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The Orange Economy and Development

By Federico Mazzella ,
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How can innovation contribute to generating employment and improving the lives of Latin Americans? What synergies exist between physical, political, and commercial integration in the region?

236_e_IDEAS1_img1A Mexican spends day after day in his tiny room in Tijuana trying to control the flight path of a helicopter by hacking it using an Arduino board[1] that he bought for less than US$20. He applied to college in his country to study aeronautics but was turned down twice as he didn’t meet the traditional application criteria. In Buenos Aires, a teenager discovers he can manufacture prosthetic hands at a very low cost with the help of a 3D printer. In Peru, a woman who has not yet turned 30 dreams of helping unemployed women in her country who have not had access to a formal education to learn to write code and become expert web programmers.

All three are part of what is now known as the creative economy. They are major players in this new sector of the 21st-century economy which is based on gray matter—people’s ideas and creativity. Although this sector’s circumstances change by the day and are marked by uncertainty, its players respond flexibly and dynamically and the sector is booming despite the extreme economic turbulence that surrounds it.

 

What is the Creative Economy?

Let’s briefly define what we mean by creative economy. To do so, I’m going to set aside semantic discussions and epistemological diatribes, as there are many definitions or terms that can help us understand this sector: creative industries, cultural industries, cultural economy… It was even dubbed the “orange economy” in a fascinating 2011 publication by Felipe Buitrago. But what’s important here isn’t so much what we call it as the players that are involved in it and the impact that it is having on the economy.

I want to refer back to the concept that John Howkins coined in a book he published in 2001[2], in which he described the creative economy as being those activities which use creativity, ideas, and the arts as their raw material. They also rely on intellectual property to generate value (or royalties) and have a direct relationship with creative value chains.

Howkins argues that there is a close relationship between creativity and the economy and that this sector includes goods and services whose value is based on intellectual property: advertising, architecture, crafts, design, fashion, film, games and toys, music, publishing, R&D, software, TV and radio, videogames, and the visual and performing arts.

But the definition that Buitrago uses is even more interesting, and more practical, in that he underlines the creative economy—or the orange economy, as he calls it— as being “the group of linked activities through which ideas are transformed into cultural goods and services whose value is determined by intellectual property.” He goes on to describe how these include the cultural economy and the creative industries, and the conventional cultural industries, which lie at the point where the first two overlap. He places particular emphasis on the areas that provide support for creativity, which is interesting. In this regard, he highlights research, innovation and development, technical skills development, the institutions that watch over intellectual property, and professional creative education.

 

The Creative Economy’s Contribution to the Global Economy

 

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Buitrago Restrepo, Pedro, and Duque Márquez, Iván. 2013. The Orange Economy. An Infinite Opportunity. IDB. October.

 

Why Now? What Has Changed in the World?

Now that the 21st century is well and truly underway, we are experiencing a complete paradigm shift. Some people describe it as the fourth industrial revolution, while others call it the technological or digital revolution. What’s certain is that the ways in which we organized our societies and related to one another in the last century have been left far behind. The economy of the masses that characterized the 20th century is gradually becoming obsolete.

Let’s think about organizations for a moment. We are seeing a progressive shift from hierarchical, bureaucratic organizations to much more horizontal, collaborative ones. Planning used to be a priority within organizations, but now we think about prototyping, doing, experimenting. Organizations were closed entities that fed off their own talent. If they are to survive today they necessarily have to move outside their own environments and seek ideas further afield. Concepts like open innovation, or open data, affect not just companies but politics, culture, science, and society as a whole.

Organizations need to listen more than talk. Above all, they need to relate to one another in multiple directions, as parts of networks. Those that don’t open themselves up to the ecosystem will find it hard to survive. Over the last two decades, the expected shelf life of a company has gone from an average of 50 years to just five. Even governments that don’t listen to their citizens may find their stability threatened to a greater or lesser degree.

236_e_IDEAS1_img3Technology has become another key factor in this equation and a major player in these changes. It isn’t technology itself that brings about change, but the impact it has on every sphere, including regional integration and trade. Technology allows us to produce more and to produce better, and it is becoming more and more accessible and less and less expensive. Using technology and digital platforms, we can produce content in Argentina and in a matter of seconds be reproducing it in India, Mexico, or Spain. It allows us to highlight the value of ideas even before we have the financing to produce them.
Technology has given us back our identity. After being lost in the mass society of the 20th century, we have become individuals once more and have started to differentiate ourselves from one another. Consumers demand personalized products and services, and today this is economically viable and technically plausible. The term prosumer—coined by Alvin Tofler several years ago and which describes the power that the consumer has over the product or service he or she is going to buyis undoubtedly more relevant than ever today. We are spectators, but we are also players and creators. Social networks have become the new agora. Revolutions, protests, and even political parties have been born in less than 140 characters.

