This week, after yet another downbeat European summit – the 22nd since the crisis began – it would be easy to write about the interminable wrangling behind closed doors in Brussels and what measly crumbs we might be getting from the European table.
But no, the column is not going to do that. Instead, let’s look at the wider, more optimistic world that I engaged with last week while travelling extensively. We are going to talk about a world where money is not in short supply, where people say what they think and act rather than prevaricate, where inspiration and hard graft are available in equal measure and where innovation and risk-taking are the norm. In short, a world which is the polar opposite of Ireland right now.
This is a world that has dealt with its financial crisis and is moving on – and one thing is sure: it is moving ahead and not waiting for Ireland or Europe to sort out its financial house.
Last week, I flew to Arizona to speak at Google’s Zeitgeist conference. This was an extraordinary experience because on show was the best of America’s new economy, where the economics of abundance, rather than scarcity, dominate the discussions.
Flying home via New York, I met investors who argued that they had never been more confident about the state of the world.
Then last Friday, back in Dublin hosting a conversation with Bono about the One campaign, we spoke about how technology is changing the world of charity. This event in the Mansion House was at the wonderful F.ounders’ tech conference, established by Paddy Cosgrove. Cosgrove has managed to get the finest minds in the global tech world to come each year to Dublin, where investors and start-up companies looking for funds can network with each other and do business.
This is the new world where the only legacies are hangovers from the past, which are little or no impediment to growth in the future. The opportunities in this new world for Ireland will be there, whether we get a bank deal or not.
Given that we will have to default if we don’t get a bank deal with the EU, this is a good thing to be aware of. Legacy debts in this new world are an accounting, rather than an economic, problem. They are ‘notional’ problems on a balance sheet – and if we can’t do a deal with the EU, we have to restructure our debts. And that’s all there will be.
The people at F.ounders and Google Zeitgeist are interested in real economics, and real economics is driven by people, brainpower, innovation and enterprise – not whether a bank that didn’t deserve to get paid back has a plus or minus sign on its balance sheet or whether its debt ratio is sustainable or not.
Think about the following great periods of social and economic innovation that occurred when the debts and state of the innovative country couldn’t have been worse. Consider the amazing construction of the British welfare state equipped with the NHS and universal free education. This happened in the immediate post-war period when the national debt-to-GDP ratio of Britain was 170 per cent.
Or how do we explain that the greatest boom in German history came in the early 1950s when the country had defaulted on all its international debts and was using several different currencies?
Or think about the amazing innovations in Japanese technology in the past 20 years, when the country’s debt-to-GDP ratio was moving towards 200 per cent, its banks bust and its property market in freefall.
Or consider the explosive growth in Nokia which occurred after Finland devalued its currency – an act which, according to the present EU bosses, would have no long-term impact on the fortunes of a country. But it does.
These are some of the many examples of innovation occurring in times of great economic stress where mainstream thinking and conventional wisdom would suggest that economies can’t grow. If economies were run by accountants, then that might be the case, but thankfully economies are not run by accountants.
Economies make great leaps forward through technology, not banking and finance. When it comes to growth, only three things matter: availability of people, availability of capital and total factor productivity, which is the productivity of those people and that capital combined. The magic, the alchemy is the technology.
Ok, so we wasted billions of euro of capital on unproductive houses and land rather than productive technology, but the money is gone. Are we telling ourselves that whatever capital we have left, we are going to waste by paying back debt which is dead money, rather than deploying it in new technology and education? Ask yourself that.
This should be the government’s response on the bank debt and the deal. Enda Kenny should map this out and say: “Angela, do you really think we will spend our money on a promissory note when we know that total factor productivity is what makes an economy grow?”
At its most basic, technology is ‘resource-liberating’. It can make scarce things abundant. Think about the cost of telephony. Years ago trunk calls were expensive and now Viber makes communication free.
Years ago, access to information was a huge impediment to innovation because it was expensive to know how to do things. Now information is virtually free, downloadable and everywhere. The poorest farmer in Zimbabwe with a mobile smart phone has more access to information now than the head of the CIA had ten years ago.
