The leadership challenges of the next economy are profound and centre around four major issues: system change, the challenges of globalisation, the rise of digitisation and new general purpose technologies and the dominance of apex consumption.

The leadership challenges of the next economy are profound and centre around four major issues: system change, the challenges of globalisation, the rise of digitisation and new general purpose technologies and the dominance of apex consumption.

System change

Take the first of these challenges — system change.

The political class in the UK has finally awoken to the fact that our current system of capitalism does not work very well. The system crash of 2008–09 and the ensuing recession have resulted in the slowest recovery for over 100 years and perhaps a double-dip recession. The failure has several root causes. A property asset bubble was allowed to develop and grow too big. This was nothing new. Since the South Sea bubble of the 18th century, capitalism has been pock-marked by booms and busts. However, what made this bubble different from most others was the way that our financial institutions, their workforces perversely incentivised, innovated a whole new generation of financial products so complex that they masked the scale of the bubble and the likely scale of the bust. For Wall Street and the City of London what mattered was size. Size of business, size of acquisitions, size of deals and size of bonus pot at the end of the year. Normal rules on risk were suspended as nearly every financial institution joined in the feeding frenzy, lending recklessly to, and among, each other. This corporate risk was matched by individual risk as people, especially homeowners, were encouraged to use their major asset as a bank, having today what they could really only afford tomorrow.

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