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The Grand Challenge Equations

If only the Grand Challenges were that simple!

The State of the Union message by President Obama focused around key challenges facing the United States to embrace the changing world. His list included:

  • education
  • innovation
  • infrastructure
  • government reform

This is not a bad list for starters. In my own work with clients, these are key recurring issues, which today take on new urgency, and are as relevant to the US as the EU and emerging countries. The one issue that does wake ministers of finance up in the middle of the night is the rising cost of healthcare, and that is its own challenge.

Let’s briefly reflect on each of these four, though, for now:

Education

A 10-year old girl in a public school will enter the world of higher education or employment in perhaps the year 2020: how is her experience of education preparing her for that world? Are her teachers the very best for developing her for the future, encouraging curiosity and helping her be adaptable and courageous? Is the higher education system ready for the challenges of the future? I somewhat despair about our universities, and do think they need to revisit their social mandate, as they are at present our key and only institutions for the inter-generational transmission of knowledge, yet academics seem pre-occupied with other matters (such as the length of the CV and research), while teaching seems to suffer. We need to re-energise the learning part of higher education, and not just through a technological fix of e-learning, but through the invention of new institutions of learning. Increasingly scarce public funding should not be wasted on unreformed higher education, but should reward innovative and potentially disruptive learning opportunities.

Innovation

Yes, more and better and faster. The historical forces that got us to the present have been silenced as we have become trapped in regulation and rules that discourage risk-taking, and reward the compliant at the expense of the disruptor. Companies and government, both, have trouble with trouble makers who don’t adopt the institutional rhetoric. Access to early-stage funding for innovations is weak and research suggests likely to be harder to get but governments may find themselves unable to provide all the necessary funding under current circumstances. Innovative ways to innovate and commercialise are necessary and which bridge the ‘valley of death’ with effective strategies that de-risk the innovation development process. Regretfully, to some extent, our universities frequently have a small view of their role here (technology transfer), but leaving this to others to take the risks is no longer an option. Entrepreneurialism is needed within the research communities, linked to real-world challenges (I am not ignoring the need for pure research to create new knowledge). And perhaps some better priority setting: while it may be nice to have the latest smartphone, we do need to solve the problem of malaria, unclean water, poor quality nutrition. These challenges do not go away just because we can text our friends more easily — yet within the smartphone technology may lie ways to solve these threats to humanity if we are creative enough to think those thoughts.

Infrastructure

This is the never-ending struggle for government and industry. Capital investments in public infrastructure offers opportunities for innovation to build faster, cheaper, better. Innovations in building technology can give us better roads, improved rail-links, better public housing. While we are focused on the digital technological infrastructure (of wireless and web), we cannot ignore the need to drive forward new infrastructure thinking around energy and transportation to name two big ones. Many (Western) governments may be trapped with legacy infrastructures, making it hard to leapfrog to new approaches. But perhaps we are at the point where we need to literally junk industrial-era infrastructure logic and make that leap of faith — in ourselves and our future. Timidity is no longer an option.

Government reform

“Smart government”. Is that an oxymoron? How has the digital revolution altered the size and structure of governments? Having looked at this issue, I find that governments are frequently wedded to ponderous and very hierarchical internal processes, characterised to a great extent by caution (legislate in haste, repent at leisure?).  We also find protective practices, which can make it hard to reform government working practices even when there is the will to act. Governments are expensive; indeed, governments are monopoly suppliers of government, and if they do their job badly, we all suffer. The next ‘bubble’ will likely be from the public sector, and in particular from central governments, where the need for reform is greatest. Open and transparent government has all of us as stakeholders and the more we take an interest as taxpayers in the functioning of government the greater the likelihood we will get the reforms for the government we need.

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Daily we read of the debts that governments have run up, whether Greece, Hungary, UK or elsewhere. How has this come to pass will require all of us to reflect on what we expect from government and indeed what is government for. Folks such as Robert Nozick argued for the minimal state, all the way over to the bankrupted ideology of the collectivist state. In between lies reality.

Therefore, in the spirit of redefining the purpose and function of the modern state, I am asking this question:

what are the Grand Challenges for modern government?

In effect, what is the purpose of government? What is on the list will reflect the current priorities, but also an effort to anticipate the consequences of current actions by public bodies — if governments stop doing some things, what will happen down the road.

Here is some to get us going. I think we need 10 at the most as they must in the be both grand and challenges; my list may in the end be neither, but let’s see.

Boundary value problem for an arbitrary shape

Like any good challenge, one needs to know what is in the problem, what is outside the problem and line that demarcates the two

  1. A challenge is to ensure that governments are subjected to the same rules and regulations as everyone else.  Someone said, it would be a shame to waste a good crisis, so many governments find themselves in a crisis, and in many cases they are part of the problem, not part of the solution. Governments have some role to pay in aligning efforts to solve the crisis, but they are not exempt from the solutions.
  2. A challenge is to design a simple tax system. We don’t need governments to create complex, full of exceptions tax systems. We have complex tax systems that have becomes ends in themselves, inscrutable and reflecting overly bureaucratic approaches. Rebooting our logic of taxation is a non-trivial challenge. The problem though is that governments use financial instruments as carrots and sticks to alter behaviour, whether of individuals or corporations. We need to rethink our use of financial instruments as tools of policy and that these financial instruments must deliver social outcomes, not just be used to fund government programmes.
  3. A challenge is to better control adventuresome, rent-seeking behaviour of civil servants.  Too often, hyperactive civil servants follow a logic of state intervention because in the end it may be easier to do and please political masters, than to do the harder, consultative and more developmental approach which will produce the best outcomes, but with the least amount of government. The problem is that civil servants are rent-seeking, and are rewarded for expansionist activities. We see this with regulators who either do their jobs badly (regulators are after all monopoly suppliers of regulation, so if they do a bad job, we the regulated have little choice), or seek to expand the scope of their mandates, like a gas (there is always some reason to expand a mandate, when there is no one to say no). To be fair, the private sector also has adventuresome corporate executives who need to prove themselves through adventuresome corporate mergers and acquisitions — fortunately they don’t always get their way, such as the shareholder response to the plans of the relatively new CEO at Prudential (on the job only 5 months and he thought this made sense). The challenge here is a general problem, but acute in government.
  4. A challenge is for governments need to know how to recognise market failure, and having identified this, decide what they should do it anything. Is there market failure in funding medical research, is there market failure in higher education? Understanding this will help define the boundaries of the government role, and importantly define the boundary conditions that tell us that different logic and problem solving is needed. At the root, we need to  first decide what the role of government should really be. Integral to this is determining a proportional response — in other words, there is identifying the need for intervention, and there is separately deciding what to do, how much to do, and importantly when to stop.
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