turning to the future after the age of easy growth · age of easy growth was nice fast gdp decline...
TRANSCRIPT
TURNING TO THE FUTURE
AFTER THE AGE OF EASY GROWTH
Kitty Kubo Head of Foresight - Estonian Development Fund Lucerne, 15.10.2009
Estonian additions to the club of European future thinkers:
Estonian Development Fund
Started in 2007 Created by and reporting to the
Estonian Parliament (Riigikogu)
Independent from the government (day-to-day politics)
Aim: to initiate and support structural changes in the Estonian economy
Foresight combined with venture capital activities
Kitty Kubo
Track record in the making of Estonian innovation policy: 10 years of experience in building up strategies and governance
Since 2008, leading the foresight team at Estonian Development Fund
Key insights:
Age of Easy Growth: Created little for the long-term Ended with the crisis Brought an understanding that economic policies
need to be rethought
Getting back to development track requires: Turning to the future – integrate futures thinking into
(economic) policy thinking Taking at state level active role towards exploring the
new (and often still only emerging) opportunities
HOW IT ENDED
Age of Easy Growth:
Baltic countries used to be STARSin Europe – and the world
Europeʼs booming Baltic corner Print edition of Dec 13, 2005
GDP growth reminiscent of Asiaʼs “tigers” Print edition of Apr 12, 2006
The roaring of Baltic tigers Print edition of Nov 3, 2006
Age of Easy Growth was nice
Fast GDP decline (2009 2Qs ~15%) Foreign income and capital flows fallen 3x Total external debt 3x higher (135% of GDP) Unemployment rising fast, in June ‘09 at 13.3% Not much deflation has yet occurred
“There is always a connection between fortune and misfortune”
Chinese saying Fast GDP growth (2004-07 avg. 8.5%) Large inflow of foreign capital, esp. loans Housing boom + internal market boom Lack of labour force, unemployment lowest at 4.1% Fast increase of salaries/prices, above productivity rise
... WHILE IT LASTED
+
Source: Eurostat and Bank of Estonia data, Estonian Development Fundʼs calculations
The Baltics now: FALLEN STARS
“Thereʼs still one corner of the continent where the idea of a return to growth remains a distant dream: in the Baltic republics of Lithuania, Latvia and Estonia.”
TIME magazine, September 14, 2009
From great growth to great fall
In 2006, Estonia ranked 13th in the world and 2nd in the EU for GDP annual growth rate - 11.2%
In 2008, Estonia at very bottom in same rankings:
Source: CIA World Factbook, as shown in Wikipedia at http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(real)_growth_rate
Source: UNCTAD and Eurostat data
The biggest problem before and now:STRUCTURE OF THE ECONOMY
Too much of that Not enough of this
Image source: share.skype.com/.../11/staff_on_beanbags.html
Image source: germanhistorydocs.ghi-dc.org/images/11074861.jpg
Such economic structures donʼt last long
Comparison of productivity in the manufacturing sector (value added per employee, thousand EUR per year) Source: Eurostat data, as presented in Varblane et al. “Competitiveness of the Estonian Economy and Future Outlooks”, Estonian Development Fund series Estonia in Focus, 1/2008
Convergence?
STATE POLICIES THEN AND NOW
Age of Easy Growth:
Policy thinking got stuck during the growth years Autopilot overruled strategic thinking:
things seemed to be going well – no need to intervene catching up and “laissez-faire” dominant or only accepted
ideologies (especially deep-rooted in Estonia)
Politics overruled policy: easy to confuse the two – e.g. there is only one and the same word
for politics and policy in the Estonian language no interest to look beyond the normal four-year electoral policy
cycle at the challenges facing the nation in the longer term
Desire for stability overruled willingness to change: reform fatigue emerged major reforms took place more than 15 years ago (education,
healthcare etc), the rest has been incremental evolution
Time to reconsider policies!
1.Ignorance
• Ignoringproblemsandhopingthattheywillgoaway• Pluggingholesandwaitingtoseewhathappen• “It'ss9llearly,let'snotoverreact”
2.Illusion
• Coun9ngonexternaleffectsandassistance• Lookingforsimpleandknownsolu9ons• “WehavetosufferandjustkeepcuFngthebudget,un9ltheworldwehaveknownbeforethecrisiswillreturn”
3.Innova3on
• GeFngrealaboutthesitua9onandreinsta9ngpolicyabovepoli9cs• Ac9velyexploringfutureopportuni9esandbuildingasharedvision• Abandoninglateralthinkingandtes9ngnewsolu9ons• Ini9atingchangesneededtocapturethedesiredfuture
3 phases of policy responses to crisis:
CURRENTLY WE ARE BETWEEN THESE TWO!
NEED TO REACH THIS 3rd PHASE TO GET OUT OF CRISIS
Innovation in policy-making most needed in 2 directions:
Futureorienta9oninthinkinganddecisions
Ac9veexplora9onofnewandemerging
opportuni9es
PUT SIMPLY, THE SOLUTION IS TURNING TO THE FUTURE!
THE CHALLENGES OF TURNING TO THE FUTURE
After the Age of Easy Growth:
Not much futures thinking so far: The culture of futures thinking is weak in society: Notion that future is always unforeseeable and we just have to cope with what comes
No experience among decision-makers: methods and benefits of foresight unknown and rarely required in strategic planning or policy-making
Little knowledge about futures thinking at-large: some futures work done by research community, but mostly remained an interesting academic exercise
Foresight seen as being unreliable or irrelevant: confused with forecasting, dreaming or just ivory-tower work
COMPETITIVE COUNTRIES HAVE AN EYE ON FUTURE
Source: Mansour Javidan, "Forward-Thinking Cultures,” Harvard Business Review , July/August 2007
Prime Minister Lee Hsien Loong (in Parliament on 27 May 2009):
Futures thinking is “IN”
The visions of “New europe” so far:
- Before 2004: joining EU (and NATO)
- During boom years: to get wealthy (Estonia aimed to be amongst the top 5 richest countries in EU within 15 years )
- After the crisis: ?
Turning to the future is not easy: examples from our experience
Change assumes that people step out from their comfort zones and take the lead – why should they want to do that?
Talking about change is the best way to collect enemies - if they control the purse, they find ways to cut you to limit the change
Friends may come from the opposition parties – but that only increases change resistance from the ruling parties
There is a real gap between futurists who make foresight and those who make decisions
To offer foresight that influences real life, avoid both extremes – nice “non-disturbing” academic foresight exercise and getting too involved in day-to-day politics
Yet, in Estonian Development Fundwe still aim for the innovation phase
EDF was created in good times, as a luxury item It took many years, before the idea was
accepted and the Fund established Initially expectations were higher for VC But “thanks to the crisis” the priority has shifted
and foresight brought into focus “Window-of-opportunity” has emerged:
never before has the need for inspiring national vision and leadership been felt
Without turning to the future, we continue on the old path –
except no more Easy Growth there to enjoy
Image source: Harvard Business Review
„The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as
most of us have been, into every corner of our minds“
John Maynard Keynes English economist 1883-1946
The General Theory of Employment, Interest and Money
