The Great Reset: How New Ways of Living and Working Drive Post-Crash Prosperity by Richard Florida (Harper Business, 2010)
Many of us have the sense that the financial meltdown of 2008 and the Gulf oil spill of 2010 signal something more profound than a couple of unfortunate and massive industrial accidents. But what? Richard Florida (The Rise of the Creative Class and Who’s Your City) offers some answers in his wonderful new book, The Great Reset.
He suggests—persuasively—that we are undergoing a great reset—one of those periods of transformative upheaval "when new technologies and technological systems arise, when the economy is recast and society remade, and when the places where we live and work change to suit new needs."
Unlike most books about the current crises, which often sound as though the world was invented last Tuesday, Florida takes a longer term historical perspective and points out that we have been here before.
In the 1870s, we had the Long Depression: a massive financial crisis that led to great hardship but eventually generated a vast amount of business innovation that led to greater wealth and prosperity. In the process, the US shifted from a largely rural population to a country of big cities.
Again, in the 1930s, we had the Great Depression in which a massive financial crash was followed by a decade of unprecedented innovation and creativity. (That surprised me a little, as I hadn't realized that the 1930s were particularly creative.) This was also accompanied by a geographical shift: the US went from being a country of big densely-populated cities, to a country of cities surrounded by suburbs, based on home-ownership and cars.
Now once again, we face a great reset—a period of transformative upheaval, with large scale economic, social and geographic implications.
The Great Reset is retrospective: we have been here before, in the 1870s and the 1930s; it is sobering: a "great reset" may take decades and involve basic change; but it is also forward looking and optimistic. In the earlier depressions, we eventually came out of it healthier and wealthier than before.
Florida accepts that no one can predict the future, but argues that there are a number of shifts or "fixes" that will drive the great reset forward.
"financial fix": The book argues that we will need to to stop
merely treating the symptoms of the recent financial crisis and trying to get
back the banks back to where they were able to lend large amounts of money for
housing, automobiles and other consumer products. Instead we need to start
dealing with the deeper malady, namely that the US was living beyond its means.
The population continued to borrow for houses and cars beyond what could be afforded. The financial sector, prodded on
by the government, continued to lend for housing and became bloated. This was
not merely a problem for the banks: it also caused productivity problems, as resources
were diverted from the real economy. The banks also became involved in
speculative trading, and when the reckless gambling failed, they successfully called
on the government to bail them out. The whole scheme was a kind of “housing-auto
complex” (not dissimilar to Eisenhower’s military-industrial complex), in which
government, financial institutions, unions and big business all collaborated to
enable large numbers of people to live in the suburbs in their own homes and
driving their own cars with a life-style they couldn’t afford. While much energy
is now mistakenly being spent in a futile effort to restore this world, Florida
argues powerfully that this world is gone forever. A new and different world needs
to open up, a world that is full of good, well-paying jobs.
* A "management fix": We need a new kind of management that creates more new good jobs that are innovative and more productive and higher paying. This is not just about good jobs for the “creative class” about whom he wrote so eloquently in The Rise of the Creative Class. It means creating better service jobs at the low end of the economic scale, using models like Toyota’s continuous improvement, where there is no such thing as unskilled labor: there are only jobs to which intelligence has yet to be applied. “We are going,” he says, “to create 7 million new jobs in high-tech and professional work: we are growing those jobs like crazy and we need to do more to support them. We are going to lose some manufacturing work which is being off-shored and routinized. But we are going to create 7-8 million new jobs in low-wage service jobs—health care, food preparation, dry-cleaning, hair salons: we need an agenda to make those jobs good jobs. That’s the role of government: to make sure that the 60 million existing jobs in low-wage service industries, along with the 7-8 million new jobs there, are good, well-paying jobs. This means applying what we learned in manufacturing in the course of the 1980s. We focus on quality and continuous improvement and get service workers to work in teams and become innovative.”
* A "consumption fix": We have to stop valuing the acquisition of more and more, and bigger and bigger houses, cars, property, gadgets and so on. Florida suggests that the younger generation is beginning to recognize the spiritual emptiness of these attitudes and values.
* A "spatial fix": a “great resettle” is under way into more densely populated urban areas, with more walking and biking and public transport and less driving. We need living spaces that "big, fast and green". He sees the main economic unit of the world economy becoming the “mega-region”, like the Boston-NY-Washington area.
* An "education fix" with an education system that is in sync with the new creative economy, a system that encourages innovation, and learning, and entrepreneurship. How will that happen?
* A "social compact fix" with general health care and a safety net for all. How will that happen?
This is a hefty agenda. The Great Reset recognizes that most of the change is going to be driven by the private sector. But what about government? What’s their role? I talked with Richard this week and asked him what he would say if the G8 were to call him up and asked for advice. He replied:
“Number one: Stop propping up the housing market. Take those foreclosures and those empty condos—what a tragedy!—turn them into affordable rental housing for people who need it, around the world. Help the people who have “under-water mortgages” by taking the houses off their hands and let them rent them back or move to a new opportunity.
“Number two: We need a massive agenda to upgrade jobs now. We need a global summit on how to turn service jobs into good jobs for the future, and make those $20,000-30,000 a year jobs into family-supporting jobs. We need to make sure that those out-of-work factory workers have some form of wage insurance or wage supplement, so that they are willing to take a job in a service company. That’s going to get them more engaged in working and so back into a better psychology and a better attitude towards work.
“Number three: For the long haul, we have to reinvent our education system. We need a system that no longer squelches the creativity of our kids, and turns out docile workers who were right for the farm or the assembly line. We need a system that turns out entrepreneurs. Every single school should be entrepreneur-creating incubator.
“And number four: We need a physical infrastructure for a knowledge economy. We have to get away from our addiction to roads and energy. We have to encourage people to live closer to where they work. We need to connect our cities, especially our declining and dying rust-belt cities, with high speed rail.”
The choice, says Florida, is between trying to re-build the past and constructing a new and more productive and resilient future.
The great merit of his book is that it sketches the big-picture elements that need to go into that better future. Without trying to predict the future or saying exactly how things are going to turn out, The Big Reset articulates the issues that have to be faced and the most likely and productive way to address them.
If we do that, we are likely to come out stronger and more resilient and more prosperous. We have done it twice already. The Big Reset gives us the road map to do it one more time.
What I love about the book is that it takes this deep and broad look at what’s going on. It takes a deep historical perspective and shows how we have coped with this before; it also shows how long it took and how difficult it was. It joins the dots and shows how the pieces fit together.
The Great Reset is sobering because it looks not just the surface problems or symptoms what is amiss. It looks at the deeper forces which are driving society. And it is forward looking and optimistic: we are likelier to come out of this economically and socially healthier and wealthier than before.
The real question is how long it is going to take. In the past, it happened by trial and error. We stumbled onto solutions. But that approach took decades to get results. Now that The Great Reset has shown us what needs to be done, we may be able to get there much faster.