The Indigo Era (or Indigo economies) is a concept publicized by businessman Mikhail Fridman, describing what he views as an emerging new era of economies and economics based on ideas, innovation, and creativity, replacing those based on the possession of natural resources. Fridman is the co-founder of LetterOne, an international investment business, [1] and first publicized the idea in early 2016. The word "indigo" was initially chosen based on the term indigo children, which has been used to describe people with unusual and innovative abilities.
Fridman describes the Indigo Era as a disruptive era driven by extraordinary levels of human creativity, where abnormally talented individuals and entities are able to realize new levels of human potential and economic achievement. It is "a new economic era where the main source of national wealth is no longer resource rent but the socio-economic infrastructure that allows every person to realise his or her intellectual or creative potential." [2] But, according to Fridman – based on his observations of recent economic indicators, political and market volatility, and historical patterns – it is also an era that will generate winners and losers as lagging countries and groups fail to adapt quickly enough.
In late 2016 LetterOne's Global Perspectives journal published an Indigo Index, ranking 152 countries on their ability to compete and grow as economies move away from being powered by natural resources to being powered by ideas, creativity, and digital skills. In 2017 it launched the Indigo Prize, to award new concepts of economic measurement beyond mere GDP as countries in the 21st century transition into economies where innovation, creativity, and digital skills are economic drivers. The competition is intended to "stimulate debate about factors currently measured, given evolving economies, technology and skill bases, and what should now be taken into consideration in official economic statistics that measure the health, size and growth of a modern economy." [2]
In an April 2016 article in RealClearPolitics , retitled and reprinted in May 2016 in the Jerusalem Post , and reprinted in November 2016 under the original title in LetterOne's Global Perspectives journal, Fridman wrote:
We are entering a disruptive era driven by extraordinary levels of human creativity. A new generation of curious, strong-willed and talented individuals is unhindered by convention or the past. This new “Indigo” generation is now shaping tomorrow's economy and creating national wealth. I use the term Indigo because it has been used to refer to children with special or unusual abilities. This is an era where abnormally talented individuals and entities are now able to realize new levels of human potential and economic achievement. [3] [4] [5]
LetterOne's Global Perspectives website adds that the indigo symbolism "embodies a breaking of the norm, something that is highly reflective of the new era that we are entering into, one that lacks convention and is driven by innovation." [6]
In a series of articles published in 2016, Fridman cites the recent extreme volatility in markets, [3] and worldwide political change and instability, [3] as signs of an emerging global shift. [7] [8] [9] He notes two frequently cited prominent indicators of an economic shift: the sharp decline in prices of natural resources including oil, and the slowing of China's economic growth despite this decline in the cost of natural resources. [3] [7] [8] [10] [9]
He and other commentators also note the rise of populism and populist leaders and candidates, both right-wing and left-wing, as these changes occur. [3] [11] [10] [7] [8] [9] Meanwhile, companies like Apple and Google – digital and technological companies he calls "Indigo companies" – have replaced longterm traditional natural-resource or manufacturing companies such as Exxon as the world's largest companies. [3] [10] [7] [8]
Fridman observes that throughout history innovations, alternatives, and technologies have always overcome any perceived shortages of any natural resource. [3] [7] [8] [10] He therefore posits that the new "Indigo era", fueled by digital and technological resources, will be marked by a shift away from the struggle for natural resources and their perceived scarcity, to a reliance on ideas, innovation, and creativity and on supporting the intellectual and creative potential of each human being: [3] "The world has entered a new era where the source of a nation's wealth is no longer natural resources. Intellectual capacity has now replaced land, raw materials and trade routes as the biggest source of wealth." [10]
According to Fridman, three interconnected factors are needed for successful Indigo companies and an Indigo economy: [3] [7] [8] [9] [12]
He notes that most emerging economies have focused on building physical structures (roads, buildings, cities, physical infrastructure) rather than the complex legal, political, and social systems, institutions, and changes that will support an effective free and innovative intellectual-resource economy. [3] [7] [8] [9] The freedoms, protections, and political and legal frameworks of developed Western countries rest on centuries-long histories, socio-political traditions, and mindsets, and therefore will be difficult to replicate quickly in emerging economies. [10] [7] [8] [9] Fridman singles out India as an emerging country that has adequate legal infrastructure and freedom to probably survive the Indigo shift. [10] [9]
