The First Knowledge Economy State

By Ron Rivers,

One of my favorite lessons learned about U.S. democracy is the concept of states as methods of experimentation. We see it to a reasonable extent in the United States with different state’s approach to issues such as abortion, LGBTQ rights, education, and redistributive social programs.
What we don’t see is any significant variation in structural arrangements such as laws surrounding property and contract, education, and democratic practice. The first state to embrace the Knowledge Economy will be the one that dedicates the time and resources required to reshape these core institutions.

Whichever state chooses to be the first to embrace the Knowledge Economy’s potential will begin with a plan for consistent, piecemeal, and focused transformation. The structural changes that we need are a far cry from Capitalism as we know it, but no one could accurately label it Socialism. Knowing how intertwined our personal lives are with our chosen economic arrangements, the Knowledge Economy provides a model of exchange that raises the human experience in every direction it grows.

Law and Identity

Central to the American historical narrative is the private ownership of property. This concept has molded the American psyche for centuries, tying freedom to economics. It has also shaped our educational institutions, our definition of work, and our relationships with one another. Culminating into a system best illustrated by Reverand Martin Luther King’s Jr., “This country has socialism for the rich, rugged individualism for the poor.”

What happens to rugged individualism when entire industries become unemployed in rapid succession due to breakthroughs in artificial intelligence and automation? We can imagine the inevitable scenario where transit drivers of all kinds, fast food, retail, and data entry workers rapidly becoming unemployed would not be handled well in today’s economy. Our present economic arrangements rely on resource redistribution to lessen inequalities created by our structures and will have no viable solution to such extensive and widespread financial hardship.

The first Knowledge Economy state will understand that a proactive approach towards restructuring laws supporting our economic structures is necessary to avoid repeating crisis driven by increasingly fast economic disruption. Policy-wise this translates to reimagining laws surrounding property and contract. In addition, knowledge economy implementation requires us to reorganize laws surrounding patents.

Patent Law

The defining characteristic of a Knowledge Economy is that it ties innovation and production into the same process. Imagine the concept of change as a foundation that we build upon, all new creations growing out of the imagination of past ideas and efforts. The higher the floor, the more rapidly human creativity can flourish in more directions. A Knowledge Economy values innovation over profit and in doing so operates under arrangements that lessen the strength of individual organizations to maximize returns while promoting a significantly higher level of access and opportunity for outsiders to innovate within an established niche.

United States patents typically last about 20 years which given the present rate of exponential technological growth[1] is, by my estimate, about 15 years too long. In a state economy organized in such a way to maximize the total creative potential of its citizenry, the goal is to allow as many people as possible to have access to the most advanced technologies and practice as quickly as possible. Reducing patent durations will enable us to provide innovators with a higher floor to stand on, accelerating both the pace and variance of innovation within a society.

As the U.S. Constitution supports patent laws, states seeking to embrace the knowledge economy would be wise to create separate sets of market arrangements to avoid getting tangled up in legal disputes. According to professor Roberto Mangabeira Unger, the single greatest achievement in legal history has been to determine that there is no unique form of market economy required by law.

Innovation firms could be attracted to these new arrangements with incentives such as public investments, workspaces, and technology access. In exchange, we could design profit structures with deep social responsibilities built into them such as social profit distribution after certain profitability tiers, and the responsibility to develop and facilitate continuing education programs for state residents looking to change the direction of their life.

Giving more people access to the most advanced technologies, practice, and procedure available will spur more innovation. The first Knowledge Economy State will require a population that believes that profit is not the defining factor of the human experience.

Private Property and Access

Implementing a Knowledge Economy within a state will require the emergence of a new type of social and moral code for the majority of residents. A shift from a profit-driven ownership mentality to an access based use approach. My argument is not for the abolishment of private property, instead for the expansion of alternatives to the singular form of property ownership we have now.

We can begin with residential properties. It’s difficult to attract and maintain talent when people cannot afford to live in locations where specific niche verticals are concentrated. Simply put, if we want to draw talented people from different walks of life, we need to think of ways for them to have access to a permanent residence.

