8.3 Wealth in the New Era

Perhaps it seems pessimistic to speak of economic losers in the information age. After all, is it not an axiom of progress that it automatically results in everyone being better off than they were before? Indeed, progress, thought of as an independent force toward human betterment has been very much an icon of the industrial age. In material terms--goods and services--a citizen of a modem industrialized country is certainly much better off than one of a century ago, and this is particularly evident in terms of medicine. Thus, in some spheres, progress seems real, even though in the social, political, and moral ones it could be questioned. Whether the almost mystic notion of inevitable progress will continue to be a control belief of the new era will be examined partially in Chapter 11.

Assuming for the sake of argument that (at least economic) progress is an inevitable force, the wealth it brings has been distributed very unevenly both by industry and by geography. Despite its name, which seems to suggest specific routes and particular goals, progress is fundamentally unpredictable--most of its prophets seize on one or another utopia as the eventual resting place, the nature of which reflects the economic and political biases of the predictor. In addition such forecasts are often made in absolute terms, ignoring that peoples' perceptions of change are in relative ones--both for where they have been and for where they see everyone else as being. Each individual in a society has a somewhat different view of the past, the present, and the future. With this come different hopes, and so different views of what has already or might yet constitute progress.

For instance, one person might define progress solely in absolute economic terms such as employment or home ownership. Another might define social progress in terms of the percentage of the population with incomes, say, one standard deviation below the mean. Since this figure--the number below a relative poverty line--does not change as the mean rises, those fond of such analysis may see no progress at all, even if more people can buy more things. Still others might survey the moral landscape of the population and draw conclusions that are not dependent on material prosperity at all--or even suggest that there is an inverse relationship. Thus, it is not difficult to generalize the arguments of the last section and suggest that progress, if it is real, may have no general goals, with the possible exception of efficiency.

Economic change also takes time, for there is a great deal of inertia in the spending habits of governments, industries, and individuals. However radical the changes in these are, this inertia acts as a governor or brake, and is itself a key factor in determining how society can change. Moreover, economic information disseminates through society slowly, and decisions made in one year might not realize their full impact for several years. Nevertheless, government and industry leaders are often expected to take immediate action and produce immediate results for the bottom line. Since the economy is probably already in a different part of the cycle than it appears to be, such pressure often results in exacerbating the very problems they were designed to solve, or exaggerating the swing away from the difficulty. One could hope, as Ted Lewis, that in a friction-free economy such bad decisions will become less likely, but such a hope also assumes that decision makers will also ignore emotional pressure, bad economic models, and demagoguery, and history would suggest this to be unlikely.

Moreover, although the new economy will inherit from the old in a straight line fashion, the steps whereby a new order is attained are documentable after the fact but are not necessarily obvious or even evident during the transition. With all these cautions, it is still interesting to analyze present and possible trends by industry and by country to determine which could gain ground and which could lose it relative to the ever-changing norms of economic activity.

Economic Change by Industry

It may seem easy to pick a few of the industries, occupations, and enterprises that will be economic winners in the information age. Electronic and biochemical high technology, information industries, robotics, habitat engineering, and space technologies are poised to become economic leaders, and many businesses in such enterprises will undoubtedly grow and prosper. It is difficult to be more specific, however, and to select individual companies as the greatest beneficiaries in the new economy, for much depends on adaptability, vision, the readiness to make decisions and take risks, and the ability to combine all this with sound management. The winners also need to be able to form and maintain associations or formal partnerships with other companies on an international basis--an exercise in cross-cultural cohabitation that may be beyond all but the most imaginative and flexible.

For instance, even well-positioned giants such as IBM, which should have been at the center of computing technology innovation, sometimes found themselves pushed to the wings by the likes of Apple, Dell, and Compaq. The big players of a previous wave of innovation often find themselves forced to play catch-up in a marketplace that is highly competitive and demands rapid decision making and change--both of which are difficult to do in traditional big companies. When IBM attempted to set standards, these were not particularly innovative and were either easily duplicated by a host of smaller companies, or ignored altogether. The result: though its sales have grown in absolute terms (they could hardly help but in this sector), IBM can no longer claim to be the single dominant force in the industry and innovative product leadership has often come from elsewhere.