Fridman considers the growth of Indigo economies to be a paradigm shift; he states that the pace at which technology is developing is creating worldwide tectonic shifts, and predicts huge global change over the next five to ten years. [10] [7] [8] [3] He and other analysts predict that the growing economic gap between free, creative economies and groups in contrast to repressive, authoritarian, totalitarian, or tradition-bound economies or groups will widen and create resentment and hostilities – whether this is between nations or within nations. [3] [11] [13] [7] [8] [9] Those left behind may be either emerging countries, or the average person – as opposed to the intellectual elites – within developed Western countries. [9] [11] [7] [8] [13]
Authoritarian leaders and authoritarianism often rise during periods of uncertainty and insecurity and economic deprivation. [10] [7] [8] [9] Fridman maintains however that in this ever-changing new economic era, the main source of wealth in a country or region will no longer be a natural resource, but a social infrastructure that will allow everyone to realise their intellectual and creative potential. [12] [14] [15] [7] [8] Therefore, he asserts that "The future Indigo economy is an economy of free people. And this means that the world will become more and more free." [3] [7] [8] [9]
In November 2016 LetterOne launched a journal, Global Perspectives, as a platform to explore "the new emerging economic era, the Indigo era, from different perspectives, including education, religion, politics, economics, history and business" and to examine "global issues through the eyes of leading commentators and business people around the world". [16] The inaugural issue contained articles by Fridman, Dominic Barton, Michael Bloomberg, Stan Greenberg, Carl Bildt, Vince Cable, Ken Robinson, Brent Hoberman, Alex Klein, Deirdre McCloskey, Yuri Milner, Nick D'Aloisio, Lynda Gratton, Parag Khanna, Ian Goldin, George Freeman, Ian Bremmer, and others. [17] [18] [13]
The November 2016 inaugural issue of Global Perspectives also published an Indigo Index, [19] [20] which rated 152 countries based on five key metrics for doing business as economies move away from being powered by natural resources to being powered by creativity and digital skills. [21] The five metrics are: creativity and innovation, economic diversity, digital economy, freedom, and stability and legal frameworks, [22] [23] which were scored based on over 30 measures from published data sources such as the World Bank, UNESCO, the CIRI Human Rights Data Project, the Center for International Development at Harvard University, and the Global Education Monitoring Report. [24] [21] [19] [15] [14] The index sought to measure a country's entrepreneurial ecosystem, and therefore its potential to adapt and develop. [24] [21] [23] [25]
Each country was given a combined overall Indigo Score, with 200 being the highest possible score. [26] [27] The 10 top-ranked countries were Sweden, Switzerland, Finland, Denmark, the UK, the Netherlands, Norway, Germany, Ireland, and Japan. [28] [29] [27] The United States was 18th overall. [29]
The report also included three key findings: Creativity and innovation was the biggest overall driver of high scores; this accentuated the importance of fostering entrepreneurialism and lifelong learning and of investing heavily in people. [12] [28] [19] Nordic countries scored particularly high on the Indigo Index, with three Nordic countries in the top four and four Nordic countries in the top ten; this was attributed to their high rankings both in creativity and innovation and in freedom. [12] [28] [25] [23] [19] And the lowest-scoring countries were beset with social and political problems, such as war, political turmoil, and corruption. [12] [19] [30]
In July 2017, LetterOne's Global Perspectives journal announced the Indigo Prize, to stimulate discussion towards finding a new way of measuring the economy in the 21st century that moves beyond the limitations of mere GDP measurements. [2] [31] [32] [33] [34]
Entrants were asked to submit an essay of up to 5,000 words answering the question:
How would you design a new economic measure for global economies that fully acknowledges not only social and economic factors but the impact of creativity, entrepreneurship and digital skills? How should your new measure be used to improve the way we measure GDP in official statistics? [35]
Entries were due 15 September 2017, and were open worldwide to groups or individuals over the age of 16, with entries particularly encouraged from people at academic institutions, businesses, charities, think tanks, consultancies, or other organisations. [35] [31] The award amount was announced as £100,000, with second- and third-place winners to receive £25,000 and £10,000. [35] [31] [36]
The judging panel included: [36] [37] [32]
The winners of the inaugural Indigo Prize were announced on 25 October 2017. A joint first prize, £125,000 to be equally split, was awarded to two teams of writers: Diane Coyle and Benjamin Mitra-Kahn; and Jonathan Haskel, Carol Corrado, et al. [38] [39] [40] A third place "Rising star" award of £10,000 was given to Alice Lassman. [38] [39] [40]
