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The New Economy - Is It Real?
A Provocative Essay
Recently I was invited to moderate/facilitate/instigate a debate on the issue of whether or not there really is such a thing as the ”new economy.” And if there is such a creature, what is it? The debate has not yet occurred, as it is scheduled for November 6, 2000, at the Houston cell of the Company of Friends. But it likely will have happened by the time many of you read these humble thoughts; perhaps, I will be inspired by the event to write a sequel. This essay is thus intended to both put my thoughts as of this moment in time on paper (or disk as it were) and to toss some kindling into the fire pit where I hope a raging bonfire of healthy debate will be ignited. (As new eras enter different locations at different times, this essay should be assumed by the reader to be addressing issues in the United States unless stated otherwise.)
As to the question of whether or not there really is something worthy of the label “new economy,” I do not find myself aroused. Perhaps this is just my personal rebellion against our society’s current fascination and inevitable degradation of “ transformation,” both the word and the concept. (Conversations involving competing descriptions of transformational experiences seem most common either among groups, all of whom own fine German luxury cars, where the game of keeping up with the Jones’s must move to intangibles simply because everyone can see the tangibles are rough equivalents; or among groups where very few own such vehicles, and so a more affordable version of the game must be played.) We seem so determined to have transformational experiences, that we create them from air with labels. And journalists must have stories, and think tanks new stuff to ponder, and business consultants a new lingo and justification. So with the advent of the Internet and cheap computing, the New Economy, a transformative economic and historical thing, has been declared.
Further cynicism on my part arises from having observed that few historians are capable of accurately identifying new eras in which they are currently living. And in the case of the new economy, I fear, the proclamation has issued forth not from true historians but from journalists in search of a story on a slow news day and not very creative advertising agencies (or investment bankers) hawking the latest and greatest dot.com or software or ASP or whatever. New eras tend to come about in an evolutionary, rather than sudden manner; and setting the dates for the beginning of new eras is an intellectually entertaining activity - but generally results in rather arbitrary conclusions. Certainly there have been transformative events and people throughout history; Newton, Einstein and the printing press come to mind. But it has always taken considerable time for society to accurately recognize them as such. So, do we really have something here or not, and is what we have appropriately labeled “new economy”?
In this writer’s opinion, we do have something here, and whether or not we call it the “new economy” is less important than understanding what it is and its characteristics. There is no doubt that certain advances in technology are a part of whatever “new” thing our economy is experiencing. Among the most obvious are: the Internet combined with the increasingly universal use thereof, cheap computing both in terms of CPU power and storage, and extraordinary advances in communications from fiber to cellular. But to those techie favorites we might add others, more subtle perhaps but real nonetheless. Among these elements of the new economy are: extreme domination of the world economy by the United States combined with undeniable and unstoppable globalization, the unprecedented fluidity of the labor market in the United States, the emergence of many third world nations into second world status, and a society that has evolved its values system into one based on material acquisition to an extent last experienced in declining Roman imperial days. (Whether or not this last factor is true, not to mention the size of its amplitude and the extent of its influence, is a subject for several books and debates of its own. But its inclusion should at the very least satisfy my desire to incite argument.)
What are some of the characteristics of this new economy that these elements have brought about? In terms of macro-economic measurements, our economy is experiencing an extraordinary period of growth. Technology has made many business operations exceedingly more efficient. For example, on the buying side, just in time inventory systems are unthinkable without computers. On the selling side, efficiencies in delivery and shipping have been tremendous, which in turn aid inventory control for manufacturers. When it comes to the Internet’s influence on the new economy, it is too easy to be lost among the romance of pure dot.com’s and overlook the fact that virtually every major corporation is either implementing an Internet strategy for order taking and processing - or losing tremendous competitive position. Margins are often slim, and shaving a percentage point or two off expenses can be the difference between corporate life and death.
On the positive side, technology has undoubtedly contributed to an improvement in the standard of living for individuals in some respects. What would life be like without cellular phones, caller id and e-mail? We can chat with people and be harassed by people anytime, anywhere! (Perhaps the standard of living for victims of cellular phone related traffic mishaps has not improved.) With caller id we can avoid being interrupted by people we are not in the mood for. (We might also be avoiding calls for help from people who need us. Hmm ......... I guess it might depend on just whose standard of living we are examining.) With e-mail we are staying in regular contact with a much larger circle of friends than was possible with the mere telephone. Of course that contact is quite sterile compared to real conversation and leads to a greater number of misunderstandings; but, hey, it’s great for spreading ideaviruses. These are very real changes, not easily economically measured - but with real economic effects.