One solution proposed in Amsterdam is that all new housing units sold cannot be used as rental properties[2]. This suggestion would decrease overall housing costs and lessen rent-seeking, a financial activity that adds nothing to the real economy[3]. An alternative idea is to fine landlords who own properties that are not occupied, encouraging them to sell the properties or lower costs to find tenants. Rent-seeking on residential properties is damaging to entire generations who were unable to take part in the cheap land and housing grabs of previous decades.

Image Credit: Hasbro Games

Alternatively, we could stop thinking of housing as a profit center entirely. One idea to accomplish this would be to establish permanent access to residential locations for people free of cost. If the public desires durations and conditions the details can be decided democratically.

This same idea could serve to help uplift so many of our residents who are victims of systemic poverty. You have a permanent residence, free of charge until you are ready to move on. Occupants of these access-based housing units would be prohibited from owning other properties and would be required to keep them in good order or face expulsion and fines.

By challenging residential rent-seeking, the first Knowledge Economy state begins to build a more comprehensive suite of protections for the individual. Giving every interested person the opportunity to attempt to experiment and innovate, to take risks, and to fail without fear of homelessness. An innovation economy protects its participants from decimation for trying something new. We know that 90% of startups do not succeed[4], but think of how many great ideas we’re missing by operating within a structure that both punishes people so immensely for failure and denies others entry entirely.

Consider the inherent structural classism proliferated by our present structure; it mainly empowers those with the safety net to fail to take risks. How much creative potential do we squander each year because our suite of social protections is inadequately prepared to deal with shifting advances in productivity?

A Knowledge Economy state recognizes that being poor isn’t a lack of character; it’s a lack of cash. Human ingenuity is our primary productive resource moving forward. The first state to recognize and organize around this concept will lead the rest in transitioning to a high-frequency innovation economy.

Education

The institutional arrangements in a Knowledge Economy state are designed to help shape each person in a way that provides them the capabilities to change the direction of their lives at will. We understand the disruptive impact technological innovation can have on entire industries, and we know that the rate of change is speeding up. Therefore it is logical to conclude that industry-wide disruption will occur more frequently soon. The first state to embrace education as a lifelong process supported by institutional arrangements will lay the foundation necessary to take full advantage of the Knowledge Economy.

Primary education will need to shift from traditional encyclopedic memorization methods used to prepare people for hierarchical work structures to a more dialogue-based way of learning. Beyond the fundamentals, school becomes less about memorizing facts and regurgitating them and more about exploration and selective depth. Whenever possible subjects learn from two perspectives and then a discussion is fostered between the students and guided by the professors. We can illustrate this point with an example of American history, teaching the colonization of North America from both the native inhabitants and the conquesting Europeans perspective.

Given that the students of today will have perpetual access to all of the world’s information at their fingertips the memorization of facts loses its value. Creative problem solving, cooperation, and communication, become driving objectives of primary education, preparing students to enter a world of collaborative competition built around maximizing the potential of every individual.

Specialized secondary educations opens up to all individuals at no cost. Democratic elections can determine the qualifications and requirements for program entry. A Knowledge Economy state rejects the practice of requiring people to subjugate themselves to for-profit banks to advance their skills and understanding of the world.

Given that the economy is shifting to a highly skilled, highly transferable workforce having more people with advanced experience and educational depth lays a foundation for more radical innovation and experimentation. The narrative that more highly educated people diminishes the value of the education is false and only perpetuated by our present economic arrangements which encourage firms to seek the lowest labor costs possible.

Beyond primary and secondary education the first Knowledge Economy state will proactively create numerous pathways for continuing adult education in a wide variety of fields. The state can cooperate with its best companies to facilitate and design these programs. Funding can be in the form of total corporate sponsorship, public investment, or a hybrid model. The decisions should be made democratically, giving the public credible and transparent sources of factual information available in multiple mediums comparing the alternatives.

Recognizing that large corporations have more social responsibility than presently required, the Knowledge Economy state designs programs where adults can enter and learn the most advanced practice and procedure from the state’s best talent. Our long term goal is to give every person the agency in the direction of their life. Companies benefit by getting direct access to highly specialized expertise in their verticals, trained and prepared to adapt to their standards and procedures upon graduation. It’s a win-win and a necessary step to create a transition into a new era of economics and labor.