Coyle was professor of economics at the University of Manchester, and Mitra-Kahn is chief economist at IP Australia. [39] They proposed radically replacing GDP with a dashboard measuring six key assets: physical assets, natural capital, human capital, intellectual property, social and institutional capital, and net financial capital. [40] [39] [41] Their essay stated that "GDP never pretended to be a measure of economic welfare", and proposed that the new measure should assess "the range of assets needed to maximise individuals' capabilities to lead the life they would like to lead"; [39] this would include "financial and physical capital but also natural and intangible capital". [42] They asserted that the new statistics should focus on measuring changes in the stock of important assets, rather than flows of income, expenditure, and output. [43] Tracking the evolution of stocks of physical assets, financial assets and liabilities, natural capital, skill levels, and implicit state liabilities would better measure the sustainability of the economy. [43] [44] Coyle and Mitra-Kahn also proposed interim improvements to GDP measurements – such as better measurement of intangibles, adjusting for the distribution of income, and removing unproductive financial activity – before scrapping it entirely. [45] Following her prize-winning essay, Coyle now leads the Six Capitals research project, funded by LetterOne, at the Bennett Institute for Public Policy at Cambridge University; the project was inaugurated in January 2019 and explores social and natural capital. [41] [46]
Haskel is professor of economics at Imperial College Business School. [47] Rather than abandoning GDP, he proposed refining, updating, and extending the existing GDP measure. [43] [47] [48] He proposed better measurement of services and intangibles, and direct measurement of the economic welfare being created by digital goods. [45] His essay focused on the fact that economies have dramatically changed structure since GDP was originally developed, with more knowledge production, more digital goods, more free things and free information, and more intangible assets such as intellectual property. [43] [47] He also emphasized the importance of factoring in the environment, sustainability, and societal welfare, in addition to calculating the value of goods and services that are provided for free. [39] [47] [48] [43] [49]
Lassman, the recipient of the "Rising star" award, was a 19-year-old geography student at Durham University. [39] Her entry proposed a "Global Integration and Individual Potential" index, which measures each nation on two levels: its value relative to other nations, and the individuals and their contributions within each nation. [39] [40] [50] [51]
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and rendered in a specific time period by a country or countries. GDP is often used to measure the economic health of a country or region. Definitions of GDP are maintained by several national and international economic organizations, such as the OECD and the International Monetary Fund.
Human capital or human assets is a concept used by economists to designate personal attributes considered useful in the production process. It encompasses employee knowledge, skills, know-how, good health, and education. Human capital has a substantial impact on individual earnings. Research indicates that human capital investments have high economic returns throughout childhood and young adulthood.
Economic growth can be defined as the increase or improvement in the inflation-adjusted market value of the goods and services produced by an economy in a financial year. Statisticians conventionally measure such growth as the percent rate of increase in the real and nominal gross domestic product (GDP).
Innovation is the practical implementation of ideas that result in the introduction of new goods or services or improvement in offering goods or services. ISO TC 279 in the standard ISO 56000:2020 defines innovation as "a new or changed entity, realizing or redistributing value". Others have different definitions; a common element in the definitions is a focus on newness, improvement, and spread of ideas or technologies.
In the economics study of the public sector, economic and social development is the process by which the economic well-being and quality of life of a nation, region, local community, or an individual are improved according to targeted goals and objectives.
The world economy or global economy is the economy of all humans in the world, referring to the global economic system, which includes all economic activities conducted both within and between nations, including production, consumption, economic management, work in general, financial transactions and trade of goods and services. In some contexts, the two terms are distinct: the "international" or "global economy" is measured separately and distinguished from national economies, while the "world economy" is simply an aggregate of the separate countries' measurements. Beyond the minimum standard concerning value in production, use and exchange, the definitions, representations, models and valuations of the world economy vary widely. It is inseparable from the geography and ecology of planet Earth.
