Spikes, flats and bumps on the road to the New Economy

These days, economic pundits sound a lot like elementary school teachers giving a geography lesson. “The world is flat!” says Thomas Friedman in his new book of the same title. “The world is spiky!” reports Richard Florida in an October Atlantic Monthly article.

But the lesson they’re trying to teach isn’t physical geography – it’s economic. Their basic question has to do with how we map the shape of the New Economy.

The starting point in the debate is always the same – information and communications technology has changed our economy in fundamental ways. We now compete globally, not just locally. “Value-added” to a product or service can happen not only down the assembly line but just about anywhere on earth. And capacity for knowledge and innovation, not just mass production, is now critical for economic success.

Friedman sums up these phenomena by declaring (with a few qualifiers) that the world is flat. By this, he means that the economic playing field has been leveled by technology to the extent that anyone who can get wired has a shot at prosperity, provided they’re smart enough, focused enough and constantly willing to learn.

Richard Florida, an academic best known for his work on urbanization and its links to creativity and innovation, sees the world differently. He says it’s “spiky” because if you were to map the world’s economic production by city rather than by country, you would see big “spikes” where there are major urban centres. Moreover, concentrations of what he calls the “creative class” – the key individuals who drive economic development wherever they are – are higher in big cities than anywhere else. For Florida, the big strategic imperative of the New Economy is to find ways to keep your cities’ “creative spike” high so that your “economic spike” stays high too.

So who is right? Well, both. And neither. Let us explain.

Friedman is right in that people have economic opportunity if they are both smart and wired. But the playing field isn’t exactly made flat by the technology, because, as Florida makes clear, some people can be a little more creative than others while also having easier access to helpers like venture capital, effective marketing and the widespread connectivity found in big cities.

The problem with Florida’s argument is that it distracts from the dynamism of smaller communities that are using locally developed knowledge to be economically successful.

For instance, the coastal town of Prince Rupert, B.C., is being billed by the provincial and federal governments as North America’s Pacific Gateway to Asia. Its port is three days closer to China than anywhere else on this side of the Pacific Rim and is a well connected rail and logistics hub reaching nearly the whole of North America.

Yet the story of Prince Rupert began years ago, when the community came together to plan how to diversify its economy beyond the natural resources in its immediate area. By collectively recognizing strengths and working together to achieve goals, Prince Rupert has been revitalized. And it is local people and local knowledge that deserve the credit.

Waterloo Region in Ontario (the Kitchener-Waterloo-Cambridge area) is another relatively small community that is home to some of the most significant innovation in the country. The reason? Investment in the community by local venture capitalists like Research in Motion’s co-CEOs Mike Lazaridis and Jim Balsille (Lazaridis helped to build the internationally renowned Perimeter Institute for Theoretical Physics while Balsille established the world-class Centre for International Governance Innovation), together with the outstanding research programs at the area’s post-secondary institutions. The University of Waterloo, for example, has a unique intellectual property policy that allows researchers to maintain ownership of their findings – leading to a number of important spin-off initiatives. The Conference Board now says the region will lead the country in economic growth this year.

What can we say about these examples? First, creativity is everywhere, and it is especially well-used when people try to create and achieve their goals together. Second, Florida’s spikes might not matter so much if people in communities work together to build on their strengths and find markets for what they can do. Third, to ensure that no one is left behind, there may be a responsibility for public institutions like universities and governments to help communities tap their creativity, build on their strengths and reach the markets they need to be successful.

So the world is not flat or spiky. Instead, it’s more bumpy. And on the road to the New Economy, those bumps could at least make for a more interesting ride.

John Milloy ([email protected]) is MPP for Kitchener Centre and Parliamentary Assistant to the Minister of Intergovernmental Affairs in Ontario; Maryantonett Flumian ([email protected]) is Deputy Minister of Service Canada. Both are members of the Crossing Boundaries National Council (www.crossingboundaries.ca).

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Jim Love, Chief Content Officer, IT World Canada

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