8.2 Technology, Business, and Economies

Each change in the characteristic technology of a given society results in a shift in economic activity and power. For example, those skills or techniques that are most highly valued in an agricultural society are much less at centre stage in its industrial successor, while those of the hunter-gatherer, while they still exist, fade altogether from significance. Businesses that depend on the importance of a particular form of trade or technique may find their very existence jeopardized when new technologies or even new trading routes and patterns come to predominate. Such alterations are always necessary whenever technology changes, for some countries will have the now required resources in greater abundance, will better develop the new techniques, or will be more strategically located than others. Indeed, those peoples most securely wedded to the previous technologies--and most successful with them--may well be the most reluctant or unable to change. They may have, in human and other terms, the poorest resources for moving into the following age. On the other hand, countries that are able to use the new technologies to bring the old ones up to date, then move on a large scale into the new are those that prosper when changes come.

When the industrial age dawned, the principal trade was in food, clothing, spices, precious stones, and metals. As machine-based industry grew in importance, these older markets all continued to exist and even enlarged in absolute terms. However, they declined in importance relative to the overall economy, which was growing many times faster. Eventually, the trade in consumer goods and in the raw materials required to produce them took on an importance that dwarfed the older economy in volume, value, and number of people involved. Those enterprises that remained in older types of trade were required to become more efficient in order to retain investment capital, as well as to release the large number of employees needed by the new industries. Thus, new farming technologies grew up side-by-side with and benefited from new industrial techniques. Farming transformed into a type of industrial activity in its organization, machinery, and prerequisite education. The flow of people and money to new economic dominators was disruptive to the degree that individual businesses either adapted to the new conditions or died. Meanwhile, overall gross national product in the industrializing nations grew at a rapid pace, as did the disposable income and standard of living of all their citizens. The key was the ability to increase productivity dramatically in virtually all sectors of the economy simultaneously. At the same time, provision of transportation and communications themselves became a major industry, as has the provision of information services in the Fourth Civilization.

Profile On . . . Business Changes

What business am I in?

o Am I a hunter-gatherer or a food supplier? If the latter, can I become a farmer as well?

o Am I a farmer who takes my produce to market or am I in the transportation business? If the latter, could I establish a distribution network?

o Do I make bicycles and horse-drawn buggies, or am I a vehicle manufacturer? If the latter, could I make the transition to building cars and trucks?

o Do I run a telephone company or an information infrastructure? If the latter, could I establish Metalibrary facilities?

o Do I loan money, or do I assemble capital? If the latter, could I arrange financing for multi-trillion dollar projects involving a network of organizations?

Where Should I be Located?

o If I am a hunter gatherer, I need to live and work where the animals happen to be on any given day in order to survive.

o If I am a farmer, I need to live and work where the soil will allow me to grow food and the transportation routes will allow me to sell it.

o If I am in the transportation business, trade and travel routes and population concentrations are critical factors in the location of my work.

o If I am in the food distribution business in the late industrial age, my location is divided between producing and consuming areas, and includes everything between.

o If I am in sales, my location is wherever my customer is.

o If I distribute goods and information via the Metalibrary, do I need even to think of myself as being located anywhere, or is the very concept of a place of business obsolete?

The Future of Economic Institutions

Transitions of a similar nature are now taking place on an even larger scale as industrial paradigms give way to those of the information age. The manufacture and distribution of consumer goods will continue to be important into the indefinite future, though the nature and sophistication of such goods will change with startling rapidity. Likewise, the production and distribution of foodstuffs must continue as well. That is, the basics cannot be discarded, though both these sectors will continue to shrink in relative importance to the overall economy. Manufacturing and food production will both lose even more jobs than they already have to the service and information sectors, though this shift will be more obvious in manufacturing because it has recently been relatively larger than agriculture. Even the latter will undergo wrenching changes as it too adopts the tools and techniques of the information age. The workers of both sectors will continue to need higher skills than ever, while they simultaneously decline in numbers. Reductions in employment in these sectors will be achieved in part by extensive robotization as many manual forms of labour are turned over once and for all to machines. In the same way as farming became industrialized, both it and industry will be remade in the image of the next age.