No Alternatives

Stagnation of the economy is bad for organizations but even worse for families. If we continue to allow a handful of companies to isolate the best technologies and practice, then stagnation is almost certainly a given. Coupled with advances in automation and artificial intelligence we find ourselves on the verge of a market and economic disruption, unlike anything we have experienced. Unfortunately, under present arrangements, these innovations will only stand to benefit a tiny minority. States that are serious about being ahead of crisis should begin the foundational work for transitioning into a knowledge economy today.

The choice to embrace a state-wide Knowledge Economy directional shift seems on the surface to be a far off fantasy given the state of politics in the many states and nation as a whole. In reality, it is both feasible and achievable. Our struggle is not ones of means. It’s one of imagination. There is no future for the methods of the past, and if we’re going to prosper, we need to rethink the structure of our most core institutions. Only then will be able to reach our fullest potential in both progress and our humanity.

The first state to adopt a Knowledge Economy will be the first state to have the political leadership that can create the language to convey the need to transform accurately.



[1] The Law of Accelerating Returns by Ray Kurzweil http://www.kurzweilai.net/the-law-of-accelerating-returns
[2] Amsterdam’s Plan: If You Buy a Newly Built House, You Can’t Rent It Out by Feargus O’Sullivan City Lab https://www.citylab.com/equity/2019/03/amsterdam-rental-housing-prices-new-home-owner-occupied/585235/
[3] Finance, the Real Economy, and the Progressive by Ron Rivers OurSocietyhttps://www.oursociety.org/finance-the-real-economy-and-the-progressive/
[4] 298 Startup Failure Post-Mortems CBI Insights https://www.cbinsights.com/research/startup-failure-post-mortem

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Embracing the Future of Labor Today

By Ron Rivers,

Throughout history, labor has been a primary defining factor in human experience. For the majority of us, it is the task we dedicate the majority of our time and mental resources to each week. Labor, like everything else in our universe, is subject to varying degrees of change that bring along new sets of human-centric problems to solve. Unfortunately, history has taught us that resistance to change is almost as common as the change itself. The solution is to encourage the proactive embrace of our present shift from a manufacturing economic model to knowledge-based labor, linking labor, economics, and politics together to form new structures and ideas facilitate an evolution that is pluralistic. To prepare we should begin by understanding why we are here.

A Whole New World

Globalized trade and labor function on theories of global exchange between wealthy advanced economies and emerging economies with low-cost human labor. The historical relationship between the United States and China is one example that illustrates this point[1], the outsourcing of labor-intensive low-value goods has been a cornerstone of U.S. business strategy for decades. Putting aside the ethical and moral conversation about the conditions in which Chinese workers operate under for another article, this strategy has proven to be a useful model in the past.

Today U.S. tensions with China and other international trading partners grow, both because of the present administration’s policies and the transformation of global economies to a Knowledge Economy model. Knowledge Economies are ones where the most advanced form of productivity is highly skilled, highly transferable labor. Companies operating under Knowledge Economy models integrate production, research, and innovation into one continuous process that allows them perpetually transform the organization’s products and services.

What sets knowledge economy organizations apart is not strictly correlated to better outputs relative to inputs, but rather their ability to quickly rise to the top of a specific market niche and remain there. Consider Google as an example, their talent, technology, and operational culture give them incredible power to ensure that they stay at the forefront of innovation within their desired niche. Google’s position as an innovative leader is secure because within their organization innovation and production are linked as one.

The ability to stay at the forefront of innovation within a vertical is the future of many existing and future companies operating under Knowledge Economy models and one of the primary reasons for progressive policymakers and thinkers to proactively foster the growth of these organizations. It is already changing the nature of how we cooperate with other countries and has tremendous potential to transform global societies. The challenge we face in embracing the transformation is how to decouple the antiquated political and economic ideologies of the past.

