What does Recovery Look Like?

This is the question posed by a new design competition, Imagining Recovery. It's a fascinating question and it will provide a needed opportunity for the design community to weigh in on the current financial crisis.

I think the most important aspect of this is the opportunity to provide a critique of the system itself. As Simon Johnson, Paul Krugman and others have been saying. The basic question is wether the current crisis is a crisis within the system or a crisis of the system itself.

I for one, do not believe it is the former. The very structure of the financial system itself will have to be reformed if we are to restore the country to sustainable growth. As a result, I think the the very nature of growth itself will have to be re-thought. But I'm a layman, not a financial expert- and the basis for my holding this belief has nothing to do with economics at all.

The underlying root of this is really a crisis of modernity- everything else flows outward from that essential problem. By modernity I mean the system of western thought, dominant since the enlightenment, that has been characterized by notions of progressivism, an alienation from the natural world and an a preference to classify and break down natural systems, the substition of man instead of faith at the ideological center of the world view and so on. And so this crisis within the system of thought, has I believe, led us to twin crises within modernity's two handmaidens, the nation-state (via the confrontation with non-state 'terrorism') and the capitalist order. The prospect for these two systems to survive in their present state is, I think, highly suspect.

So that is my grounding for all of this. Looking back to the financial crisis, we see, I think, a certain power structure, now foundering, that really is at the center of modern capitalist nation state.

Take a look at this visual from Pro-Publica:

It shows the distribution of Tarp money across individual institutions throughout the U.S. One of the things that is powerful about the image is that it situates, finally, how the abstract flows of globalization are actually grounded in real physical locations. It shows us geography of power.

A true recovery will have to look differently than this. A real recovery would not have the large concentrations of power (and risk) that this map illustrates.

Here's something Simon Johnson wrote in a very important article in the Atlantic :

Oversize institutions disproportionately influence public policy; the major banks we have today draw much of their power from being too big to fail. Nationalization and re-privatization would not change that; while the replacement of the bank executives who got us into this crisis would be just and sensible, ultimately, the swapping-out of one set of powerful managers for another would change only the names of the oligarchs.

Ideally, big banks should be sold in medium-size pieces, divided regionally [emphasis mine] or by type of business. Where this proves impractical—since we’ll want to sell the banks quickly—they could be sold whole, but with the requirement of being broken up within a short time. Banks that remain in private hands should also be subject to size limitations.

This may seem like a crude and arbitrary step, but it is the best way to limit the power of individual institutions in a sector that is essential to the economy as a whole. Of course, some people will complain about the “efficiency costs” of a more fragmented banking system, and these costs are real. But so are the costs when a bank that is too big to fail—a financial weapon of mass self-destruction—explodes. Anything that is too big to fail is too big to exist.

The point Johnson makes here has to do with the structure of power, its concentration, its geography. If we are to truly get ourselves out of this, then the supra-national power that has been concentrated in the areas shown on the maps will have to be spun out and devolved on a regional basis.

Regionally based power structures within the U.S. , instead of national of supranational ones, would provide for certain system redundancy that would make systemic risk less probable. The regions would also be more diverse, more competitive (since they would compete with each other for talent, resources and prominence), more diverse (instead of a one-size fits all national inflection, you would have differences), more innovative and more stable.

Regional power structures would also be smaller, investments would be made on a more local basis- distrubution systems would be more responsive to regional supply and demand needs and therefore less wasteful than say a global supply chain. Strong regions (and a weak central authority) would make us more sustainable, more stable, more self-reliant and less subject to a crisis of the central regime which is where we are now.