2012-01-11

Co.Exist

Principles For Social Innovation In 2012: Follow Emerging Economies

The world economy is rapidly reorienting toward a growing middle class in the global East and South. And social innovators should follow, helping to aggregate consumer and citizen power to create change.

This year marks the fifth anniversary of the beginning of the global financial crisis—a crisis that is changing the global economy just as significantly as the collapse of communism in 1989 and the OPEC oil crisis of 1973.

A major impact of the financial meltdown is that global markets are now being driven by the world’s emerging economies. The economies of the U.S. and Europe have entered a long period of sluggish growth, financial instability, rising debt, and relative decline. They still provide great opportunities for innovators—developed country markets will remain the world’s largest for some years to come. But the furnace of the global economy is now being powered by the white heat of industrialization in the East and South—economies like China, Brazil, Mexico, India, and Nigeria.

That means that the locus of social, economic, and even cultural innovation is shifting as well. This historic shift requires those of us who work at this intersection to re-evaluate priorities, change strategies, and create new types of innovations rooted in this new balance of power. For social innovators, we offer three tactics: focusing on the new middle classes of emerging economies, engaging them with technology, and building new global social movements.

Innovate for the fast-growing global middle classes

The rise of the middle class plays a central role in the historic development of all major economies, whether in 19th-century Europe, 20th-century America or 21st-century China.

We’ve all heard about the rising middle classes of the emerging economies, but few understand the scale of this shift. Consider this: within five years, India’s middle class will be larger than America’s, at over 250 million. Less than two decades from now, the billion in the middle class of industrialized economies will be outnumbered by the three billion in the middle classes of emerging economies, according to new McKinsey research.

Nor will these rising economies be weighed down by the troubling demographic trends afflicting the West. America’s median age is 37; Nigeria’s is 19. As the need for innovation quickens, countries with faster growth and more youthful workforces will prove more dynamic and more adept at change. As their economic power grows, so too will their cultural power. The influence of Nollywood is already being felt in the Middle East, Latin America, and even the remote islands of the Caribbean. The middle classes of these countries will be a driving cultural force across the world, much as American culture shaped globalization in the final decades of the 20th century.

What does that mean as we plan for the year ahead? As a starting point, your organization should ask itself this: where are we looking for our future growth and impact? Are our priorities shaped by the growth patterns of the past, or by the growth trajectories of the future? Understanding the dynamics of this major global change can ensure that our organizations stay relevant.

Specifically, the resource impacts of the fast-growing global middle classes demand an urgent acceleration of innovation. We know the planet cannot sustain an additional four billion people who replicate the current patterns of production and consumption in the West. Right now, much of our innovative energy is spent on coercing people to consume more things they don’t need. Our priorities need to be redirected so that we develop the groundbreaking innovations in technology, business, and society that will make economic growth sustainable. For example, even small innovations in choice architecture—such as changing the size of household recycling bins and trash cans—have large impacts when implemented at scale. In every part of our economy, we urgently need to identify and implement such innovations.

Invest in technology that empowers individuals

Last year began with Tahrir Square and the Arab Spring protests. It saw huge anti-corruption rallies throughout India, and ended with Time magazine awarding its Person of the Year award to “the protestor,” while the streets of Moscow were a canvas for the largest anti-government protests since the end of communism. It also brought protestors to the streets of Athens, London, and New York.

We are seeing an awakening of middle classes to their role in change. On major global challenges where the West has failed to lead—like climate change, renewable energy, and modernizing education systems—it’s likely we’ll see citizens in the global South increasingly driving change and innovation. They will use a new suite of technology tools that span from social media infrastructure appropriated from the West, to context-driven technology such as M-PESA, the mobile payment system that already has more than 9 million users in Kenya alone giving many of them access to secure capital exchange for the first time.

The test for innovation will be its success in new global markets. Rather than building tools for developed markets and then retrofitting them to emerging country markets, those at the forefront of social innovation will increasingly invert their design process. Innovations that empower people in those countries and allow them to self-organize—whether by starting a business, starting a school, or organizing their local community—will reward both producers and users.

