We are delighted to announce the appointment of Dr. Nagy Hanna, adviser and former head of Corporate Strategy at the World Bank, as a Senior Fellow of C-PET.
Nigel Cameron, C-PET President, interviewed Hanna on some key questions that he has addressed in his extensive published work. Hanna gave us his thoughts on where the U.S. is heading, the digital revolution, and how he sees C-PET’s role as important to what is happening in Washington now.
You career has been spent with the World Bank with a focus at the nexus of business innovation, national strategy, digital economy, and globalization issues. Drawing on your experience, what lessons are relevant for developed countries now undergoing debt, growth and employment crises?
Perhaps I can draw on my experience in working with many developing countries or emerging markets. I draw five lessons that I think are particularly relevant to the US at this moment.
First, growth involves structural change, and ongoing globalization imposes many requirements for continuous and deep structural change in sectors, employment and institutions. Having a strong future orientation to facilitate this change is crucial to both developed and developing countries. Neither the government nor the private sector alone can take care of deep structural change. These changes are often painful and unsettling. Successful emerging economies have learned to invest in the future and balance short-term pain for long-term gain. China for example saves and invests 30%-40% of its GDP annually. India is not far behind. This tradeoff seems to be more politically difficult for developed economies. The US borrows to consume and invest, and invests little. Yet strong future orientation is essential to lead a successful structural transformation.
Second, effective governments and markets are both essential to sustainable and inclusive growth. Markets are critical to growth. But this lesson should not lead to the simplistic view that the problem is government. There are no cases of high performers where government institutions are ineffective or dysfunctional. Growth comes from healthy interactions between government and private sectors, with governments setting future-oriented polices and institutions, addressing market failures, developing public goods, and filling gaps: in infrastructure, human capital, and knowledge creation and diffusion. Governments also play a critical role in addressing the distributional aspects of growth. This is necessary not only in democratic societies, but even in all fast growing economies. Strengthening domestic growth, critical to large economies like the BRICs countries, must be increasingly anchored by an expanding middle class.
Third, successful countries take a pragmatic view of policy. They emphasize learning. They remain flexible on the means while clear on the ends. They adopt an experimental approach, not ideological and rigid ones. Capitalism has been durable because of its infinite malleability. A rigid single recipe does not work for all contexts and all times. A “Washington consensus” that emerged in the late 80s and codified by the World Bank for developing countries was modified by successful Asian countries to suit their conditions, But when applied rigidly, reduced to market fundamentalism, and imposed from outside in Latin America, it led to lower and unequal growth. Apart from avoiding various forms of fundamentalism, successful countries put a premium on openness to the global economy as a source for opportunities, learning and adaptation.
Fourth, leadership and institutions matter most to sustain growth and structural change. Leadership at all levels must be able to build consensus around a compelling and inclusive vision and to build the necessary coalitions and institutions to make it happen. This is a collective or networked leadership that spans public, private, civil society, and academic institutions. High performers develop institutional depth in policy making and draw on think tanks and NGOs to guide formulation, implementation, and learning. As economies grow and further integrate into the global economy, leaders and societies also need to retool and reshape their institutions to accommodate empowered citizens and expanded participation in priority setting and accountability.
Fifth, emerging economies are accelerating their growth by catching up on technological learning. In particular, information and communication technology has been a powerful source of globalization and structural change, and successful countries have used it as a key source of dynamism and an enabler of economy-wide transformation. This has been particularly the case in many Asian economies, but it is now spreading across the world. It has been transforming how businesses and governments do their business, deliver their products and services, access global talent, mobilize and share knowledge, and interact with their clients, suppliers and partners. Harnessing this revolution helped many countries to catch up, accelerate their development, and position themselves for a highly competitive global economy.
Also drawing on your global perspective, how is the U.S. doing and where is it going?
Viewed from a global economy perspective, the US has many strengths and some emerging as critical weaknesses. The US is still the largest economy, with the largest middle class, with the most first-class universities and research centers in the world. Since WWII, it has assumed global leadership on many fronts, including open trade and global governance institutions. It has been the source of most breakthrough technological innovations and the home of the most innovative ICT companies in the world. It has the largest pool of techno-entrepreneurs and venture capitalists. It has tremendous capacity for adaptation and innovation.
