The task is to combine finance, knowledge, and social capital in a virtuous circle of innovation, growth and social progress. There are three ways this can be done: by organizing society around the leadership of (1) the market, (2) the community, (3) knowledge and creativity. “Those who believe that self-interest and the search for profit are the main motive force for economic growth argue that the market and private companies should primarily organize the economy. “A free-market society would put us at the mercy of the impersonal and capricious forces of the financial markets, widen inequalities and under-invest in the long term and the public goods on which we all rely. “The rise of the knowledge economy will force us to revise many of the claims of the new right which have assed into conventional wisdom.

“The goal of politics in the 21st century should be to create societies which maximise knowledge, the well-spring of economic growth and democratic self-governance…Our aim should be to harness the power of markets and community to the more fundamental goal of creating and spreading knowledge.

(if you have the time—or are interested, I recommend that you read the last section—‘welcome to the knowledge society’)