And all this access to technology is spreading. At Google, engineer Peter Diamandis outlined that, today, there are two billion people on the net, connected with each other, talking, exchanging information.
But in eight years’ time, by 2020, there will be five billion people. This is three billion new minds, new ways of doing things and new ways of looking at the world which will come online and start making a difference. The possibilities through technology are truly vast.
At the F.ounders conference, Bono spoke about an anti-corruption website called ipaidabribe.com, which is a website used to expose petty corruption at source. Truck drivers and others who are forced to pay a bribe can register it anonymously and snare the corrupt official.
In the years ahead, these technologies will proliferate and undoubtedly change the world we live in. Now, just before you start to think I have gone all soft and infatuated with the elixir of the new and have forgotten the difficulties facing us, I have not.
But what I appreciated last week is that life has to go on. If we can’t pay the bank debts, we won’t. If we can’t get the ESM to pay them, we will default on this bank debt and life will go on.
More to the point, as we waste time and resources worrying about this, the world is moving ahead without us. We’d be better going to Europe with a note, saying something like this: “This is our bottom-line position. Please come back to us if you can do a deal. In the meantime, we’d like to go to work on the future, but you have our number if you want to call. We’ve been at 22 summits in four years, but nothing is sorted out. We just don’t have the time for this any more. The world is waiting; it’s not hanging about – and nor can we. Take it or leave it. All the best now, Ireland.”
All makes perfect sense David, although their may be one tiny wee problem. Democracy. Together with the lack of courage & understanding among the electorate. Only when enough people have have really suffered and if they don’t DEMAND real change, nothing will.
Sad, but true…
To read this article properly I advise everyone to do so with their full lungs ……and slowly ….and life returns again.
[…] David McWilliam: Moving On Upward (DavidMcWilliams.ie) […]
Like a tale of two cities, there are two economies which are often talked about. There is economy of the old world: land, property, the professions, banks and their political supporters, which is currently on a taxpayer based life support. There is the economy of the new: risk, sometimes calcuated, sometimes not. Buzz words like ‘innovation’, ‘entrepreneur’, ‘new technologies’, ‘creativity’. Fortunately for the connected few, they either have the resources or are able to access them in order to explore this new world, to be fair it is pretty peripheral stuff which may or may not end up employing tens… Read more »
If I’d known about that event last Friday, I would have wanted to be there (assuming it was open to the general public). As it was, I went along to an Asia Trade Forum event focused on building an expanded and lasting trade relationship with Japan (from where I recently moved with my family). Much of the event was focused on educating Irish business people on the nuts and bolts of Japanese business etiquette and culture and there were a few too many dry statistics for my personal taste. Minister Phil Hogan was there to lend some official cred and… Read more »
http://www.telegraph.co.uk/finance/comment/9623863/IMFs-epic-plan-to-conjure-away-debt-and-dethrone-bankers.html
Interesting Article from Ambrose Evans Pritchard on an IMF paper suggesting the issuance of government money directly instead of the debt based money in current use could result in the removal of massive government debt and a return to suplus. One of the previsos is the removal of fractional reserve banking.
Subscribe to David’s viewpoint; but has anybody else noticed a definite recent trend amoung the late 30’s peer group of simplification of their tech-dominated lifestyles (and not because of personal finance but by choice)? Refer to: discarding personal technologies ie disposing of hardware (smart devices etc) and disengagement from online (facebook, twitter etc). And secondly, choosing to cycle than drive to work. Again, insufficient disposable income is not an issue with the people I’m referring to, these are lifestyle choices. I’ve met so many die-hard techies over the last few months who are turning their back on the wired world,… Read more »
Nice upbeat article with all the usual caveats etc. When you look how various parts of the world bloomed out of nowhere – it is hard to imagine just how explosive and unexpected the nature of many of the rapid developments. The most amazing for me has been the fast knowledge acquisition to acquire such a competent industrial footing from near zero to a well educated workforce. Give people the lead and the incentive or hope and they perform. What could be troubling is the lack of renewal. Has Detroit rejuvenated? Has Belgium for all its wonderful infrastructure ever become… Read more »
Bank debt and enda . Enda and his government have proceeded on its agenda of reducing the debt and seek this from Germany , why Germany does Germany run Europe . Noonan said we are back in the bond markets why do we need to be , who are we paying out of this borrow money. It’s said that we need this money to keep the lights on , who’s lights. Why are we kissing Germany’s arse . It feels like we are back in 1939 and Germany is calling the shots. How can Germany corner such a position in… Read more »
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The country is full of smart and gifted people
see link
http://www.youtube.com/watch?v=mNxRwaF6iyo&feature=plcp
The political sybaritical decisions of Noonan will invite nemesis before Angelas Ashes rise from the Dante Inferno .