Successful manufacturers in the post-industrial age will continue to switch rapidly from product to product as their research and development departments improve on or replace the old and as their public relations arms either detect or create changes in consumer tastes. Because computerized design and manufacturing of goods can so easily be re-programmed, lead time for bringing new goods to future market becomes much shorter. In addition, it will be more cost effective than in the past to order short production runs of specialized items, perhaps even to the point of manufacturing single pieces to customer's personally ordered specifications. Thus, variety of goods increases, within broad standard categories. It will still be possible for small companies that carefully select niche markets to compete with larger ones on even terms, though it may take some time for the prices of manufacturing robots to fall to the point of being affordable by the smaller firms. There will be a continuing increase in the volume of goods ordered through electronic shopping malls that collect subscribers' orders and send them direct to manufacturers, thus eliminating wholesale and retail middlemen. Improvements in efficiency and price to the end-user could be very substantial, because from 30 to 70 percent of the retail cost of some goods represents post-manufacture markup. This disintermediation or exclusion of the middle man is an important trend in the information age, as it places manufacturers in direct contact with their customers for the first time since the agrarian age.

Everyone is connected to everyone else, but the chains that form those connections are getting shorter.

Ultimately, however, service and information sectors, and manufacturers supporting them, will dominate other sectors as much as industry came to overshadow agriculture in the past. More goods may well be manufactured, and they may be cheaper and more sophisticated, but their making will employ fewer people, and this part of the economy will contribute less obviously to everyday life. Except when they take the time to design their own, people will buy and use consumer goods as they now do food, that is, with little thought for or understanding of the means by which such goods come to their hands, since few people will have direct contact with those processes except at the retail and delivery (i.e., service) stages. It could become as rare to be or even to know an assembly-line worker as it is today a full-time farmer. In other terms, the manufacture and distribution processes will become higher level (more invisible) abstractions, passing out of sight and out of mind as things many people think consciously about. Perhaps "hobby factories" could develop, much as hobby farms have, to provide outlets for a certain kind of nostalgia and a source for hand-made goods for specialty markets, or as some kind of tax shelter.

Capital will still be needed for the extraction of raw materials and for the establishment of factories--even those run by robots--but much less money would be spent on operating costs because of the relatively lower numbers of salaries paid. These funds would go instead into shareholder profits, research and development, and large-scale capital-intensive projects. Medical research and technology, information systems, communications, transportation, the building of new habitat on earth, and the colonization of space could become the dominators of the large capital economy and the most visible vehicles for the business of doing business on a grand scale.

Some of these teraprojects would require concentrations of capital orders of magnitude larger than those arranged by the wealthiest tycoons of the industrial age. This need could result in even larger banks and multinational corporations and even more government involvement, for these institutions would also need to grow to meet such challenges. At the same time, however, the rapid economic changes taking place are catching many industrial giants unprepared, creating many new opportunities for individual entrepreneurs and small companies, if for no other reason than that a small number of people can reach decisions faster than can a large number. Some of these enterprises are in turn becoming the middle-sized and larger corporations of a decade or two later. Change opens up numerous opportunities for small-scale business, so one could predict that numerous and dramatic changes could cause the average size of business enterprises to shrink for some time, reach some equilibrium, and not begin to grow until a new stability emerges (if one does).

In other words, there are collectivizing and individualizing trends in tension here as well. Another kind of equilibrium could be reached if manufacturing and financing concerns formed temporary project-oriented partnerships on an item-by-item basis, rather than merging into permanent and enormous conglomerates.

