In the midst of this economic upheaval, like in those that preceded it, there is a palpable tension amongst developed nations between innovation and risk aversion.  In a globalized economy, with energy security looming as one of the central concerns of the next many decades, risk aversion is particularly dangerous on at least two fronts: it ignores the realities of a global marketplace, and it threatens long-term growth.

In a pre-globalized market it was easy enough to seek incremental gains during troubling periods because the stakes were similar among most players, or groups of players.  There was a shared sense of situation, and a determined desire to get through it and then back to the business of doing business, of competing.  There were price wars, new features, and the like, but the focus was on survival.

Globalism introduced the common goal of trade and growth.  The point of a globalised economy was the search to connect goods and services with buyers at the best possible price point.  But here’s the catch: the stakes between the players are vastly different.  Developing countries can’t afford to hunker down.  Nobody is going to retreat; the stakes are too high.  This is a lesson that developed nations have to learn.

According to OECD, only the US government spends more on innovation than the Chinese.  Chinese nanotech parks, solar research facilities, and even US funded R&D projects may slow down, but China understands that it can’t afford to ‘wait it out’. Likewise, India, with both its indigenous innovation programs and those it supports from abroad, isn’t in a position to see what happens.  Elsewhere?  Much the same.  In a globalized market, regardless of the economic situation, the innovation imperative holds sway.

The challenge for developed nations is two-fold: first, recognizing the overwhelming need to grow the economy, it’s important to resist the urge to sit it out and wait for things to get better, and second, absent the more immediate requirements of energy security – particularly with petroleum around $50/barrel – assuming that there are more important things on which to spend any limited available funds is false.   This challenge, then, is ultimately about leadership.

Only strong leadership from government or industry can provide the incentive for citizens and shareholders to accept that it is not enough to just survive.   As developed nations and their leaders look forward to the new year, one that’s not likely to see an economic uptick until sometime Q3 or Q4, they must keep one eye on where they need to be, and one eye on a market that’s not likely to tolerate their half-hearted participation.