Yet, though IBM may have lost some of the edge of innovation, it retained the marketing skills that kept it in a prominent position even without the mantle of leadership. It also retained sufficient trust in its name to be able to charge the highest prices, as well as sufficient volume to manufacture at the lowest cost in the industry. These factors increased the size of the company and allowed it to do costly research on supercomputers, superconductivity, new materials, and new kinds of software--all of which will be required to build the kind of devices that will establish the Metalibrary, will result in new and innovative products, and will enable management of the wider economy. IBM may not be the first to manufacture the devices made possible by its research, but its role is important to their eventual production. This situation nicely illustrates the need for both large-scale, capital-intensive research and small-scale, innovative applications of new knowledge.

Meanwhile, Apple Computer, on the other hand, illustrates that even being the company responsible for almost every innovation in computing for two decades is not enough to maintain a dominant market share. This is because it is not quality that sells in a mass market, but perceptions (the sizzle rather than the steak). Better managed companies whose people understood this were able to out-market Apple, even though their software and hardware products were often inferior. With the return of Steve Jobs to Apple, and the subsequent change in management style and marketing techniques the company once again became prosperous. This example serves to teach two lessons: first that any one of bad management, poor decisions, or worse marketing can easily overcome superior product quality; and second that as in the moral realm, knowing what is best does not imply doing it--or in this case, buying it. In other words, even perfect information does not lead to corresponding action; Aristotle was simply wrong about this.

The automobile industry provides another interesting example. In its infancy, it boasted hundreds of small enterprises, but those gradually coalesced into a handful of giant car makers with numerous cross-industry standards. These in turn came to be threatened by more sophisticated and automated offshore firms that took advantage of new technologies to build better products before their North American counterparts could react to new market realities, and it took a long time for the latter to catch up.

As the computing industry grows, aspects of it will also mature and become standardized, and there will continue to be a reduction in the number of vendors, though some of the remaining ones will grow in size. Such a rationalization in the computer industry has taken place before, in the 1960s and 1970s, when mainframe manufacturers adapted to the IBM standards. A similar process may be as all-encompassing in the small-computer industry, even though there are many personal tastes to accommodate.

For instance, the visual desktop metaphor that was pioneered by Xerox and popularized by Apple as the MacOS, was then partially imitated by Microsoft, and as "Windows" has taken most of the market. There remains room for some divergence in basic hardware, storage devices, operating systems, languages, and even consumer applications. In the end, the number of small computer manufacturers may shrink substantially and fall in line behind Intel, Microsoft, IBM, Sun, Apple, and one or two others insofar as standards are concerned. While some will undoubtedly be casualties in the consolidation crossfire, others will prosper as they do now supplying parts, peripherals, service, consulting, and software. At the same time, international organizations such as ISO, the IEEE, and ECMA have also become more important for the setting of useful standards in the industry for the simple reason that they are perceived as impartially transcending any single economic interest.

The establishment of the Metalibrary might serve to open up individual opportunities to gain and use technical knowledge for profit. It may well be some future start-up company run out of a garage that builds and sells, say, the first "pocket brains" or the first lap-top or pocket Metalibrary terminals. Today's computing giants must contend with innovation from start-ups at home and also with attacks on their market share from abroad. They may not even exist in sixty years; their survival depends on their adaptability and vision.

Apart from the computing industry, others likely to be successful in the information age include biotechnology, communications, transportation, and high-technology construction. Engineers of all kinds will be in great demand, as will be lawyers, teachers, analysts, system designers, accountants, document writers, and contract supervisors. Certain professions that may seem to be obvious winners, such as circuit design and programming, may enjoy only a short-lived boom. When computers are used to automate such tasks, such jobs may not be needed as much. However, their holders will be used being problem solvers, and as such will always experience demand for their services, regardless of the specific job title.

It is more difficult to forecast which industries will be unsuccessful, especially outside the high technology fields. Some managements have the vision to adapt new tools to their fields efficiently, and others do not. The properly perceptive corporation in any field--including agricultural and smokestack industries--may not lose market share or importance, even if their overall sector declines relative to the entire economy. Manufacturers such as General Electric have often been cited as examples of companies that have been able to grow and change with their customers over long periods of time. Likewise, the Hudson's Bay Company (HBC) has become the world's oldest continually operating commercial concern by being able to discern those same changes on a retail level, though it was very late getting on the Internet. Interestingly, it too is currently re-inventing itself as discrete chains of speciality outlets instead of as monolithic department stores.

