Innovation drives growth
The Courier Mail, November 22, 2006
Article by Tom Bentley, Board Member, Eidos Institute
MOHAMED Yunus is hardly a household name in Australia, but this year he hit the big time by winning the Nobel peace prize.
He did not negotiate a truce, end nuclear proliferation or lead a people out of oppression, but his particular brand of innovation may have more profound long-term consequences.
When Yunus returned from an American postgraduate education to his native Bangladesh 30 years ago, he looked for new ways to tackle the grinding poverty that millions of its people still suffer.
He tackled the fact people who most need credit – those who start with literally nothing – are the least likely to get it, because the measures of risk that banks use to lend automatically exclude them for consideration.
His solution – micro-credit – has grown into a system now being used in scores of countries, and is beginning to change the way banks serve even rich customers in wealthy countries such as the UK and Australia.
The innovation is brilliantly simple; rather than trying to make independent assessments for small loans, micro-credit relies on referrals and recommendations from others – friends, neighbours, colleagues.
Yunus's Grameen Bank has given millions of people access to opportunities that otherwise would have passed them by. But why is a Bangladeshi banker relevant to Australia? Because Yunus's scheme typifies the innovation even wealthy, industrialised societies need to meet the big challenges of economic, social and environmental sustainability.
Australians are familiar with the idea that globalisation will put new competitive pressure on jobs and livelihoods. Australia, like many others, is also becoming an older and more diverse society as it grows wealthier. And anyone paying attention to current water shortages knows that investing in new ways to protect and manage the environment is a growing priority. But where should we look for solutions?
The first source is economic innovation. As global competition intensifies, we know that the big emerging economies, especially China, India, Brazil and Russia, will change the game for existing industrialised players. Increasingly, wealth and jobs will flow from the ability to add value to goods and materials through knowledge, services and design.
This puts a new premium on education, research and patents, and is leading to a growing emphasis on innovation policies around the world. But the innovation that matters is not just in the science lab and the university precinct.
Service-based innovation, for example, in which innovations like coffee shops and car sharing transform the way we think about very familiar activities, can have a powerful effect.
Equally important is social innovation, of the kind that Grameen Bank represents. Many of our changing social needs are not automatically met by private or by government services, because lifestyles and social values change continuously, and new solutions often emerge on a small scale.
Another striking example is Wikipedia, the online encyclopedia that now rivals Britannica as a global reference point.
Millions of us use Wikipedia, but nobody owns it in the formal sense, and its value depends on free contributions from thousands of experts, enthusiasts and amateur contributors.
The Yale law professor, Yochai Benkler, in an important new book, Wealth of Networks, argues that this kind of production goes far beyond exciting new web applications in its significance for society.
He suggests that activities in which large groups of peers draw on "commons" – shared resources which everybody can access and from which everyone can benefit – represent a growing sector of the economy, in which non-market production can feed the long-term prosperity of market economies and give people greater freedom in their own lives.
So what role might government have in all this? The lesson is that many of the solutions will start as small-scale, everyday practices and then grow.
Government's ability to invest in new capabilities, new partnerships and new ways of organising is just as important as the power of government to direct, resource, and control key areas of our lives,
But it is worth remembering that Australia's century of success has rested on a broader cluster of institutions often taken for granted – post offices and public houses, limited companies and trade unions, libraries and credit unions, universities and parks.
If we look with fresh eyes, we may find solutions to the big challenges are staring us in the face.
Tom Bentley, immediate past director of the London think tank Demos, is a part-time director at the Australia and New Zealand School of Government. He was the inaugural speaker at Brisbane's Eidos Institute Breakfast Series.
The next speaker is Frans Nauta from the Netherlands who on December 13 will discuss government innovation and reform.