Statement on the need for self-made thinkers, published on May 23, 2012
The following is the copy of an email which we have sent on May 17 to University of Chicago Professor Raghuram Rajan. Professor Rajan is one of the leading supply side economists of our times. He is a former chief economist of the IMF. He gave the keynote speech at Alan Greenspan’s farewell reception. And he correctly questions the lasting impact of anti-cyclical government intervention which other economists such as Professor Krugman tend to continuously proffer these days. Our email to Professor Rajan reads as follows:
“Dear Prof. Rajan,
As an embattled Euro-zone European, I believe the time has come to explicitly thank you for providing a much needed counter-argument to the sea of Keynesian populism that is engulfing us now more than ever. In particular, I would like to congratulate you for the observation that the structural problem in today’s debt ridden economies is not so much the lack of adequate demand but rather the lingering inability of these countries to produce enough useful and commercially viable things. (see your article: The True Lessons of the Recession, in Foreign Affairs, http://www.foreignaffairs.com/articles/134863/raghuram-g-rajan/the-true-lessons-of-the-recession)
It is, in deed, correct that Western economies, perhaps with the notable exception of Germany and California, have generally failed to generate a steady flow of relevant, perhaps even ground‑breaking, product and service innovations which would allow them to maintain a competitive edge in today´s super-competitive world market. And it is equally true that mature economies have by and large failed to educate their citizens in such a way that they could constructively adapt to and add sufficient value in a fast changing market-place.
Now, obviously, the real question that poses itself here is this: What do governments and societies really have to do culturally and politically to encourage a better performance both on the educational and on the innovative front. And the general answer so far has been:
a) to grant tax credits to start-up companies
b) to foster a venture capital industries (complete with Angel investors, incubators etc.)
c) to encourage further cooperation between industry and universities
d) to provide government sponsored retraining schemes to unemployed workers
e) to promote the set-up of “elite”academic programs and universities
f) to integrate more practical (case study etc.) aspects into otherwise rather theoretical academic study programs
g) to accept immigration of highly skilled engineers and workers from abroad
h) to increase flexibility in the labor law
i) to reduce welfare entitlements (rise of pension entry age, co‑financing of health care services etc…)
j) to employ a constant political rhetoric that advocates a “need for change” and a need to adapt to a “fast moving marketplace”
But if we are honest here, we have to admit that none of these measures has been sufficient to turn the tide in the structural loss of competitiveness which Western economies have been witnessing for a quite a while now. So, something else needs to happen to achieve that supply side breakthrough which some of us are working towards. And in my humble opinion, this supply side turnaround can only come by way of changing the criteria according to which the perception of credibility is being granted in the marketplace.
Because at this time, the intellectual and entrepreneurial credibility and credit worthiness of prospective innovators and applicants is more based on first appearance and circumstantial evidence rather than on the quality of content and the merit of argument. In this, standard wisdom in our mass society has it, that
a) previous success, no matter where, raises the possibility of future commercial success
b) academic degrees, by definition, enhance the capability to add value
c) degrees from prestigious universities naturally deserve more attention than those from not so prestigious organisations
d) employment experience with well known companies is better than career experience with less well known companies
e) and better looks are generally better than not so good looks etc…
In fact, it is this standard operational procedure which banks, politicians, editors, strategic partners and human resource personnel apply when taking their decisions that leads our societies to heavily favor the established over the innovative, the incumbent over the new and the well groomed over the self‑made. It, hence, comes as no surprise that, when in doubt, even the most free market-oriented governments tend to rescue banks and defend their national industry champions once the latter come under any kind of existential threat.
In other words, it seems crucial to me to understand that no mature economy will be able to maintain its competitive supply side edge if it continues to harbor an institutional skepticism towards self‑made leadership. And yet this skepticism towards self‑styled innovators has never been as huge as it is now. ( … perhaps with the exception of technological pioneers who have an easier time to explain what it is that they defend since their application tends to do most of the explanation for itself). I know what I am talking about here, since I have repeatedly experienced the habitual distrust which a no‑name tends to receive just for being what he is.
Perhaps, it would help if you could include that kind of reasoning into your own future work.
Best regards,
WL”
Do you find this message relevant? Do you view it worthy of a reply? – We certainly hope so. Did we ever get an answer to this email? – Of course not! And, yet it is this absence of a response which is at the heart of the distorsion that the supply side of Western economies is suffering from. Because, by now, it has become way too difficult for self-made entrepreneurs and pioneers to get any meaningful attention in the marketplace since the monopoly of credit worthiness which highy recognized academic institutions exercize therein make it next to impossible for those home-made innovators to get the strategic collaboration which they need.
Or to put it even differently: How should a no-name innovator ever be able to do his share to decrease the supply side distorsions which exist in our mature economies if even the leading supply side therorists aren’t willing to grant him a helping hand?
