The Way Out of the Current Crisis

Posted by Carol Coletta on December 03, 2008

Richard Florida challenges the current approach to the global financial crisis.  The problem, according to Richard, is that we are stuck in an industrial economy mindset.  We still do not take seriously the idea-driven economy that is emerging.

"The first step," Richard wrote in his November 29 Globe and Mail column, "must be to reduce demand for the core products and lifestyle of the old order. The industrial economy more than a century ago required a revolution in agriculture - one that improved productivity and reduced the share of agricultural labour from roughly 50 per cent of all workers in North America in 1900 to less than 5 per cent today. Cheaper food then freed up disposable income for cars and other household products.

"What's needed now is to massively shrink expenditures on houses and cars to free up spending for newly emerging goods and services. Part of this rollback will naturally occur as the real-estate bubble deflates and housing prices fall. But we need to take it a step further if we truly want more demand for new kinds of economic activity."

The one step?  Stop celebrating single-family home ownership.  "The experiment has outlived its usefulness," he insists.  "Homeownership made sense when most people had one job and lived in the same city for life. But it makes less sense when people change jobs frequently and have to relocate to find new work."  He also calls for converting housing production from a cottage industry to one with the capacity to lower costs significantly.

This should be mandatory reading for all transition team members.