If we think of the possibilities that are opening up in terms of improving our health and quality of life, even making our lives longer, the options are infinite. We will be able to edit our genes to cure illnesses even before these have started to manifest themselves in our bodies. A blood test will be enough to tell us if we have cancer, and bombarding ourselves with chemicals in the fight against malignant cells will soon be a thing of the past. It will be possible to provide the 9.5 billion people that will inhabit the planet by 2020 with drinkable water through highly efficient large-scale desalination plants. And we’re hoping to eradicate hunger once and for all, with the help of plants that carry out supercharged photosynthesis and thus produce greater quantities of food.

Some of the more optimistic and daring technologists out there even dream of the “death of death.” The so-called technological singularity that we will soon achieve will mean that machines will be able to create. How so? Well-known scientist and Singularity University founder Ray Kurzweil claims that in the not-too-distant future, technological progress and social change will speed up due to progress in the field of artificial intelligence, and that human beings that predate this hypothetical point in time will not be able to understand these events. Artificial intelligence will be able to recreate itself, and these humanoids will become ever more intelligent, so much so that they will even find the cure to dying.

It does sound rather like science fiction. So thinks Paul Allen, philanthropist and co-founder of Microsoft, who responded to Kurzweil in an article in the MIT Technology Review that even though he didn’t rule out that all this might happen at some point, he didn’t think it would be in the medium term. [3]

While we recover from the vertigo that such hypotheses tend to induce, let’s see how economists, technologists, and scientists analyze the possible impact that technology may have on our economies—or that it’s already having. Technological changes may build a better world but they also bring new challenges. So claim Erik Brynjolfsson and Andrew McAfee, renowned MIT professors who study and analyze technology’s impact on the economy.

In one of their most recent publications, The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies, they explain that although technology helps the economy to grow faster—which explains why most creative industries are booming—not everyone benefits equally. Compared to the industrial revolution, it would seem that digital technologies increasingly create what are known as “winner-take-all markets.” Sadly, this situation may continue to widen the already worrying inequality gap, among other things.

However, the authors are optimistic about technological progress. They are convinced that good ideas will help us to produce more and better, which will translate into more health, more education, and more infrastructure. But they warn us that we are facing a range of economic disruptions that are the result of the digitization of the market and that given this, we should be preparing ourselves as individuals and our institutions to take these on. Above all, we need to focus on talent. The changes we are facing will demand a workforce that is ever more skilled, better educated, and highly creative. Everything else will be done by… robots?

 

Creativity and Innovation

Given this outlook of constant change that demands that we become more flexible, open, and resilient, creativity may be the spark that sets off the explosion in the creative economy in Latin America and the Caribbean. As John Howkins says, “Creativity is not new and neither is economics, but what is new is the nature and extent of the relationship between them, and how they combine to create extraordinary value and wealth.”[4]

Let’s go back to the idea that we can take a qualitative leap and set our economy alight if we focus more on talent and ideas. For a long time, it was thought that creativity was a talent that only a few geniuses had, and that was very hard to acquire. However, experience has shown us the opposite to be true. Creativity can be acquired, developed, and perfected, and we are increasingly aware of this. It is a skill that develops with practice and not a talent which you are born with.

We tend to overuse terms so much that we get sick of them, which in this case might lead to confusion or distrust around what “creative” actually means. Today everyone, every company, every institution, every city, and even every country wants to be creative. The same thing is true of “innovation.” The two are alike in many ways, but while creativity is more subjective and lies within the individual, innovation is more objective and is generally achieved as a group or within a certain ecosystem. The combination of the two is key in this context.

We have long spoken of the creativity that Latin America and the Caribbean harbors, from the talented individuals among us to the passion we have developed for innovation and technology. We have Nobel Prize winners in literature, medicine, and physics. We are home to some of the world’s best-known cultural events, such as the Rio Carnival or the Guadalajara International Book Fair. We manufacture geostationary satellites that we launch into space and we have exceptional doctors who have helped global medicine make great strides.

But as I argued above, talent and creativity need to be cultivated. If we want to innovate, stand out, and make our region a paradigm for innovation and the creative economy, we need to be aware that there is a lot of work to be done before we get our eureka moment. Entrepreneurs are well aware of this: 1% inspiration and 99% transpiration. But if this is the case, how can we make the creative economy represent at least half of our GDP?

236_e_IDEAS1_img4First, through the core area of education. In a region as unequal as Latin America, education is one of the main tools that will enable us to reach the levels of development we are seeking. Recent years have seen great efforts to improve education, which have led to tangible results in terms of increased access to this and rising literacy rates. However, we continue to fail international examinations and are falling short of the quality of the education we want for our children. Education frees us, opens up a thousand doors, and drives us to create.