The knowledge economy, or knowledge-based economy, is an economic system in which the production of goods and services is based principally on knowledge-intensive activities that contribute to advancement in technical and scientific innovation. The key element of value is the greater dependence on human capital and intellectual property as the source of innovative ideas, information and practices. Organisations are required to capitalise on this "knowledge" in their production to stimulate and deepen the business development process. There is less reliance on physical input and natural resources. A knowledge-based economy relies on the crucial role of intangible assets within the organisations' settings in facilitating modern economic growth.
Mikhail Maratovich Fridman is a Ukrainian-born, Russian–Israeli tycoon. He is one of the co-founders of Alfa-Group, a multinational Russian conglomerate. According to Forbes, he was the second-richest Russian as of 2013, moving down to ninth-richest Russian in 2023. In May 2017, he was also ranked as Russia's most important businessman by bne IntelliNews. In February 2024, Fridman had a net worth of $13.1 billion, according to the Bloomberg Billionaires Index.
National accounts or national account systems (NAS) are the implementation of complete and consistent accounting techniques for measuring the economic activity of a nation. These include detailed underlying measures that rely on double-entry accounting. By design, such accounting makes the totals on both sides of an account equal even though they each measure different characteristics, for example production and the income from it. As a method, the subject is termed national accounting or, more generally, social accounting. Stated otherwise, national accounts as systems may be distinguished from the economic data associated with those systems. While sharing many common principles with business accounting, national accounts are based on economic concepts. One conceptual construct for representing flows of all economic transactions that take place in an economy is a social accounting matrix with accounts in each respective row-column entry.
William Dawbney Nordhaus is an American economist. He was a Sterling Professor of Economics at Yale University, best known for his work in economic modeling and climate change, and a co-recipient of the 2018 Nobel Memorial Prize in Economic Sciences. Nordhaus received the prize "for integrating climate change into long-run macroeconomic analysis".
Dame Diane Coyle is a British economist. Since March 2018, she has been the Bennett Professor of Public Policy at the University of Cambridge, co-directing the Bennett Institute.
Joel Mokyr is a Dutch-born American-Israeli economic historian who has served as a professor of economics and history and as the Robert H. Strotz Professor of Arts and Sciences at Northwestern University since 1994. Since 2001, he has also served as the Sackler Professorial Fellow at the Eitan Berglas School of Economics at Tel Aviv University.
Innovation economics is new, and growing field of economic theory and applied/experimental economics that emphasizes innovation and entrepreneurship. It comprises both the application of any type of innovations, especially technological, but not only, into economic use. In classical economics this is the application of customer new technology into economic use; but also it could refer to the field of innovation and experimental economics that refers the new economic science developments that may be considered innovative. In his 1942 book Capitalism, Socialism and Democracy, economist Joseph Schumpeter introduced the notion of an innovation economy. He argued that evolving institutions, entrepreneurs and technological changes were at the heart of economic growth. However, it is only in recent years that "innovation economy," grounded in Schumpeter's ideas, has become a mainstream concept".
Intangible asset finance, also known as "IP finance", is the branch of finance that uses intangible assets such as intellectual property and reputation to gain access to credit. Like other areas of finance, intangible asset finance is concerned with the interdependence of value, risk, and time.
The International Innovation Index is a global index measuring the level of innovation of a country, produced jointly by The Boston Consulting Group (BCG), the National Association of Manufacturers (NAM), and The Manufacturing Institute (MI), the NAM's nonpartisan research affiliate. NAM describes it as the "largest and most comprehensive global index of its kind".
These are the international rankings of Hungary.
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Carol A. Corrado is an American economist who was the former chief of industrial output at the Federal Reserve Board and currently serves as a senior advisor and research director in economics on The Conference Board. She serves as a member of the executive committee for the National Bureau of Economic Research's (NBER) conference on research on income and wealth. She is a senior policy scholar at Georgetown University McDonough School of Business Centre for Business and Public Policy where she focuses on economics of growth and innovation as well as fiscal and monetary policies. In addition to these positions, Corrado is involved with the American Statistical Association as well as the Technical Advisory Committee of the Bureau of Labor Statistics. With the American Statistical Association Corrado serves as the chair-elect of Business and Economics.