Extend your entrepreneurialism to building movements, not just products

Many of the social innovations of the past have been about making profits from premium products in developed markets, and redistributing some portion to the developing world (e.g. Product RED, Tom’s Shoes). This model of branded charity support will be overtaken by innovations that focus on aggregating the power of individuals’ choices more directly. Just as companies like Groupon and Gilt have aggregated consumer power for discounts, social innovators will aggregate consumer and citizen power for change. That might involve demanding changes to environmental or commercial practices. It might involve shifting large numbers away from businesses that won’t stop causing harm to the environment or specific communities. It might mean bringing pressure to bear on governments. Whatever its form, it will see the development of a new breed of "movement entrepreneurs," who use mobile and Internet platforms to aggregate and organize action.

We are still in an era when social movements are mostly country-based. But this is changing – just consider how in 2011, the global LGBT rights organization All Out (which was incubated by Purpose) created a community of almost 1 million members in under 12 months. We are entering an era of global movement building. Many of these movements will emerge from the global South, where individuals who have had little say over the conduct of their governments and corporations now have inexpensive new tools to address those issues, tools that are easily aggregated and can cross national boundaries. The political possibility of this has enormous potential. In time, the global mobilization of consumers and citizens could create a countervailing power to global businesses, which until now have mostly been accountable only to national governments.

The sociologist Eric Hoffer once said, “We are usually told that revolutions are set in motion to realize radical changes. Actually, it is drastic change which sets the stage for revolution.” We have entered such a period of rapid change. The rules of business and politics are being rewritten, as established economies stumble while emerging economies surge. The expansion of the new global middle classes, the demand for technologies that empower individuals in those markets and the emergence of a new wave of movements with a global identity are three factors that redefine the future of social innovation. Economic and cultural power is shifting from north to south, from corporation to consumer, and from governments to citizens. It’s the time for entrepreneurs and innovators in all spheres of life to seize this moment and shape the revolution.

Add New Comment

5 Comments

  • Paul Polak and Team

    I'd like to revise
    the idea to innovate
    for the fast-growing global middle classes by adding it's time to innovate for those living on less than 2 dollars a day. The future corporation will remain competitive in the global
    marketplace by creating vibrant new markets serving $2 a day customers
    at scale http://blog.paulpolak.com/?p=7...

  • mikeriddell62

    This is an excellent assessment of the socio-economic possibilities that will be possible with engaged and empower people. I don't share your view however that the south will deliver the change. There is just as much of a need (and therefore demand) in the north. As a firm believer in free markets I assure you a response from social innovators is on its way.

    We here in Manchester, Uk are lucky to have been part of the first industrial revolution that gave us steam power. Then Manchester gave us computer power and now that the world needs a movement for change that isn't corrupted by money, it will revolutionise once again using people power. The tech way of describing this change is "Vendor Relationship Management". Check it out.

    I thoroughly enjoyed your article. Thanks.

    @mikeriddell62:twitter
     

  • Peter Palms

    600 page document describing steps for avoiding  Global Economic Meltdown of 2012 is provided free at http://PeterPalms.com/banking
    31,000,000
    Americans became age 65 in 2011. That has  added $310 billion dollars to the annual budget of the United States not including the cost of Medicare and Medicaid benefits, which
    young American will have to pay for. It took 198 years for the U.S. Government to borrow the first trillion dollars. Then, in just
    another 12 years, mostly under the Reagan ministration, it borrowed another
    three trillion. By the first year of the George W. Bush Administration, even
    before the terrorist attack on September 11, the federal debt had risen to over
    $5.8 trillion. By 2010 it had risen to $202 trillion, when all liabilities are
    included.

     

    It is difficult to
    comprehend such numbers. If you had a stack of $100 bills 40 inches high, you
    would be a millionaire. $202 trillion would rise over 127 thousand miles into
    space. By the time you read this, after the expenditures of subsequent
    administrations that stack has reached the moon.

