Gov­ern­ments’ self-dis­rup­tion chal­lenge

Financial Mirror (Cyprus) - - FRONT PAGE -

One of the most dif­fi­cult chal­lenges fac­ing Western gov­ern­ments to­day is to en­able and chan­nel the trans­for­ma­tive – and, for in­di­vid­u­als and com­pa­nies, self­em­pow­er­ing – forces of tech­no­log­i­cal in­no­va­tion. They will not suc­ceed un­less they be­come more open to cre­ative de­struc­tion, al­low­ing not only tools and pro­ce­dures, but also mind­sets, to be re­vamped and up­graded. The longer it takes them to meet this chal­lenge, the big­ger the lost op­por­tu­ni­ties for cur­rent and fu­ture gen­er­a­tions.

Self-em­pow­er­ing tech­no­log­i­cal in­no­va­tion us, af­fect­ing a grow­ing num­ber of peo­ple, ac­tiv­i­ties world­wide.

Through an ever-in­creas­ing num­ber of plat­forms, it is now eas­ier than ever for house­holds and cor­po­ra­tions to ac­cess and en­gage in an ex­pand­ing range of ac­tiv­i­ties – from ur­ban trans­porta­tion to ac­com­mo­da­tion, en­ter­tain­ment, and me­dia. Even the reg­u­la­tion-re­in­forced, fortress-like walls that have tra­di­tion­ally sur­rounded fi­nance and medicine are be­ing eroded.

This his­toric trans­for­ma­tion will con­tinue to gain mo­men­tum as it ex­pands in both scale and scope. But its ben­e­fits will not be fully re­alised un­less gov­ern­ments take steps to em­power the forces of change, en­sure that the mas­sive pos­i­tive ex­ter­nal­i­ties are in­ter­nalised, and min­imise the neg­a­tive im­pacts. Un­for­tu­nately, this is prov­ing ex­tremely dif­fi­cult for many ad­vanced-coun­try gov­ern­ments, partly be­cause the fail­ure to re­cover fully from the re­cent cri­sis and re­ces­sion has un­der­mined their cred­i­bil­ity and func­tion­ing.

The emer­gence of anti-es­tab­lish­ment and non-tra­di­tional po­lit­i­cal par­ties and can­di­dates on both sides of the At­lantic is com­pli­cat­ing even the most ba­sic el­e­ments of eco­nomic gov­er­nance, such as en­act­ment of an ac­tive bud­get in the is all around sec­tors, and United States. In this con­text, tak­ing the steps needed to up­grade eco­nomic sys­tems, in­clud­ing in­fras­truc­ture in the US and the in­com­plete union in Europe, or to meet his­tor­i­cal chal­lenges like the refugee cri­sis, seems all but im­pos­si­ble.

In fact, Western po­lit­i­cal and eco­nomic struc­tures are, in some ways, specif­i­cally de­signed to re­sist deep and rapid change, if only to pre­vent tem­po­rary and re­versible fluc­tu­a­tions from hav­ing an un­due in­flu­ence on un­der­ly­ing sys­tems. This works well when pol­i­tics and economies are op­er­at­ing in cycli­cal mode, as they usu­ally have been in the West. But when ma­jor struc­tural and sec­u­lar chal­lenges arise, as is the case to­day, the ad­vanced coun­tries’ in­sti­tu­tional ar­chi­tec­ture acts as a ma­jor ob­sta­cle to ef­fec­tive ac­tion.

The po­lit­i­cal in­flu­ence of financial donors and lobby groups add to the chal­lenge. Rather than pro­mot­ing ac­tions aimed at im­prov­ing the long-term well­be­ing of the sys­tem as a whole, th­ese ac­tors tend to push mi­cro ob­jec­tives, some of which help the tra­di­tional, of­ten wealthy el­e­ments of the es­tab­lish­ment main­tain their grip on the sys­tem. In do­ing so, they block the small and emerg­ing play­ers that are so vi­tal to up­grad­ing and trans­for­ma­tion.

All of this serves to com­pli­cate an im­per­a­tive that is rel­e­vant not just to gov­ern­ments, but also to com­pa­nies and in­di­vid­u­als that must adapt to chang­ing cir­cum­stances by up­grad­ing their struc­tures, pro­ce­dures, skills, and mind­sets. Few are ea­ger to self-dis­rupt, a process that takes us out of our com­fort zone, forc­ing us to con­front our long-stand­ing blind spots and un­con­scious bi­ases and adopt a new mind­set. But those who wait un­til the dis­rup­tions are un­avoid­able – easy to do when gov­ern­ments do not mount a timely re­sponse – will miss out on the huge ad­van­tages that tech­nol­ogy of­fers.

Even when gov­ern­ments de­cide to im­ple­ment poli­cies that en­able eco­nomic up­grad­ing and adap­ta­tion, they can­not do so in iso­la­tion.

With tech­nol­ogy en­abling un­prece­dented mo­bil­ity and con­nec­tiv­ity, the ju­ris­dic­tional power of na­tion-states is be­ing eroded, mean­ing that a truly ef­fec­tive re­sponse – one that un­leashes the full ben­e­fits of dis­rup­tive tech­nolo­gies – is im­pos­si­ble with­out mul­ti­lat­eral co­op­er­a­tion and co­or­di­na­tion.

But mul­ti­lat­er­al­ism is un­der­go­ing a trans­for­ma­tion of its own, driven by doubts about the le­git­i­macy of ex­ist­ing struc­tures. With re­forms of the tra­di­tion­ally West­ern­dom­i­nated in­sti­tu­tions hav­ing stalled, there have been moves to cre­ate al­ter­na­tives; China’s Asian In­fras­truc­ture In­vest­ment Bank, for ex­am­ple, com­petes di­rectly with the World Bank and the Asian De­vel­op­ment Bank in some ar­eas. All of this makes global-level re­sponses more dif­fi­cult.

Against this back­ground, a rapid and com­pre­hen­sive trans­for­ma­tion is clearly not fea­si­ble. (In fact, it may not even be de­sir­able, given the pos­si­bil­ity of col­lat­eral dam­age and un­in­tended con­se­quences.) The best op­tion for Western gov­ern­ments is thus to pur­sue grad­ual change, pro­pelled by a va­ri­ety of adap­tive in­stru­ments, which would reach a crit­i­cal mass over time.

Such tools in­clude well-de­signed pub­lic-pri­vate partnerships, es­pe­cially when it comes to mod­ernising in­fras­truc­ture; dis­rup­tive out­side ad­vis­ers – se­lected not for what they think, but for how they think – in the gov­ern­ment de­ci­sion-mak­ing process; mech­a­nisms to strengthen in­ter­a­gency co­or­di­na­tion so that it en­hances, rather than re­tards, pol­icy re­spon­sive­ness; and broader cross-bor­der pri­vate­sec­tor link­ages to en­hance mul­ti­lat­eral co­or­di­na­tion.

How economies func­tion is chang­ing, as rel­a­tive power shifts from es­tab­lished, cen­tralised forces to­ward those that re­spond to the un­prece­dented em­pow­er­ment of in­di­vid­u­als. If gov­ern­ments are to over­come the chal­lenges they face and max­imise the ben­e­fits of this shift for their so­ci­eties, they need to be a lot more open to self-dis­rup­tion. Oth­er­wise, the trans­for­ma­tive forces will leave them and their cit­i­zens be­hind.

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