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Why We need Social Impact Innovation

In 1959, Peter Drucker, one of the most influential management theorists of the 20th century, observed that “the new frontiers of this post-modern world are all frontiers of innovation.”

Landscape-altering discoveries and inventions, once so infrequently stumbled upon as to be in large part attributed to chance, were now budgeted for and purposefully sought out; now, proclaimed Drucker, in his Landmarks of Tomorrow: A Report on the New Post-Modern World, “each technology, each industry, each business lives under the risk of being made obsolete without warning…by innovation.”

The consequence of this post-modern reality? In Drucker’s view, “more and speeded-up innovation alone can protect against the risk of being overtaken.”

It appears today that Drucker’s premonition, and concurrent prescription, have come to bear and have been fully embraced by American industry. When Landmarks of Tomorrow was published in 1959, the US allocated an aggregate $12.5 million to innovation-geared R&D; of that $12.5 million, US businesses invested $4 million, or roughly 30 percent. The rest – 70 percent – was contributed by the government, and DARPA, as is generally acknowledged,  played a key role, as is well expressed by its slogan: “creating breakthrough technologies for national security.” Among these technologies was: the Internet.

By 2015, roles were inverted, with business in the lead.  

Investment in innovation-geared R&D had jumped to $359.5 million, with US business investments accounting for a whopping $304.8 million, or nearly 85 percent, of total R&D spending. If Drucker found innovative passivity, and its reliance on inevitable progress, to be “outdated” in 1959, today it is a universally recognised industrial reality.

Yet Drucker’s insistence on the need for innovation was not intended solely for the world of industry. Perhaps that he is remembered first and foremost as a business strategist demonstrates the extent to which his contention that “we need social innovation more than we need technological innovation” seems to have been ignored.

While a passive attitude towards progress has been eradicated from industrial strategy, it still has a stronghold on our attitude towards social good, and it shouldn’t.

Our longstanding confidence in the public interest’s ability to be supported by the individual pursuit of economic self-interest represents an equally outdated passivity towards progress.

The same Druckerian reasoning that ushered in the industrial innovation era calls for a reassessment of this American conviction, and, I will argue, legitimises my belief in the need for a collective commitment to implementing an expanded conception of value that ascribes more weight to social impact at the heart of our economy.

Our passivity towards the scientifically backed, and at this point indisputably problematic, issue of impending environmental catastrophe is perhaps the most easily identifiable indicator of the discrepancy between our approach to industrially-oriented and social impact-oriented innovation.

To say we have paid no heed to the rise of the spectre of climate change would be an unfounded exaggeration. According to the Climate Policy Initiative, the US invested a not-insignificant $27 billion in climate change-combating initiatives in 2013.

Compare that to the $12 trillion committed and $2.5 trillion spent by the US government to combat the Great Recession of 2008, however, and the environmental investment figure appears less impressive. I juxtapose these figures not to offer my own estimate of the appropriate relative investment the problems deserve, but primarily to suggest that there is likely a far wider gap between the magnitude of the response to climate change and the magnitude of the problem as articulated by climate experts, than between the magnitude of the response to the Great Recession and the magnitude of the problem as articulated by economic experts.

We prefer to listen to economists rather than climate scientists.

This would suggest – and it is confirmed by the election of Donald Trump, who in 2014 tweeted “when will our country stop wasting money on global warming” and campaigned primarily on an economic-revitalisation platform – that we are far more concerned with adapting to changing economic realities than to environmental ones.

A HISTORICAL RELIANCE ON PRIORITIZING ECONOMIC PROSPERITY

I see this attitudinal pluralism, wherein economic and environmental problems are met with differing responses, as rooted in our historically unwavering adherence to the belief that prioritising economic prosperity is the most efficient way to reap public benefits.

Publicly interested political initiatives require economic justification; this is how Trump legitimised his dismissal of global warming.  

This is also why Bernie Sanders’ radical social program platform failed to capture the Democratic nomination, and why we elect to combat culturally-pervasive racism with demographically-targeted jobs programs.

Drawing a causal relationship between economic and public interests is not entirely unreasonable; capitalism’s success and ascendance to international standard has demonstrated the national benefits conferred by a decentralised, competition-based market system.

Yet we need to remember that millennial youth, the demographic with the weakest ties to the glory-of-capitalism doctrine, cast more votes for Sanders than for Trump and Hillary Clinton combined. This reveals a growing disillusionment with the free market capitalist belief that the public interest will be sufficiently served by the proverbial invisible hand, and that economic incentives encourage communally beneficial action.

It can be economically efficient to lay off pregnant mothers, but does that really validate gender-based hiring discrimination as a public good?

I recognise the host of implementation problems involved if we try to pivot away from the science of monetary economics towards a concept of value that integrates social and environmental metrics.

The health of the intricate economic system upon which Americans’ monetary livelihood rests is based on our ability to measure it, and adjust it accordingly; integrating difficult-to-measure value into a price tag threatens the delicate and critically important balance of supply and demand.

Yet there was a time when even monetary economics seemed more qualitative than quantitative until the myriad advantages of economic science became apparent enough to inspire the generations of American thinkers who have contributed to our systematised understanding of the economy.

There seems to me little indication, however, that we are less capable of quantifying the qualitative now than we were at the dawn of capitalism.

Many of the metrics and indicators upon which business executives rely to make prudent financial decisions today must have at one point seemed beyond actionable measurement. Spurred by monetary incentive, however, we have proven capable of quantifying the price of chance, office aesthetics’ relationship to productivity, and the financial cost of weather.

This indicates to me that the only barrier preventing the quantification of social and environmental impact is our unwillingness to relinquish the ethos of inevitable social progress.

A BIPARTISAN PROPOSAL

Though seemingly radical at first glance, I see the potential for bipartisan appeal in the project of integrating social and environmental impact into our economic calculus.

Conservatives cry for fewer governmental regulations, redistribution programs, and inefficient taxation, when these political decisions are often remedial responses to the social costs of the free market, while progressives support these economic productivity-reducing initiatives precisely because they are concerned about those social costs.

Developing an actionable and manipulable economic science with expanded value at its foundation would mitigate the need for government social insurance by hiking the price tag of monetarily beneficial, but socially damaging, economic decisions.

Reliance on economic innovation in lieu of government imposition is a fundamentally conservative American priority, while innovative adaptation to contemporary realities is a fundamentally progressive one. In an age of partisan deadlock, this has the potential to strike a chord with one of the few common denominators Americans seem to have left.

There remains the problem of ideological inertia, and the immense risk of overhauling the foundation of our vastly complex economic system, such that this call to action may appear to some to be made in vain.

It might be useful to remember here that there was an analogous point in our history when we were forced to decide between the economically expedient and socially responsible, and retrospectively have celebrated our decision to elect for the socially responsible.

The abolition of slavery, and the host of structural, social, and industrial challenges that came with it, necessitated a collective commitment to a new ideal at the heart of our economic dealings, and a new generation of thinkers to fine-tune the gutted economic machine.

The time has come again to abandon the hope for inevitable social improvement and embrace the risk of innovation. Otherwise, we are, to use Drucker’s words, at “risk of being overtaken not by another business, industry, or economy,  but by the consequences of our own passivity.”


FEATURED PHOTO CREDIT:  Editors note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com

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