Despite a proliferation of small companies, large enterprises will have to operate on a scale never before seen, and this will require new financing techniques to make sufficient capital available. Just as the introduction of stocks broadened participation in business during the industrial age, new instruments would have to be devised to create larger and broader-based capital pools than ever before. Many ordinary citizens, companies, and governments will probably have to have a stake--even if only through mutual funds--in such things as space-based industries, biochemical research and sales, land reclamation, the Metalibrary, the robotization of industry, and a variety of transportation, communications, and habitat projects. The result may well be that even more international commercial enterprises will transcend national interests to the point that people will have more feeling of loyalty to and involvement in the companies in which they own shares than they have an attachment to the countries in which they reside. For the increasing number who work as single entrepreneurs under service contracts to make a living, corporate ties will be entirely proprietary. The employees that businesses do have will more often be either part owners or independent contractors, for the times of viewing labor as a vast pool are now past and the day of the professional worker has dawned. This professionalizing of the work force focuses attention on the individual rather than on the mass of workers and may well create an economy and social values that are more individualistic in many aspects of life.

The Question of Size

It is worth observing that there may be an upper limit to the size of a company as a single financial or structural entity, for some governments have acted strongly in recent years to break up large concerns into smaller ones, acting in what they believed to be the best interests of the public. In the past, such divestitures had widespread popular support on the theory that giant size and monopolies automatically produce predatory behavior. Classic U.S. cases are the breakup of Standard Oil early in the century and the more recent creation of the Bell group of companies from the former ITT holdings. It is too soon to judge the results of the latter action, or of the blocking of proposed mergers in other fields. By the late 1990s Microsoft had grown to be the most dominant company in the software world, and also became the target of successful antitrust suits, though political considerations following a change of government may have precluded applying appropriate penalties for the illegal activities. It is also worth noting that very large companies sometimes break themselves into a number of entities based on geographical or market sector considerations, so as to gain efficiencies and maximize shareholder value. A case in point is the giant Canadian Pacific Railway, which in the late 1990s re-invented itself as several non-overlapping entities, allowing each to concentrate on a specific market sector.

Even if it is the case, however, that companies were never individually allowed to grow beyond a certain size, they may still form multi-trillion dollar capital pools through use of corporate linkings and partnerships. After all, each expansion of the scope of the economy has required a corresponding increase in the size of capital pools to serve the growing market--just as it has required a larger transportation and communication sector. The difference is that such partnerships need not be permanent, but could instead be temporary and flexible--large versions of the metaperson. Some formalization of international cooperations of specialist firms or of individual professionals could provide the alliance a formal identity. These entities could be corporations whose stakeholders are other (possible personal) companies (a practice already common for longer-term entities). Though not necessarily large in themselves, the conglomerate could have an enormous supporting structure.

Suggestions for Large Projects

Among the more remarkable proposals (fictional and otherwise) that would take large sums of money, people, and other resources:

o reclaim large deserts such as the Sahara for living space,

o build domed cities under the ocean,

o build a circular dam in mid-Ocean, pump out the water behind it, and build a new nation-city within the dam walls,

o construct an elevator to near-earth orbit,

o construct cities in space,

o explore the solar system and beyond,

o build colonies on the Moon, Mars, Venus, and a moon of Jupiter,

o build a pollution free power source/ transmission facility in space,

o mine the asteroids,

o build solar energy power plants in space to transmit energy to Earth,

o establish the full Metalibrary

o move manufacturing to non-habitable locations underground, inside mountains, to space, or to the moon,

o not only map the human genome, but find out what every gene does,

o explore the Solar system and beyond.

Some of these may never come to pass, but others on a similar scale surely will. It should be clear that they can only do so through individual, corporate and government cooperation of a type that has never before been experienced.

Trends for the Future

In all, it is clear that the post-industrial economy has both collectivizing and individualizing trends. It has facets that promote individual professionalism and entrepreneurship on the one hand and those that promote the growth of very large scale enterprises on the other. None of the present aspects of the economy will vanish--manufacturing of goods and food distribution will continue to grow with population in absolute terms--but they will not continue to dominate either public interest or employment. Instead, those sectors will shrink back into a nearly invisible infrastructure run by machines that are superintended by a few managers, who would themselves be part of the information economy rather than be traditional blue-collar workers. Of necessity, the companies engaged in such activity would be relatively large (in capital terms) by today's standards but would occupy a middle ground in the economy. It is of course, uncertain how long some of this will take. Social responses to new technology are even harder to predict than availability of the techniques themselves, but the very possibility of moving in the indicated directions will itself create pressure to do so, in the name of efficiency if nothing else.