     

    By 2006, gross interest
    payments on the national debt were running $406 billion per year. That consumed
    17% of all federal revenue. It now represents the governments largest single
    expense; greater than defense; larger than the combined cost of the departments
    of Agriculture, Education, Energy, Housing, and Urban Development, Interior, Justice,
    Labor, State, Transportation and Veteran’ affairs

     

    These charges are not paid
    by the government; they are paid by you. You provide the money through taxes
    and inflation. The cost currently is about $5,000 for each family of four. All
    families pay through inflation but not all pay taxes. The cost of each
    taxpaying family therefore is higher. On average over $5,000 is extracted from
    your family each year, not to provide government services or even to pay off
    previous debt. Nothing is produced by it, not even roads or government
    buildings. No welfare or medical benefits come out of it. No salaries are paid
    by it. The nation’s standard of living is not raised by it. It does nothing but
    pay interest.

     

     

    Furthermore the interest is
    compounded, which means, even if the government were to completely halt its
    deficit spending, the total debt would continue to grow as a result of interest
    on that portion which already exists. In 2006 interest on the national debt was
    already consuming 39% of all the revenue collected by personal income taxes.

     

    Amazing, isn’t it? Without
    interest on the national debt we could save enough to cut our personal income
    taxes by a third and we could reduce corporate taxes as well. Unfortunately,
    under present policies and programs, that is not going to happen, because
    Congress does not live within its income. Many expenses are paid, not from
    taxes, but from selling government bonds and going deeper into debt each year.
    So, even if we could save enough to slash personal income taxes, it would not
    be enough. The government would still go into the red to keep its present life
    style. However if a reduction in the size and scope of the bureaucracy were
    accomplished at the same time, personal and corporate income taxes could be
    eliminated and the government would have an annual surplus.

     

    By 2008, outlays of the
    federal government were one-fourth of the nation’s economy. More people now
    work for government than for all manufacturing companies in the private sector.
    There are more bank regulators than bankers, more farm-bureau workers than
    farmers, more welfare administrators than recipients. More citizens receive
    government checks than those who pay income taxes.

     

    By 2010 the average federal
    worker was earning 60% more than the average worker in the private sector. By
    1992 more than half of all federal outlays went for entitlements

     

    Normally with contracts for
    future obligations like private insurance company pension plans, annuities,
    life insurance, the issuer is required by law to accumulate money into a fund
    to make sure that there will be enough available to make the payments when
    future payments become due. The federal government does not does not abide by
    those laws. The funds exist on paper only. The money that comes in for future
    obligations is immediately spent and replaced by government IOU. So as those
    future payments become due, all the money must come from revenue being
    collected at that time.

     

     

    (600 additional pages and
    210 items of bibliography available about oil prices, hyper inflation, Economic
    meltdown of 2011, collapse of banking industry, oil prices denominated in other
    than dollars,  new gold backed currencies
    (not the dollar) of two other nations , 
    gold prices to $5,000.

     

    1/6th of 1% of
    the American public now earns more than 50% of the total income of the nations.
    One in every 2000 people earns as much as the remaining 1999 earn.

    Only corruption can
    accomplish that.  It has nothing to do
    with capitalism or democracy, which we do not have. Our Government is a
    republic. The one’s the people elect to make the laws make the laws. The people
    do not. The ones the people elected, represent the ones that paid the campaign
    funds for their election costs. Those who pay the election costs pay them for
    both parties.

     

     

  • Peter Palms

    600 Page Documents of details for averting the Global Economic meltdown of 2012 are to be found free at http://peterPalms.com/banking.

    31,000,000
    Americans became age 65 in 2011. That has  added $310 billion dollars to the annual budget of the United States not including the cost of Medicare and Medicaid benefits, which
    young American will have to pay for. It took 198 years for the U.S. Government to borrow the first trillion dollars. Then, in just
    another 12 years, mostly under the Reagan ministration, it borrowed another
    three trillion. By the first year of the George W. Bush Administration, even
    before the terrorist attack on September 11, the federal debt had risen to over
    $5.8 trillion. By 2010 it had risen to $202 trillion, when all liabilities are
    included.

