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| A reaction against linear thinking | | Date Created: Aug 29, 2005, 10:06 PM |
I feel compelled to write this after receiving a mini-lecture from a senior civil servant on the use of the word "lever". "Lever" is one of the most used words in the Civil Service. It is usually used to describe a "tool", like a levy or a quota, that a civil servant can adjust, depending on poli-socio-economic considerations, and expect a certain outcome. Many levers come from the world of economics, such as interest rates, exchange rates etc. Less well-used, but no less popular are other levers such as labour levies, employment quotas etc.
Unfortunately for civil servants, levers do not work as well as they used to. Witness the Fed's futile attempts at curbing excessive credit through raising interest rates. Even in the good old days when the economy would respond like a well-worn script to a government's actions, there was always a signficant time lag between the application of a lever and its outcome. This time lag could take months, during which time other events could have taken place to render the original lever action useless.
My discomfort with the language of levers is the idea that an economy or a society is a large deterministic machine that, if we only knew enough about its innards, we could predict its every response to our actions. There is a seductive simplicity in this mental model where every action leads to a pre-defined result. Our only work is to figure out the mathematical formula that links action to outcome.
But globalisation has resulted in an intermeshing of societies and economies such that there are very few economies that behave so linearly. Going back to the Fed's actions, one school of thought holds that the integration of China and India's labour markets into the global market has held down inflationary pressures and thus blunted the Fed's erstwhile reliable interest rate tool. So it turns out that millions of Chinese and Indians willing to work for a fraction of the hitherto global wage are more important than Alan Greenspan and the Fed's decisions.
So what can we do? I don't have an answer but the first step should be to shed the hubris that a deterministic model engenders. Only then can we consider other factors outside the closed system that we have grown comfortable with. In an increasingly inter-related economy, the most effective lever could well be the knowledge of the inter-relationships within and between systems; and the ability to find the tipping point within these inter-relationships or networks to one's advantage. I have to say this because many people would not even think of knowledge and network building as levers. I hope to prove these people wrong. Will keep you updated.
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