Goodbye Global Economy, Hello Local Ecosystems

Kai Goerlich in Forbes

The economy seems to act like a domino play these days. One initial stone sets off a cascade of falling economies. Apparently, the only way to fix this critical situation means returning to growth. Perhaps this is true, but I feel a lack of imagination with this solution and would like to offer an alternative.

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In my view, the age of information and telecommunication started in 1940 with the development of computers and telecommunication and ends in 1990, when we entered the new age of entanglement, initiated by the launch of the World Wide Web and the second generation of GSM.

Intrigued, I wondered if there might be a view on economical waves as well. Unfortunately, I could not find anything off the shelf (readers, if you’ve found something please let me know) and used the number of IPOs instead. Between 1950 and 1980, when the IPOs finally took off, we had national economies, followed by international business overlapping with the PC wave and globalized business in line with the networked computing wave. A perfect match, IT and business aligned.

Reacting to the Recession

But as we know, just at the end of networked computing, we crashed and ran into a recession. Why? The economies have been networked too much. Risk and recession spread globally, just like diseases, plants, animals and ideas spread via our global travel routes. In essence, we tore down too many barriers that once separated the ecosystems from each other. It’s as if we wanted to fill the Mediterranean Sea hoping for cute zebras (and more business) and got crocodiles and hyenas instead.

Is there a way out? Yes, the smart computing wave will fulfill its equivalent in the economy of connected ecosystems. The focus of our activities will shift to smarter regional business subsystems connected which each other. Compared to our recent situation, the difference is threefold. First, subsystems will be much better managed and analyzed. Second, all local usage (energy, space, natural reserves) will be balanced. Third, the global economy will not be as hyper connected and prone to fast moving crises.

Diversity Makes a Return

Returning to a level where real life acts and re-establish more diversity is in order. Scientists believe the financial system is not a true network but more a global oligopoly, where 1% of the transnational companies, most of them banks, control 40% of the global market (New Scientist, Vol. 212, 2011). As a result the world appears global but in reality, life is not.

The energy flow in an ecosystem is first local and global second. The financial crisis shows that simply globalizing the value of very local U.S. real estate or betting heavily on global currency effects the way Iceland did, is too far removed from the local economy and its special make up. The same effect can be seen with production and the use of natural resources. For example, we allowed the globalization of the fishing industry and did not allocate the very local effects into the equation (fish is not for free, you take out energy with every fish you catch and the ecosystem needs to be nurtured).

Obviously, it is not logical to get fish caught at the other side of the world for a much lower price than local fish. But as fishing companies are optimized on scale and profitability, local resources are consumed without benefitting the local communities. In the very end, we destroy diversity on a local level. We can do much better.

http://www.forbes.com/sites/sap/2011/12/05/goodbye-global-economy-hello-local-ecosystems/