But in a fast changing world, America cannot rest on its laurels. Some of the US strengths are eroding while weaknesses have become critical vulnerabilities. Emerging economies, led by China and India, have been growing in the range of 7-10 %, exploiting the scope of catch-up growth and the global flows of knowledge, technology and finance. The risk is that US political leaders hold a static view of a fast changing world, and if this view of the world persists and turns inward, it could squander painfully accumulated entrepreneurial and human capital. This risk also applies to EU countries where structural changes are also urgent. Globalization, climate change, energy demands, and financial volatilities are key dimensions of the “new normal”. This new global economy will remain one of convergence and a multi-speed world for the next 50 years or so, as suggested by Nobel laureate Michael Spence. But accommodating this new world and establishing new sources for long-term growth will require innovation, leadership, political courage, and widespread science and technology literacy in the developed countries.
The traumatic financial crisis that started in 2008 has morphed into structural unemployment and increased tensions within and among countries, particularly among the heavily indebted countries. It has exposed the growing vulnerabilities of the US where short-term political considerations have clashed with the much needed but future-oriented policies and longer-term structural changes in the economy. The global governance system-for finance, trade, development cooperation, climate change-is also being stretched beyond its current capacity. One recent response was to expand representation from G7 to G20, but this new global mechanism has not moved from addressing short-term cyclical issues to fundamental structural change and inclusive growth in both developed and developing countries.
The US, EU, and Japan are on a steep learning curve. The political and business elites must earn the trust of the populace and present a convincing vision of “fair” and “smart” globalization. The dangers of turning inward and protectionist are very real unless structural and distributional issues are addressed. A vacuum of leadership can be filled quickly by confrontational politics. This must be arrested by a compelling vision and a pragmatic, cooperative, inclusive agenda. This is essential not only for the US, but also for a sustainable and smart planet.
We have seen a lot written about the “digital divide” (and the “nano divide” and other divides too). At the same time, we hear of rapid deployment of mobile devices in developing nations and innovative use of them (such as in banking). Is the ongoing digital revolution going to bring the rich and poor closer together, or simply to compound existing inequities?
The ongoing digital revolution has brought much growth in productivity, growth and trade. It also has a great potential to solve or manage old development challenges across all sectors: improving access to education and finance, improving access to government and agricultural extension services, empowering citizens, and enhancing transparency and accountability. I have covered such issues and how governments all over the world are harnessing the digital revolution in three recent books published by Springer:
e-Transformation: Enabling New Development Strategies, Enabling Enterprise Transformation and Transforming Government and Building the Information Society
But information and communication technologies are not a panacea and do not work in a vacuum. ICTs have also increased the return on knowledge and education, automated many jobs, and enabled global outsourcing of manufacturing and services. These developments are having uneven impacts on people and nations, accelerating productivity and growth around the world, while increasing inequality within nations. Rising inequality is thus a growing concern. This problem is no longer just within developing countries. With globalization, outsourcing, financial volatility, and the weakening of social safety nets, distributional issues are on the rise even among developed countries.
The digital divide still remains a pressing issue among nations. The mobile phone has bridged only one aspect of connectivity, mainly for voice. But the divide remains high in other terms: affordable Internet access, relevant digital content and applications in local languages, and capabilities to use information and knowledge, even when available. Overcoming these divides in holistic ways is necessary for the digital divide to become digital provide. Even as critical is to have the digital divide become part of integrated solutions to address poor and isolated communities.
The broad and long-term implications of ICT for income and opportunity divides are uncertain. ICT impacts are not automatic. Leadership, policies, institutions, social and cultural contexts, public-private partnerships, and political commitment to inclusion-all matter a lot in determining the outcomes. If local, national, and global leadership put a priority on economic and social inclusion, ICT can become a powerful tool for that, rather than compound existing inequalities. Despite a lot of rhetoric of political leaders in many countries, few have been successful in securing digital inclusion and even fewer have leveraged ICT to secure inclusive growth. But the sprouting of so many examples of grassroots social innovations–even among the poorest countries–gives me some hope.
