Government Forecasts and Scenario Planning
Governments need to start speaking and thinking in scenario planning terms and not just articulating single-minded dire government forecasts. They need to do this in times of struggle and in times of prosperity.
Today, for instance,
“The Federal Reserve sharply downgraded its projections for the U.S. economy Wednesday, warning that weak growth and high unemployment will be the norm for years. “
according to the Washington Post (Fed lowers forecasts on economy, jobs Neil Irwin, Nov 2, 2011). There may be some qualifications on the forecast, but there are no radical differences based on different sets of assumptions. The Fed trades in a narrow range of options because it is the product of the system it is forecasting.
What the Fed needs to do is create a set of US government scenarios that allow it to step outside its own context and start a national dialog about choice. Under these circumstances, this is what happens, under these, growth would look like this. The forecasts for the economy need not be all doom and gloom. If we create positive futures and then systematically map out the path toward those futures, we can make more rational decisions and perhaps, eliminate some of the ideologically-based decision-making that has come to define the current Congress.
We must remember that economics, unlike natural science, is a human invention. Look at this paper by Dr. Tina Lynn Evans which offers an analysis of Bretton Woods which she titles The Bretton Woods Paradigm. Dr. Evans outlines how choices made in the post-World War II era (the mid-1940s) created the economic issues we face today—and how some, including John Maynard Keynes, argued for an entirely different economic approach. Of course, we didn’t try the Keynes approach, so we don’t know if it would have worked or not, but this article does describe how our current economic inventions led to the inequity of the global markets and the hegemony of the U.S. dollar.
Invoking scenarios today could help drive a deep global dialog about the next economic system. As I warn often in my presentations, when you create a system, that system is based on a set of assumptions. When those assumptions start to falter, the system can continue forward, but it will become increasingly unstable. I think we have reached a point where the post-Bretton Woods assumptions have turned false. We struggle to reinforce a foundering foundation rather than reinvent the paradigm. Scenarios would help posit a number of alternative foundations and perhaps lead to the creation of a more stable global economy. I’d like to see the world leaders put that specification into Innocentive.
The central debate among the parties today is about government redistribution of wealth vs. beneficent redistribution of wealth through personal and business spending. If we embrace scenarios, the government role could change from arbiter of policy to facilitator of dialog. Wild crowd sourcing is probably not the way to solve global economic problems, but many people are coming forward with sincere interest in dialog about the solution. Perhaps the government should step back and truly facilitate the dialog rather than rushing to judgment or asserting positions. That’s a debate I’d like to tune into.
For more serious insights on scenario planning click here.