There will be vast new economic frontiers opening up, and the instability common to all rapidly growing and changing economies will be a feature of the economic landscape for some time to come. An interesting side-effect of this is that the study of economic technique itself could become more important, though efforts to apply systematic planning to the economy could continue to be frustrating because old data never quite catches up to current reality. It could be argued, for instance, that one reason for the recent success of the computing industry is that governments have not understood it soon enough to be able to stifle it through regulation. It could also be argued that a state of stasis or economic stability is undesirable and should not be striven for, because it would imply stagnation and eventual decay, and that change ought therefore to be welcomed as a benefactor and encouraged.

There is no shortage of information about the economy, and computing hardware will soon exist to collect, store, and manipulate this information even on a global scale, but it is not yet evident that an economic calculus exists that can comprehend the effects of change on the scope being discussed here. Such a calculus will have to deal more with change and growth than with a stable economy. Explaining what is happening in economic terms even while the object of study is rapidly transforming itself beyond recognition is one of the major academic and technical challenges of the information age. There is certain to be no shortage of candidates for the position of Economic Newton to the new era. If a means of explaining how the economy works can be found, there will likewise be no shortage of those proposing to manage it on a professional basis. Thus, economic technique might be part of the collectivist aspect of the future order, despite the failure of comprehensive management efforts in the past.

Jacques Ellul saw this trend clearly, and argued that like all techniques, those of economies could brook no opposition in being developed to their logical conclusion--a comprehensive planned economy, micromanaged to the last detail by an army of economic technocrats in the name of maximum efficiency. However, his conclusion was based on certain assumptions of the industrial age, some of which may no longer be valid.

First, such an analysis presupposes that there does exist at least one comprehensive economic technique. During an age when industrial technology provided the paradigms, this may have seemed to be a reasonable assumption. It is possible to observe techniques in many fields of human endeavor as they are born, develop, and mature to a comprehensive statement or discipline. They become well-understood components of their environment, taking on an automatic and machinelike aspect. Although this is certain to continue, it is unclear as yet that this process applies to knowledge itself--that is, to information, the supplier of paradigms for the current age. Is the sum total of knowledge in any field of study, or in all of them collectively, limited or unlimited? If it is limited, a final equilibrium state is perhaps possible; otherwise it is not.

However, it will never be possible to prove that everything knowable has already been discovered by the human race, even if it has. Humanity may well style itself as its own god but can never know that it is all-knowing. A transcendent deity is one that can only be revealed, not constructed. If, therefore, the information economy continues to transform itself rapidly, growing without any apparent limits, a comprehensive set of economic techniques might never be devised--attempting to do so might be as difficult as managing the weather at every point on the globe.

Second, it is not clear how the general availability of economic information and general knowledge of economic technique will affect application. The citizenry may well submit to the professional opinion about what is economically efficient, thus creating a de facto managed economy. However, there are certain to be competing voices offering alternative theories, so that even if the best of economic techniques is discovered and applied, there will be the political problem of persuading people that this is so. There will always be some prepared to argue that a current technique, efficient as it may seem, ought to be replaced by a different one. The only way to discover if the argument is correct may be to try it; theoretical demonstrations of efficiency are unconvincing and often wrong. This may always be the case, for technique is application, not theory.

That is, Ellul's worries about the inevitability of economic techniques may be valid, but as long as there is neither understanding of the role of information nor the ability or will to manipulate it, the day when the economy will be manageable in every detail will be postponed indefinitely. Indeed, economic theory has had a hard time in recent decades. It failed to explain the "stagflation" of the late 1970s, which saw high unemployment and high inflation together--a combination previously thought impossible. It also failed to predict or account for the dramatic stock market plunge of October, 1987 and for the prolonged rise through the nineties. Economic pundits had widely differing, even contradictory, interpretations of why such events took place and what the effects would be, even in the short term. For its part, the information economy is not only new, but entirely out of regulatory control. No one person or group "owns" or manages the Internet (or is likely to the Metalibrary). It is growing and changing so rapidly that its major features may be in place long before there is even any theoretical work done on its management.