Second, by attracting—or rather, retaining—talent. Not only must we teach people to be creative, we also need to motivate them, fill them with enthusiasm, and encourage them to realize their full potential so as to have an impact on the economy. We need to bring back talented individuals who have moved elsewhere, hold onto those that are still here, and—why not?—even draw in talented individuals from outside our region who recognize the creative opportunities among us.

But how do we attract such talent? By creating an ecosystem. More than ever before, even though our technology platforms allow us to be in many places at once, being part of a system undoubtedly drives our creative development. We can innovate and be more creative if we have institutions that watch over our ideas through patents or copyrights. Governments that invest in quality education. Congresspeople who legislate in favor of diversity, tolerance, and freedom of expression. Agencies that drive small and medium-sized enterprises that today are the heart of the creative economy. Cities that promote entrepreneurship with tools but also through support. Failing is part of the process.

And for all these tools to open up a new era of growth and prosperity, we need to guarantee access to technology. We believe that connectivity has become a universal human right and that guaranteeing access to it will undoubtedly build a bridge that will bring the two halves of society together. Some 4 billion people in the world today are still not online, which is a serious impediment to narrowing the inequality gap. Once again, creativity has opened up possible solutions: the helium balloons of Google’s Project Loon, Facebook’s drones, or Elon Musk’s satellites. These solutions are extremely exciting and make us optimistic about the future.

 

Creativity for Integration

As a region, Latin America and the Caribbean needs to keep strengthening its foundations and invest decisively so as to create talent within its borders and attract the best talent from outside these, as this will be the basis for growth and improvements to the quality of life of its inhabitants in the years to come. It will be our gray matter and not our natural resources that will help us overcome the problems we are currently facing. It will be the creative minds among us that will find solutions to our most pressing emergencies.

Today, global economic centers compete more over talent than over goods and services. The University of Toronto’s Global Creativity Ranking draws on different rankings to point to the three factors that it believes drives economic development: talent, technology, and tolerance. According to Professor Richard Florida, who created the index, “A growing body of research finds that openness to diversity spurs economic development, while homogeneity stunts economic growth. Places that are open to new ideas also tend to attract creative people from around the globe that provide an edge in generating innovations and startup companies.”[5]

Today, people and firms aren’t the only ones who are competing to be creative. Cities and regions are, too. The more dynamic and creative an ecosystem is, the greater the numbers of talented people that will come in search of it. And where talent and creativity go, innovation and economic growth follow.

Latin America and the Caribbean have a huge opportunity before them. These are hard times. All around are natural disasters like the earthquake in Ecuador or the spread of the Zika virus in Brazil. The economy is sailing on rough seas due to the falling prices of oil and commodities. Yet the creative economy continues to grow. It is here to stay and is opening up the opportunities we are seeking in order to keep growing and improving the lives of millions of Latin Americans.

Efforts to foster physical, political, and commercial integration between our countries will be key to reaching our growth and development objectives sustainably. Strengthening our institutions and promoting access to technology will open up infinite opportunities for us.

We are living at a unique point in history. Passion and creativity, together with our citizens’ commitment to solving the problems we are facing, will sow the seeds for our future.

That Mexican who spent hours shut away in his room in Tijuana is today Jordi Muñoz, co-founder of the largest consumer drone manufacturer in the world. His firm 3D Robotics is valued at tens of millions of dollars, and his drones are of help to other entrepreneurs like Paola Santana, a Dominican who co-founded Metternet, the goal of which is to take medicines to areas that are hard to reach by road.

Gino Tubaro, the 20-year-old who brought hope to children with his prosthetic hands with superhero motifs on them, today has over 60 3D printers that help hundreds of people with limited resources. And the young women in Peru that learned to program are today successful heads of households after attaining formal employment in a field with a bright future, all thanks to Mariana Costa.

As I said at the start, all of these individuals add value to what is now known as the creative economy. Not only because of the economic value that their enterprises may have, but because of the talent, creativity, and inspiration they represent for many young people in Latin America and the Caribbean. The creative economy will soon stop being invisible and will instead become our region’s new El Dorado.

 

[1] Arduino es una plataforma electrónica de código abierto que permite diseñar proyectos interactivos. Más información en www.arduino.cc.

[2] Howkins, John. 2001. The Creative economy. Penguin.

[3] Buitrago Restrepo, Pedro y Duque Márquez, Iván. 2013. La economía naranja. Una oportunidad infinita. BID. Octubre.

[4] Ver artículos en: https://www.technologyreview.com/s/425733/paul-allen-the-singularity-isnt-near/

[5] Entrevista a John Howkins. “El motor de la creatividad en la economía creativa” por Donna Ghelfi. OMPI.

[6] Andrés Oppenheimer. 2015. “Latinoamérica, la creativa”. Diario El País, Uruguay.

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