We undoubtedly have access to more information faster than ever before, and we have access to more information faster than most of us even imagined possible ten years ago. And that access to information is fairly affordable. On both a corporate and personal level, this has had the effect of reducing to commodity status. What is being reduced to commodity status you ask? I started to type “things,” but swiftly recognized the error of my ways, since increasingly intangibles, both the traditional accounting kind such as stocks and bonds, and intangible stuff like advice, are becoming commodities along with tangible products. It is incredibly easy to check out specifications and prices for almost anything. Markets have become much more efficient in economic terms, and this is largely good.
Interestingly, in the new economy, it seems that people, too, have become commodities, simply production units to be replaced by more efficient models when available (those more efficient models might be human or robotic - doesn’t matter). This is the fluidity of the labor force to which reference was made above. Corporations are quick to hire and layoff employees by the thousands and tens of thousands in an effort to shore up short-term earnings. Today everyone is talking “market cap,” and market cap is short-term earnings driven. In many mergers and takeovers, the single largest factor for analysis is the savings to be generated by job elimination - euphemistically referred to as “efficiencies.” Granted, unemployment is at very low levels in comparison to the last thirty years. But in contrast to earlier times, no individual knows when he or she will be joining the ranks of the unemployed. Even the most sought after creative and talented people have been dehumanized into “inventories of intellectual capital.” The first two qualities listed in the Boy Scout law are “trustworthy” and “loyal.” How many of today’s employees would use those adjectives to describe their employers? Not many. Those are old economy ideals, inefficient and obsolete in the new economy. Our material acquisitive culture has no room for them. The sociological and philosophical issues abound, but there is no denying the economic efficiency.
Recently I’ve read two articles in the mainstream business press about ideaviruses. Their focus was a bit different, but the principle being discussed was the same. Sell the sizzle and not the steak, and sell it fast before the market notices the steak is missing. Hey, today we are all operating at something called “Internet speed,” and we are afraid that if we don’t we’ll be left behind. In that we might be right. Best I can tell, “Internet speed” means making decisions before we really know what we are doing; not every time, but often enough. One of the articles appeared in Fast Company and included a discussion of sneakers. A contrast was drawn between the old Converse shoes sold by earnest shoe salesmen concerned with things like fit (translate: customer satisfaction) and Nike selling its Air Jordan shoes for extraordinary prices with terrific profit margins. What is being sold here is ostensibly the myth that anyone wearing these shoes can defy gravity like the shoes’ namesake. But that’s not really what is being sold. Knowing full well that speed is the key factor here, Nike debuts new Air Jordan models regularly and frequently. There is customer satisfaction of a sort here, too. These are the ultimate “stay ahead of the Jones’” shoes. In our materially acquisitive culture, this means real value. But is it a real value we want? The Fast Company article suggests that survival in the new economy requires being in touch with and selling to these values. Quite possibly true, but how does it feel?
Certainly the same new economy factors had been dominant in the world of technology stocks, at least until last spring. The game was to create buzz, get the company to the IPO stage, and get out as soon as the stock became unrestricted. Can you count, dear reader, the number of times you’ve read that John Doe was a founder of Whatever.com, which was either sold for $600 million to BigCompany or which went public last year? Often today when economic stars are being introduced, this is the sole qualification. The implication is that having accomplished the feat described above, a person is to be admired. What happens to the stock purchasers at the IPO when the company turns out to be all sizzle and no steak? Who cares? Internet speed, make a quick buck and get out. That’s what matters. Besides, every con artist needs greedy victims to survive. But after the spring of 2000 tech stock crash, people started talking about “fundamental values.” Weird!! Is this a crack in the new economy? I wonder.......
In terms of traditional values, never in the economic history of the United States, have so many sold so little for so much. It is doubtful that anyone knows how the eventual economic fallout will look. Can the new values sustain an economy, or can the new economy sustain the new values? We’ll see.
Meanwhile, back to the beginning. Is there really a new economy worthy of the name? Probably so. But it is not alone. There is a new society, a new culture, too. How do we measure them? What do they look like? What will they look like? What do we want them to look like? It ought to be an interesting evening.
© 2000 Daniel A. Krohn
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