Third, the sorry history of attempts to do comprehensive micromanagement of the economy must lead us to question whether it would be wise to attempt it even if it did seem possible. Putting such power into the hands of a government has invariably resulted in brutal dictatorship, and there is no reason to suppose that because we collectively became competent to do what could not be achieved in the past, we would be better off for doing it. History suggests that such power would simply produce another tyranny.

Profile On . . . The Economy


Throughout the 1980s and 1990s billions of dollars have been spent on computing and information technology. Yet, the standard measure of productivity (product value divided by average wage) has remained constant during this time. This fact is called the "productivity paradox" and many commentators have used it to suggest that money spent on new technology has been wasted.

However, this analysis fails to take into effect two factors:

First, this is not the first productivity paradox, but the third. The first two (in North America) were the electrification of factories from 1899 to 1939, and the electrification of urban homes from 1907 to 1929. In both cases, there was little or no change in productivity until the end of the period. Then, on the one hand, more efficient factories could be built with radically different designs, and on the other, the gains made by using machines in the home could be translated into economic advantages for the family and the standard of living improve dramatically.

Second, productivity gains are unlikely during the time an old system is being modernized. Such a process consumes time, energy, and capital, but leaves essentially the same way of working in place when it is done. Rather, the important changes take place after the technology has been deployed for traditional tasks, when it begins to transform the workplace into something new and fundamentally different.

Thus, it is only when the economy is into the latter phase of computerization, and adoption into existing systems has reached at least 50% is it likely that the transforming enablement of the information age will produce great productivity gains--these take place after the old system has been changed. Perhaps just such a radical transformation can be seen in the growth of the World Wide Web after about 1993, when the Internet went from being a scholars' tool to a household appliance in a few short years (Changes take place much faster than in previous technology revolutions).

Ted Lewis, writing in the May 1998 issue of the IEEE journal Computer suggested that the economy is moving to a friction-free model, wherein new information can be acted upon almost immediately. He notes some of the same trends mentioned in this chapter--the exclusion of the middle man (disintermediation), the integration of many economic functions under single entities, the increasing flexibility of the workplace under a more professional and less rigid organizational model, and the increasing ability for manufacturers to target individual customers' wants and needs.

If this analysis is correct, then the lengthy expansion of the North American economy experienced in the 1990s might well continue for a decade or more, as the productivity gains of the Metalibrary begin to be realized by the majority of citizens.


What then, can be drawn as a definite conclusion about future businesses activity and the economy as a whole? Although there are certain broad collectivist trends, individualist ones seem also likely to be manifested, with economic knowledge and power becoming widely disseminated. This very knowledge will feed back into the system to reshape it. A group of self-professed economic technocrats or professional managers may well exist, though they may not be successful in achieving a comprehensive understanding or much real control over a very rapidly changing system.

However, less neutral opinions are not hard to find. The stock market could suffer a great crash, confidence in government could decline from low to none, or the new century could see a variety of other calamities that render late 1990s economic and social analysis unusable. It is too soon to say, for instance, whether the bear market begun in 2001 constitites a trend, the beginning of a deep decline, or merely a temporary technical setback. Ted Lewis might be wrong, and a deep recession just around the corner. Governments could collapse, nations self-destruct, and corporations important in the 1990s cease to exist. Some of this has happened already, with problems in Eastern Europe and the Middle East continuing to affect the world economy, perhaps in the end profoundly. In this volatile time, when dramatic change is normal, some apparently small factor could trigger radial alterations to the world's economic, corporate, and political structures that dwarf all the considerations mentioned thus far.

Given recent patterns of economic change, it ought, however, to be possible to forecast with reasonable accuracy what will be the winning and losing sectors in the new civilization--in at least the intermediate to long run-- and the next section will be devoted to these issues.

The Fourth Civilization Table of Contents
Copyright © 1988-2002 by Rick Sutcliffe
Published by Arjay Books division of Arjay Enterprises