Only then will Time lead us once more .The Pain has not begun .There is a very long road to travel before we even think to lift our hearts .
In contrast to the column inches given to the meaningless ‘Ireland is a Special Case’ waffle; little or no coverage has been given to the challenge taken against the ESM by Irish Independent TD Thomas Pringle. Why? Plenty of coverage in the German media.
NAMA wine lake synopsises the challenge:
http://namawinelake.wordpress.com/2012/10/21/crucial-esm-court-hearing-set-to-start-this-coming-tuesday/
Live commentary and excellent background info by:
http://taleoftwotreaties.tumblr.com/
Out with the popcorn; this could be good…imagine if….
Holy Moly…Gayle Killilea commenting on the coverage by NAMA wine lake on the US case development against the Dunnes. NWL said it was her when asked by Gavin Sheridan. Ever the shrinking voilet.
http://namawinelake.wordpress.com/2012/10/21/nama-versus-the-dunner-us-court-case-starts-tomorrow/#comment-43452
“Zeitgeist” is a sign of the times. What should be worrying everyone is what follows this “Zeitgeist”, “Volksgeist”, and we know what that means. We will have at least 9 billion, not five by 2020, with water, energy, food, power, transport needs that are very east to reckon. The Sign of the Times is that none of these are addressed by “innovation”, which is simply a controlled creativity to be spooned out by some elite. “Innovation” comes from the Schumpeter column of the Economist Mag. It is part of creative destruction which is under no circumstances ever intended to support… Read more »
The Irish government past and present have back there people into a Dead end.
Our problem now is we can’t afford to live in this country.
Is this the Ireland of no hope .
We are going to have to stand up and make our own hope so stand up .
“At its most basic, technology is ‘resource-liberating’.” David am delighted you wrote an article along these lines. Talking is important but action allied to purpose matters much much more. I came out of college and was sick at what I was seeing and hearing. Reaction: gave up reading newspapers, hadn’t a penny in my arse pocket but founded an online campaign to Tweet Twitter to set up jobs and a HQ in Dublin. Mobilised thousands of people and wrote a free ebook on how to use Twitter for start-up businesses (@BirdCourter & @Twindset) – Result: Twitter set up shop here… Read more »
Japan sits at the top of the water slide
http://www.telegraph.co.uk/finance/financialcrisis/9626542/Japan-to-join-currency-wars-as-exports-slump.html
‘Ok, so we wasted billions of euro of capital on unproductive houses and land rather than productive technology, but the money is gone. Are we telling ourselves that whatever capital we have left, we are going to waste by paying back debt which is dead money, rather than deploying it in new technology and education? Ask yourself that.’
Good question. So you won’t mind if I hit you up for a loan to have a good time in Kilkenny, Then I’ll split and find another sucker?
http://truthingold.blogspot.ie/2012/10/what-economic-recovery-your-taxes-at.html
The downside to the US economy.
Mark Lundeen What I find very suspicious is how the Dow Jones is within 6% of making a new all-time high in the face of collapsing trading volume (Green Plot Below). And then look at the Dow’s all-time high volume, it occurred during the very bottom of the Credit Crisis crash, March 2009. Everything is upside down. I fear that the stock exchanges may go out of business for lack of business before this bear market is over. For the most part, the public is out of the stock market. This exact thing happened during the Great Depression, and they… Read more »
http://usawatchdog.com/massive-foreclosures-after-election-fabian-calvo/#more-9224
It ain’t over till the fat lady sings
http://detlevschlichter.com/2012/10/but-there-is-no-inflation-misconceptions-about-the-debasement-of-money/
Hyper inflation happens when you do not believe in your currency any more
Chinese gold imports surge.