     

    It is difficult to
    comprehend such numbers. If you had a stack of $100 bills 40 inches high, you
    would be a millionaire. $202 trillion would rise over 127 thousand miles into
    space. By the time you read this, after the expenditures of subsequent
    administrations that stack has reached the moon.

     

    By 2006, gross interest
    payments on the national debt were running $406 billion per year. That consumed
    17% of all federal revenue. It now represents the governments largest single
    expense; greater than defense; larger than the combined cost of the departments
    of Agriculture, Education, Energy, Housing, and Urban Development, Interior, Justice,
    Labor, State, Transportation and Veteran’ affairs

     

    These charges are not paid
    by the government; they are paid by you. You provide the money through taxes
    and inflation. The cost currently is about $5,000 for each family of four. All
    families pay through inflation but not all pay taxes. The cost of each
    taxpaying family therefore is higher. On average over $5,000 is extracted from
    your family each year, not to provide government services or even to pay off
    previous debt. Nothing is produced by it, not even roads or government
    buildings. No welfare or medical benefits come out of it. No salaries are paid
    by it. The nation’s standard of living is not raised by it. It does nothing but
    pay interest.

     

     

    Furthermore the interest is
    compounded, which means, even if the government were to completely halt its
    deficit spending, the total debt would continue to grow as a result of interest
    on that portion which already exists. In 2006 interest on the national debt was
    already consuming 39% of all the revenue collected by personal income taxes.

     

    Amazing, isn’t it? Without
    interest on the national debt we could save enough to cut our personal income
    taxes by a third and we could reduce corporate taxes as well. Unfortunately,
    under present policies and programs, that is not going to happen, because
    Congress does not live within its income. Many expenses are paid, not from
    taxes, but from selling government bonds and going deeper into debt each year.
    So, even if we could save enough to slash personal income taxes, it would not
    be enough. The government would still go into the red to keep its present life
    style. However if a reduction in the size and scope of the bureaucracy were
    accomplished at the same time, personal and corporate income taxes could be
    eliminated and the government would have an annual surplus.

     

    By 2008, outlays of the
    federal government were one-fourth of the nation’s economy. More people now
    work for government than for all manufacturing companies in the private sector.
    There are more bank regulators than bankers, more farm-bureau workers than
    farmers, more welfare administrators than recipients. More citizens receive
    government checks than those who pay income taxes.

     

    By 2010 the average federal
    worker was earning 60% more than the average worker in the private sector. By
    1992 more than half of all federal outlays went for entitlements

     

    Normally with contracts for
    future obligations like private insurance company pension plans, annuities,
    life insurance, the issuer is required by law to accumulate money into a fund
    to make sure that there will be enough available to make the payments when
    future payments become due. The federal government does not does not abide by
    those laws. The funds exist on paper only. The money that comes in for future
    obligations is immediately spent and replaced by government IOU. So as those
    future payments become due, all the money must come from revenue being
    collected at that time.

     

     

    (600 additional pages and
    210 items of bibliography available about oil prices, hyper inflation, Economic
    meltdown of 2011, collapse of banking industry, oil prices denominated in other
    than dollars,  new gold backed currencies
    (not the dollar) of two other nations , 
    gold prices to $5,000.

     

    1/6th of 1% of
    the American public now earns more than 50% of the total income of the nations.
    One in every 2000 people earns as much as the remaining 1999 earn.

    Only corruption can
    accomplish that.  It has nothing to do
    with capitalism or democracy, which we do not have. Our Government is a
    republic. The one’s the people elect to make the laws make the laws. The people
    do not. The ones the people elected, represent the ones that paid the campaign
    funds for their election costs. Those who pay the election costs pay them for
    both parties.

     

     

  • Rich Weisberger

    The innovation should come from, not brought to, the developing country. The model that I am usingits known as mentor drive seed stage investment capital, not dispersed across a region,, but targeted, so to creative hub that will then spawn spokes.