Why Things May Never Return To Normal

A new book argues that many of the systems and institutions we rely on no longer work

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This will all blow over, right? The financial crisis will end, the economy will recover, prosperity will return, and America will reclaim its place as the world’s model nation. Right?

Maybe not. In his new book, The Age of the Unthinkable, Joshua Cooper Ramo argues that many of the systems and institutions we’ve relied on for decades have failed, leaving us without the tools we need to navigate a complex and dangerous world. Ramo, a managing director at the consulting firm Kissinger Associates and former foreign editor at Time, draws on learnings from Silicon Valley venture capitalists, Middle Eastern terrorists and Japanese video-game designers to write about a new epoch in which change will be constant and unpredictable. I spoke to him recently and asked what this means for ordinary Americans. Excerpts:

In your book, you describe some changes that have happened over recent years without a lot of notice. But they add up to something you describe as revolutionary. So what's changed? We live in ways that are unsustainable. The policies we rely on to make us safe are not only failing, but backfiring. The financial crisis is a perfect example of that. The world has become too complicated to make sense to most people, or to people relying on ideas that are several hundred years old. Just a year or two ago, we felt like the most powerful nation on earth. There’s a sense now that the foundations of American power are not as strong as they were. This is the story of how that happened.

[See why smart investors see plenty of pain ahead.]

Can you offer a few more examples? There’s a gap between rich and poor that we’ve never seen in human history. If you look at the financial mess – we don’t know whom to trust to lead us out of this process.

Think of the things we consider to be modern: Bioengineering, for example. Airlines. These things deliver incredible promise, but they also deliver unbelievable risk. The more interconnected you are, the more likely it is that somebody can drop a shock that permeates to all corners. One obvious marker is 9-11, when 19 guys on four airplanes realigned our entire security structure. Globalization is exacerbating all the problems in the world. We like to think that capitalism is an engine for equality, but that’s not really the case anymore. The very things we rely on for progress are now the things that cause us risk. That’s forcing us to recalibrate.

[See how bailouts can butcher capitalism.]

So how do we need to recalibrate? We need a complete revolution in how we act and how we should think. One shift we need to make is how we look at the world. We focus on single objects without paying attention to other realities of the situation. We need to go from narrow-gazing to a broad focus.

Shift 2 involves the old idea of deterrence. We need to get away from deterrence, and away from these huge defense budgets, and more toward the idea of resilience. It’s inevitable that bad things will happen to us. We need a Dept. of National Resilience. We need to move away from a world in which we try to terrify people, toward a world of more resilience.

Shift 3: We need to move away from direct control toward indirect control, or an indirect approach. Away from hoarding power, toward giving away as much power as possible. The things today that are powerful are those that distribute power: Computers. The Internet. That’s how Obama ran his campaign and got elected. What will save Obama and [Treasury Secretary] Tim Geithner as they deal with the financial crisis is what put them into office in the first place: An investment in millions of people.

[See why optimism may be the latest economic threat.]

Would you go as far as to say the ‘western model’ has failed? I don’t think the triumph of capitalism and democracy is inevitable. Institutions do fail. In truly resilient systems, what makes them resilient is that they diversify.

Help me understand how this relates to ordinary people. We’re living in a historical moment. Anybody who doesn’t realize that is making things difficult for the rest of us. In a revolutionary age, the reputations of the great figures of the last age get destroyed. That creates a vacuum. Revolutions don’t just produce revolutionaries, they produce whole new casts of historical champions. They create new winners. We need radical new ideas. And our ideas are not radical enough yet.

We live in a world where there’s a lot of change right now. You have to hope there’s more good change than bad change. You have to make a fundamental bet about human nature. As people get scared they want to control more. The overwhelming lesson of history is that they can’t do that.

[See more companies that could fail in 2009.]

Most people have no ability to control U.S. policy or global trends, but they can make decisions that affect their own lives, and maybe those of a few people around them. So what should people do? Much of this doesn’t touch ordinary American every day, but it will touch all of us to some degree sooner or later. The financial crisis, for example, is incredibly dangerous. Financial crises inevitably lead to political crises. The failure of institutions is making the world more perilous.

How long will this go on? We’re very early in the process. The change we’re going through is not one change, it’s a cascade of ceaseless change, because all of these things are interconnected. All of these problems are unbelievably more complex that the institutions established to deal with them.

[See what would happen if the government had to nationalize big banks.]

A lot of Americans are waiting for the recession and the financial crisis to run its course, kind of expecting that sooner or later things will just return to normal in their comfortable suburb, or wherever they live. I guess I disagree with that. Obviously something profound is going on here. The issue is the scale of complexity in the world today. It’s difficult to manage all the risk. I’d be amazed if that comfortable suburb stayed the way it’s always been.