Gold now australia’s 2nd biggest export behind coal!
http://www.zerohedge.com/news/2012-10-21/chinese-gold-imports-through-august-surpass-total-ecb-holdings-imports-australia-sur
http://economictimes.indiatimes.com/markets/commodities/gold-demand-surges-as-prices-drop-on-strong-rupee/articleshow/16913702.cms
India buys yet more
http://www.goldmoney.com/gold-research/alasdair-macleod/gold-bullion-flowing-from-west-to-east.html?gmrefcode=gata
http://www.mineweb.com/mineweb/view/mineweb/en/page31?oid=160593&sn=Detail&pid=31
how much gold is china buying
I share David’s optimism for changing the current system simply because the current system is unsustainable. To keep the economy running smoothly we have to take on more debt than we repay. To date, this has been achieved through global population growth and mortgages taking longer and longer to repay. However the rate of increase in global population is declining and mortgages have reached their natural limit of duration. We simply can’t take on more debt than we repay for the foreseeable future. Monetary reform is gaining momentum in the mainstream media too. The Telegraph had an article on full… Read more »
“This is our bottom-line position. Please come back to us if you can do a deal. In the meantime, we’d like to go to work on the future, but you have our number if you want to call. We’ve been at 22 summits in four years, but nothing is sorted out. We just don’t have the time for this any more. The world is waiting; it’s not hanging about — and nor can we. Take it or leave it. All the best now, Ireland.” Well, if FG do this, they have SF’s full support. Chasing rainbows at summits has not… Read more »
A Tale of Magic Wands and Wunderwaffen – Euro Wonder Weapon ESM Is a Flop Oct. 22 (EIRNS)–If there were ever any expectations that the ESM would be the super-solution to the euro’s bailout needs, the fund has not performed at all well, during its first two weeks: More than half of the bonds which it has sold so far, have been bought by Eurozone investors, whereas non-Eurozone investors are hesitant. Asians have so far only bought 25% of these bonds, Americans scarcely 6%, and the British even less. The idea behind the ESM however was that it would be… Read more »
In the context of the article, I would not be so sure about the current technology bubble that is “social media”. Here is one example of why when there is media hype, and a critical mass of people carrying unresonable euphoria, there might well be a scam in place. http://www.marketoracle.co.uk/Article37146.html Now obviously Wayalat will not be flavour of the month with the Irish media, or with such wealthy movers and shakers as Paul Hewson. But, I think he is correct in his prognosis. Yes, there is new technology advancing, and it does signify great potential to make money. But be… Read more »
The Finnish devaluation of 1990 had about as much to do with Nokia’s success, as Robbie Keane’s bootlaces had to do with Jonathon Walters goal against the Faroe Island.
Next to nothing.
If you look at the history of Nokia, it had been working on telecommunications products for years prior GSM taking off in the nineties. The hard work was done by their engineers and staff, who painstakingly developed the right expertise, and were fortunate to be well placed in a technology whose time had come.
Hi David, When I read this article in the SBB I found myself on a number of occasion catching my breadth. The articles being produced recently are of such higher substantiative and qualitative content they are a pure pleasure to read. From reading the more recent articles its clearly obvious you have had a political awakening in such a short time frame it could only be describe as whirlwind like. Its like David McWilliams lost his political virginity just before he got on the plane to the USA and McWilliams, David got off it. The same person but a complete… Read more »
Sure look flks, the kind of forward looking brave mentality that David is aspiring to, he as mush as said it himself, it couldn’t be more removed from the public sector “for the file” hopelessly lost “we need to have our arses covered in Europe” mentality that we see every day here in this country from the “leadership”. There isn’t even an acceptance in government that we cannot pay our banking debt back, it’s a bury your head in the sand mindset that refuses to even face up to the national injustice that has been heaped upon our backs, let… Read more »
How can being in debt be so easily dismissed. It has brought major nations to it’s knees and will do again. Is it another tale of two economies?? Jim’s Mailbox October 22, 2012, at 10:47 am by Jim Sinclair Eric, Russia and China have a plan. It is the exact plan that Volcker invented and initiated when he destroyed Communism as an economic entity. Russia and China intend to keep up the military threat pressure, not allowing the US to cut its military budget meaningfully. The USA is not the ball in international economics anymore and cannot afford to become… Read more »
Bonds are no longer a safe investment havingbeen the superior performer the last 20 years
http://www.drschoon.com/members/commentary/GoldDisappearinYield.pdf
As the paper manipulators lower the gold lease rates to negative territory. They even pay you to take the gold.(note the 1 month lease rate) How soon before the breakdown in currencies and the hyperinflationary event occurs. Nobody knows but it is a year closer than it was!!