Designing Uncertain Employment

One of the primary roadblocks to breaking open access to this new innovative labor model is that the organizations at the forefront shield themselves from challenge through our existing laws of property and contract. Developed during a time when the present arrangements were inconceivable, these structural arrangements impose a limitation on American innovation. Observing our current circumstances, we know that the mega-corporations of today have essentially commoditized their production models — outsourcing labor to other parts of the world where human capital is cheap, and taxes are low. The ability to maximize capital gains at each level of value generation creates a cascading impact, where the most advanced Knowledge Economy firms can grow at incredible rates and solidify their power.

While nothing mentioned in the above paragraph is news to any student of business or economics, the implications are compounding and disheartening. If we observe the present trajectory of labor it is clear that we are rapidly entering a space of permanent uncertain employment, often cited to as the “gig economy.” We can observe this shift around the world but especially in wealthy economies like the United States.

Politically the impacts of these economic shifts are already being felt and will only open up future opportunities for ill-intentioned abusers in the future as industry-wide disruption begins to occur more rapidly[2][3]. The old mass production economics models were the foundation of the same political thought and theory that we practice today. Proactively embracing these new economic models through innovations in our legal arrangements will help insulate ourselves from bad actors while simultaneously heightening our ability to address unexpected and immediate challenges.

Image Credit: Nordic Business Forum

Opening Access to Innovation

As continuous innovation is central to the function of firms the best and most advanced practices and technologies, become further concentrated in just a handful of companies. This isolation of knowledge is supported legally by property and contract laws written from a place in space-time and human consciousness that is not reflective of our present trajectory. In a sense, we are actively participating in the stifling of innovation and experimentation here in the United States — the exact opposite of what we would be doing under a proactive embracing of the Knowledge Economy.

I believe that a unifying purpose for every American should be to actively fight for the spread of Knowledge Economy practice and procedure to every productive vertical that can use it. We can approach this effort from numerous directions such as requiring large firms to develop free continuing education programs, revising patent laws, legally requiring finance to be tied to the real economy, and deepening cooperation between existing large firms and new innovators.

Opening up access to more people to learn, explore, and work with the most innovative technologies and techniques will significantly raise the floor that every innovator stands on. Imagine a new startup working in logistical technologies having access to Amazon’s proprietary patents and practice and being able to use them in their chosen direction. By revising patent laws to support new innovators over existing market giants we give ourselves the ability to expand beyond anything possible today.

If it sounds radical and incompatible with the present arrangements, you’d be correct. But what is the alternative? Do we continue to allow the select few companies to dictate all experimentation and innovation at the highest levels? No, we do not. That is a pathway to the dystopian future that we’re all tired of reading and seeing.

Our reality is that the future is not waiting for us; it is here. If we’re open to embracing the future of labor and acting in a way to create structural arrangements that empower innovation over profit we will provide ourselves more opportunity to express our productive power in the direction of our choice. In rejecting the past’s grasp on the present, we take a significant step towards a more pluralistic future that evolves proactively, without the need of crisis.


[1] Understanding the US-China Trade Relationship by Oxford Economics U.S. China Business Councilhttps://www.uschina.org/reports/understanding-us-china-trade-relationship

[2] Robots could replace 1.7 million American truckers in the next decade by Natalie Kitroeff The Los Angeles Times https://www.latimes.com/projects/la-fi-automated-trucks-labor-20160924/
[3] Japanese white-collar workers are already being replaced by artificial intelligence by David Gershgorn Quartz https://qz.com/875491/japanese-white-collar-workers-are-already-being-replaced-by-artificial-intelligence/

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Progressive Lessons from our Productive Past

By Ron Rivers,

Production is a transformative process, consistently and perpetually changing to solve new problems.  All regimes of government are tied to their most advanced form of production. This bond fuels the growth and expansion of the government organization while at the same time defining the social, economic, and political arrangements of the society.  By deepening our understanding of the modes of production fueling the political economy of the United States we can expand our imagination of possible alternatives.

