Technological change must always precede economic growth. We are going about the process of market capitalism as if economic growth can precede technological change. Somewhere along the line we have gotten the cart in front of the mule.
It seems that this situation can be fairly easily corrected – after all, it’s the same cart and the same mule. All we need to do is get the same driver to point the same carrot on the same stick in the opposite direction; and the system should turn itself around. Impossible we ask? Not if we understand the problem and are clever about fixing it.
The same species…
Economic growth and technological change are the same species; each is represented by human productivity. If I take a loan to buy a house, the debt is “counted” as economic growth backed by my future productivity. If I go to work and invent a method that provides a better way for people to accomplish something, that same productivity increases with my innovation. They should hedge each other much like insurance. The problem arises when we forget to count the mule.
If A = C and B = C, then A = B
If any two currencies are backed by the same standard, they should be readily convertible. If Euro’s and Dollars are both backed by Gold, they would be convertible between each other and the market can simply choose to trade one or the other. Arbitrage opportunities would keep the system balance.
This is the same case with debt and innovation; i.e., two currencies represented by the same standard, “productivity”.
What if a new currency was introduced and pegged to human productivity? By definition, that currency would also be proportional to the dollar. Arbitrage opportunities between debt and innovation currencies would seek a balance. The two scorecards would hedge each other as they should.
It is going to happen eventually, why wait?
While this may seem odd to talk about one State, two currencies, it is not so odd to talk about what happens if the dollar fails. People will start trading a different currency. The Plumber will trade ideas with the lawyer who will trade with the doctor, carpenter, teacher, grocer, laborer, etc. An intelligent computer enabled society will likely build a knowledge inventory of who knows what. Reputations will arise thus organizing knowledge in the form of a financial instrument. This social medium will be the tool that organizes trading schemes and establishing supply and demand. An Innovation Bank will keep track of who owes what to whom and distribute wealth in the form of tangential innovation currency. Venture “capital” will be the cheapest money in town because it’s like money in the bank for an innovation economy. This is in fact, the nature of society and largely the function it has served for thousands of years.
Little carrot on a big stick
The difference between now and any other time in history is that society is computer enabled. Human knowledge has been held hostage behind the construct of “intangible assets” on a corporate balance sheet for too long. There is a great deal of energy building up and it can now find a productive outlet through social media. The best government policy is to accommodate what people will do naturally. It would be extremely inexpensive to empower society to form an innovation economy to hedge market capitalism. People need a currency that is first and foremost natural for them to trade. Later, Wall Street can convert and gamble away at their pleasure. But first, point the stick in a different direction and the system will correct itself.
[The Ingenesist Project (http://www.ingenesist.com) in a non-profit open-source economic development and research program. We have specified three web application which if deployed to social media would allow social capital, creative capital, and intellectual capital to become tangible inside social networks. Please tweet]