http://www.drschoon.com/members/commentary/GoldStage3.pdf
Thomas Pringle: ‘If #ECJ rules in my favour will we get €508m back?’
https://twitter.com/ThomasPringleTD
Wishful thinking; maybe it will be the Kasus Knaksus and bring an end to this charade.
David, Just like to say Thank You. Best article I have read in long time!
Back to David’s article. The big rage about social networks etc dominates a lot of popular so-called tech thinking. A friend of mine told me a story of 2 pigs in a barn chatting to one another…Tis great we have this lovely accommodation and grub for free it is not?…meaning if the product is free, then, maybe, you the user are the product. Reminds me of Freud’s view of the development of the individual. We go from needing to belong to being anally retentive to being a final genitally productive individual. If we are a product, we hunger to sell… Read more »
Dot Com 2.0 with a crash also ?
Have we another bubble based on low interest rates, and deluges of central bank provided credit ?
http://blogs.telegraph.co.uk/technology/willardfoxton2/100008101/farmville-apocalypse-could-zynga-layoffs-mark-the-beginning-of-the-second-dotcom-crash/
Glad to see that some of our American optimism rubbed off on you David. I was beginning to feel like I had landed in a bottomless pit of despair back here. Maybe Ireland should send more of its media to Arizona (or better still to my own city San Diego) for a few days every year. They really are a most depressing bunch, especially your fellow Irish Independent columnists. They seem to be the worst.
David is correct. Irrespective of the idiocy that is happening in the media/political/state system/banking nexus – innovation and progress still manages to happen.
The problem for the bankers is finding a way to take the proceed from such endeavours and redirect them to bailout out their gambles gone wrong.
I have to say, that the are doing a highly effective job of it.
I am home While my plane was delayed due to the French Airlines Strike I thought my train would have left without me . Alas , the train engine had broken down and it was delayed by an hour in Dublin so that a change of engine would arrive . I have learned since that many trains have broken down recently and long delays caused on other journeys . And two weeks ago they finally found ‘ a fund’ in Irish Rail to pay the wages to end of next month ….so whats next ? And. Today . I bought… Read more »
How Much Did Obama Offer Spain’s P.M. Rajoy to Draw a Nuclear Bullseye on Spain? Oct. 6 (LPAC)–Spain’s Vice-President Soraya Saenz de Santamaria announced yesterday, following a meeting of the cabinet, that the Spanish government had formally authorized a deal with the U.S. to participate in NATO’s anti-missile defense shield. The accord will be signed in Brussels on Oct. 10 by both countries’ defense ministers. Under the agreement, four U.S. destroyers equipped with missile interceptors and Aegis defense systems, along with 1,400 American military personnel, will be deployed in 2013 at a U.S. naval base in Rota, in southern Spain.… Read more »
Here’s a brutally frightening glimpse at Europe’s future. Societal breakdown, revolt and death. Here’s the stark reality of austerity on those least able to absorb the costs. Ireland is not far removed from the picture this article paints.
http://www.nytimes.com/2012/10/25/world/europe/greek-unemployed-cut-off-from-medical-treatment.html?pagewanted=2&_r=0&ref=global-home
http://usawatchdog.com/dollar-sell-off-and-hyperinflation-by-2014-john-williams/