A Crisis is a Terrible Thing to Waste

Urbanist and Author
The U.S. hasn't been making much of the possibilities brought by the downturn—but most other countries have been doing even less.
  • Transcript


Question: Why did you write “The Great Reset?” 

Richard Florida: When the economic crises hit in September, a year-and-a-half ago, my long-time editor at the Atlantic Monthly, a fellow named Don Peck, called me up and said, “We want to do something on the crisis, can you write about how New York has been hit: The financial markets, job loss, Wall Street, and all the spillover effects.” And I said, “Sure,” but as soon as I looked at that, it became clear to me that in fact, New York wasn’t the place, ironically, that was being decimated by the economic crisis. It was other parts of the United States, which I, then I wrote an essay for the Atlantic, called “How the Crash is Reshaping America.” And the article got a great deal of excitement and people said, “Why don’t you write a book on it?” With all that interest, I had to write a book. 

So what I decided to do was, in the United States, in fact, in economics or in business, we kind of have a good sense of where economic crises, financial crises, panics, great economists have written on this, where depressions come from. The interesting part is we really don’t understand recoveries that well. So what I tried to do was write a book about, not just the short-term nature of recovery, about looking back historically and then into the future, what motivates economic recoveries? And so I looked back at the Great Depression, and then I looked back at the crisis before that, the long depression that was initiated in 1873. 

What I found out was something, I think, and hopefully you guys think, is interesting. That the way we typically think countries and cities and communities escape economic crisis is either they have a wave of technological innovation—this is what great economists, Joseph Schumpeter, wrote about. And it’s true, the 1880s and the 1930s were fabulously innovative at that case. The 1930s were much more innovative than the 1990s or 2000s. 

We also think sometimes that government spending, Franklin Roosevelt, The New Deal; John Maynard Keynes, Keynesian, public spending is what gets you out of crisis. 

And then we had this notion that after the Depression it was World War II that saved us. When I looked at it actually—those things are very important—but what really recasts our economy or resets it or leads to these great resets, are what really you can think of as a new way of living and working. What saved the US or what propelled the U.S. out of recession and depression in the 1940s and ‘50s and ‘60s was suburbanization. And geographers, and I’m an urban planner, geographer, we have a word for this, we call it a "spacial fix." This new way of living and working and shaping our economic landscape propels us out of crisis. And so then I said, “Oh, my, it’s important that public policymakers, the president, the cabinet, the decision makers, the congress understands this,” and then I also wanted to look at what this next great reset, so a good part of the book is looking backward, but then the preponderance of the book is looking forward. What would this new great reset or new special fix or new economic landscape, what would this new way of life potentially be like, looking forward? 

Question: Why is a crisis a terrible thing to waste? 

Richard Florida: Rahm Emanuel, the president’s chief of staff, is often thought of as saying, you know, it’s a terrible thing to waste a crisis. But the quote actually comes from a fabulous economist, who actually is now working on cities, a fellow named Paul Romer, who was at Stanford University and had a thing called the Charter Cities Institute, a really terrific organization. 

And the idea being that crises are times when you, if a company is in crisis, an organization in crisis... but if a country’s economy is in crisis, you can do things that will help you recover and regenerate and go past the normal. Yeah, I think we’ve been wasting the crisis. 

But, that said, most other countries have been doing less. But I think, and I think we’re starting to get it now, but what really got me going was that what it seemed to be doing in the very early stages of this crisis was we were either bailing out banks, it turns out we’re going to get some of that money back, but I still think it was a mistake. I still think, and I think people are realizing we’re going to have to do something new and different on that front and every reset has seen us reform the way our banks and financial institutions operate.

And the second thing that was really tragic to me is our attempt to bail out these old industries and people are apologizing for that and saying, “Yeah, GM and Ford, and they all look better,” but I think what’s made America great was the ability not to just bail out the old, but to really focus on making investments in the new. And one of the big arguments in the book is, "Boy, we have to do that again." We can’t just bail out the past, we can’t let this crisis be a wasted opportunity, but it’s really interesting, you know, I do think now, the United States is starting to collectively get it. And the recovery may or may not hold, that’s not what I’m talking about, and many people, Robert Schiller, and others, think it looks a little bit false.. and Roubini.

But I think what’s really interesting: my dad, when I was kid, always told me, “Richard, when I was a young boy, you know, we struggled with the Depression”—my dad was eight when the Depression hit, and then he joined up for the American Army when Pearl Harbor was attacked, he was infantry soldier, he stormed the beaches at Normandy—he said, “But it’s amazing how fast America re-made itself.” To him, it was remarkable how a country that had no war mobilization, military mobilization, kind of stoked up this industrial engine and made tanks and jeeps and ships and planes and armaments, and he used to tell me, “You know, when the Germans saw that stuff coming, it must have just demoralized them.” When our opponents—I do think that we’re starting to get this again. I live in Canada now, I love Canada, but they’ve been spared this crisis. And somehow... not that times are great in Canada, but they’ve been spared the crisis, somehow when a crisis hits the United States, it forces the country to wake up, and I hope—we’re still very early on in this—I hope now we’re beginning to see the signs that our business leaders, our political leaders, our country, is really waking up and beginning to rethink some of the core things that we used to think of as the cornerstones of American way of life, or the American dream. And I hope that book contributes to that ongoing rethinking conversation. 

Recorded on April 27, 2010
Interviewed by Jessica Liebman