While Washington hosts the Bank, and the IMF, and the Inter-American Development Bank, and other institutions, they are not well-known and seem little integrated with the U.S. policy community. Are there ways we could all benefit from better connections around D.C.?
I can think of many reasons staff of these global institutions and US policy community located in Washington should link and benefit from better connections. First, both communities ask, or should be asking tomorrow’s questions and many of these questions involve common problems and global solutions. Both framing global issues and creating global public goods require engaging global policy networks that cut across institutions and even nations. Second, strategic thinking and innovation thrive on face-to-face interaction among policy makers and researchers and DC is a hub for many policy making and research institutions, and epistemological communities including those concerned with globalization, competition, cooperation, global finance, security, education, health, sustainability, and poverty alleviation, to mention a few. Third, there is no monopoly by developed countries on how we can solve complex social and economic problems. Increasingly, we see more and more innovative solutions coming from emerging economies, such as in microfinance, mobile applications, frugal innovation, and even education and health systems. Benchmarking performance and practices across countries in informal settings like C-PET can also facilitate global learning and induce local reforms and innovations.
The question is why this synergy or connection between the two communities is not happening. Time pressures? Silo mentality? Parochialism? Little awareness of what each can offer the other? I welcome the fact that C-PET is seeking to build bridges.
You are no longer full-time with the World Bank but continue as an adviser. I know you are also busy writing. What are the efforts now taking your time and energy, and what’s the main concern on your mind in 2011?
I write a lot. I also engage in keynote speaking and executive education on e-leadership and ICT-enabled innovation. I also provide advisory services on national ICT strategies for many governments and international organizations.
My work for this year includes two books comparing the e-transformation experience of eight countries, published by Springer: Seeking Transformation Through Information Technology: Strategies for Brazil, China, Canada and Sri Lanka and National Strategies to Harness Information Technology:Seeking Transformation in Singapore, Finland, the Philippines, and South Africa.
My review of experience of these eight countries helped me reach some key conclusions. Countries that moved fastest in harnessing the digital revolution for their economic transformation have adopted and persisted with long-term transformational objectives, integrated ICT into their key sectors and overall development strategy, developed new kinds of leaders and institutions that can make this integration possible, invested generously in human resources development to harness the technology and manage the associated changes, committed to experimentation and continuous learning, and pursued economy-wide ICT diffusion and digital inclusion.
I have also just finished a paper commissioned by the World Bank on a strategy for using ICT to enhance transparency, accountability, participation and governance in Africa. Two more books are under preparation, one pursuing research on smart cities for a smart planet, to be published by MIT, and another comparing the national innovation strategies of 10 countries.
We are delighted to have you as part of our C-PET circle of Senior Fellows, as we scale our efforts and engage across silos and perspectives. Do you see Washington moving in the direction we would like – incrementally longer-term in its decision-making and its grasp of the impacts of emerging technology development?
C-PET’s vision suits me well. It is concerned about shaping the future, while Washington seems to be preoccupied with reacting to (denying?) crises, fighting fires, and defending turfs, divisions, and old habits. Both political leaders and the electorate seem oblivious to the implications of globalization and the ongoing technological revolution, or more seriously, resisting smart adaptation and necessary change. We seem to focus on old jobs and old solutions, not new sectors, new technologies, new skills and new ideas. The limits of short-termism should be increasingly obvious.
The challenges facing Washington and the world call for thinking in global, holistic, and inclusive terms. How are we going to accommodate a 10 billion population on our increasingly stressed planet? How will the rich countries evolve their production, consumption and institutions to emphasize quality of life and sustainable life styles while accommodating inclusive growth that takes account of emerging giant economies like China and India? Solutions will require foresight capabilities, long-term perspectives, public-private partnerships, participation by diverse stakeholders, bold experimentation, openness to learning, and exchange of experience among countries. Progress will require re-thinking current practices, questioning current institutions, and focusing on smart, quality, and sustainable growth. And this search starts by asking tomorrow’s questions.