A Crisis is a Terrible Thing to Waste

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

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

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

What\r\n I found out was something, I think, and hopefully you guys think, is \r\ninteresting. That the way we typically think countries and cities and \r\ncommunities escape economic crisis is either they have a wave of \r\ntechnological innovation—this is what great economists, Joseph \r\nSchumpeter, wrote about. And it’s true, the 1880s and the 1930s were \r\nfabulously innovative at that case. The 1930s were much more innovative \r\nthan the 1990s or 2000s. 

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

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

Question:\r\n Why is a crisis a terrible thing to waste? 

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

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

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

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

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

Recorded on April 27, 2010
Interviewed by Jessica Liebman

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

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