 

Time and Technology

Historically social democracy in the United States is aligned with a mass production economy.  One of the most recognized examples being Henry Ford’s assembly line. The mass production model benefits from low skilled, highly transferable labor.  The ideal worker in this mode of production would be able to focus on a singular task, obedient, have a basic grasp of literacy for safety and operational purposes, and the fundamental physical skills necessary to operate the machines.  Under this model, labor could be moved from one factory to another and quickly adapt to the new operational requirements. This system of large-scale production of standardized goods and services was structured in a very hierarchical and technical division of labor.  You can imagine mass production as a template that could be applied to various production verticals to produce similar outputs.

Fast forward to present day, and we can observe that time and technology have diminished mass manufacturing’s economic dominance here in the United States.  Today our most advanced type of production is the Knowledge Economy. Most advanced defined as the method of output creating the highest returns for input.  The Knowledge Economy is an economic system where the most work relies on highly skilled labor that is easily transferable between organizations, Silicon Valley developers being a single example.  Similar to the manufacturing organization of the past, developers working at one firm can easily transfer to another and be able to begin productive work within a relatively short time frame. The defining difference of this new era is that labor is highly skilled, dramatically limiting the number of people who can access these opportunities.

 

The structure of Access

Comparing the present to the past, we can observe other critical differences in the structuring of access to advanced production resources.  Today the Knowledge Economy exists in almost every industry sector but remains isolated to a few organizations, usually those with dominant market shares.  Its insular nature is due to a few aspects; one is that it is challenging for the new knowledge-intensive labor practice to spread organically unless the general population is brought up to speed with the educational requirements for this type of work. We can also observe that the concentration of access to this mode of production favors the present dominant interests, both political and business, making the path of least resistance to keep it isolated.

If we compare our present modes of production to historical examples, we can observe significant differences.  In the past, the most advanced form of production was disseminated on a national scale. The mass production revolution shared access to advanced production technologies and methodologies such as standardization of products, assembly lines, and methods of batch production.  This philosophy of shared access to technologies developed an economy based on the competition of production value rather than the concentration of access. In the present day, we observe the opposite happening. Our most advanced firms maintain access to the most advanced technologies support machine learning, logistics, data analytics, and more to themselves.   Comparing GDP growth rates [1] of past and present, we can observe that we consistently received more significant economic growth when access to the most advanced methods was shared.

 

New ideas, new systems

If our objective is to create a better engine for productivity and innovation, then data regarding productive growth favors opening up access to the most advanced forms of production to more people.  More people with more access to the tools necessary to innovate will result in more innovation. More innovation creates more opportunities for labor and potential collective impact. Under the current institutional arrangements, we are hindering our possible progress in favor of a small group of mega-corporations.  Therefore the solutions of modern Progressives must be to find ways to reshape our legal and institutional arrangements to unlock access to more people. In transcending our current legal, political, and economic limitations defining who can access the best technology we lay the groundwork for experimentation and innovation that could grow exponentially larger and faster than anything we observe today.

Critics of my argument might claim that people want to join companies like Google, Facebook, and Amazon because they provide the most money.  Capital is indeed a big incentive for tech workers, but I would argue that the critique cannot be validated because Knowledge Economy workers have no options.  By choosing to work at the largest firms, the developers gain access to more capital and, more importantly, the ability to work on the most advanced projects in the world.  These opportunities are denied to other sectors of our economy, shrinking the scope of the potential for innovation and access. The claim I make is that if workers of the current Knowledge Economy had more options to use their talents in different directions outside of the monopolistic minority of tech conglomerates, they would do so.  Innovators want to innovate, but it’s hard to do that in a world where your laws and government support the isolation of access.

It’s a fact that the nature of work is changing.  In his second lecture on Progressive Alternatives, Roberto Unger discusses how the future labor will be separated into cooperative organizations and self-employment. Collaborative efforts in the joining of individuals of similar interest working to solve a common problem and self-employment in the form of meaningful work drawing from the creative talents of the individual.  Transforming our approach to labor from a means of survival into a series of passion projects is the goal of the suggested incremental changes. This isn’t a dream of a distant future, instead a call to the leadership of today and tomorrow to recognize the potential we squander every day we do not embrace our transition. No person should have to do a job a machine can do.  Through a combination of institutional reformation, focused automation, and cooperative projects we can begin to construct the future of labor today.


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