By contrast, many firms that were successful in the late industrial or early information age collapsed when they were unable to make the transformation from one product or market to another that a rapidly changing situation demands. Whether a given company-- old or new--can expand its vision sufficiently to thrive (or survive) change remains to be seen. After all, there are numerous high tech firms, some of which were for a time quite large, that have already succumbed to market pressures, poor management, and negative marketing perceptions. A journalistic feeding frenzy alone can do serious damage to a company--even in the absence of any genuine marketing or technical problems. A classic example was the treatment Apple got from the press in 1996-1997 when reporters with no real news on hand were able to halve Apple's market share on the basis of nothing more than mutually-reinforced negative reporting.

The HBC serves as an example that it is possible to establish trade to hunter-gatherers from an agricultural society, maintain that trade throughout the entire industrial age, and participate in the next as well, by retailing electronic devices. That no other companies have survived the same time span is telling evidence of the difficulty of managing commercial change and might lead to the conclusion that few of the present companies will survive, though information on potential change will also be available to them if they can take advantage of it. The point is that the new technologies necessarily transform the old institutions even while they create new ones. Those that can effectively manage the transformation survive and thrive; those that cannot die out.

Geographical Considerations

Just as there have been geographical, economic, and political considerations that have resulted in uneven concentrations of certain technologies in the past, such factors will also cause some regional disparities in the near future. That is, there will probably be geographic winners and losers at least in the initial stages of the new economy.

North America has been a leader in the computing industry and that may continue, though it is always hazardous to predict that some economic pattern of the past will continue into the future for very long. This is particularly true in the context of the Metalibrary, where neither information nor vendors need respect artificial lines drawn on the Earth as national boundaries. As the biomedical and aerospace industries grow and change, they will go through startling transitions. It is tempting to suggest, for instance, that the progress of the former could be similar to that of the computing industry, with the giant drug companies losing ground to enterprising garage and basement operations. Research and development costs in this field can be remarkably small in some situations; the potential return is often very high, and numerous academics have left universities in order to reap profits from their research. These factors are certain to encourage many new entrants to the field. On the other hand, the existing North American regulatory environment can result in a ten year, 250 million dollar cost to bring a new pharmaceutical product to the commercial market. This fact alone stacks the deck heavily in favour of the very large companies, and the industry has already become quite concentrated.

In the aerospace industries, the relatively large amounts of money involved will likely benefit large companies in the near future, but some contract work will continue to go to much smaller firms, especially those in close physical proximity to the industry leaders. Again, it is easy to forecast more mergers as the market globalizes and capital needs for new and larger products skyrocket.

As the routine use of global communications networks becomes a reality, geographical proximity may diminish in importance in many industries. This could effect such enterprises as banking, retail sales, travel, investing, and the offering of professional services. Eventually, economic partnerships will know few national boundaries.

Like corporations, those countries and regions that foster economic innovation and permit rapid change will benefit the most economically. Some countries are in much better position in this respect than others. The United States, though experiencing massive shifts from old northern manufacturing belts to sunnier climes in the South and West, has a wide lead in all the future technologies. The former Soviet Union also has certain advantages in basic science and engineering, including the largest concentration of doctorates in the world. These people now have more freedom to pursue their work without state interference, and could become an important factor in the future. In the short term, however, they have little funding, outdated manufacturing capability, food shortages, political instability, and a collapsed economy to deal with, and will therefore be severely handicapped for a time.

For a time, the United States lost some of its economic leadership to smaller, more rapidly developing and innovative countries whose entrepreneurs seemed ready to manage change effectively. These included Japan, Germany, South Korea, Taiwan, Singapore, and the underpopulated but resource-rich Canada and Australia. However, bad management, government corruption, and poor market supervision led to excesses in the Asian economies in the late 1990s and a sharp contraction ensued in that part of the world. It is too soon to say whether those countries will recover and resume the mantle of leadership, or whether they will give it up to others. In the meantime, capital and other resources have flowed back to safer havens in North America and this has been partly responsible for a renewed domination of the world economy by the United States.

Canada and Australia might be thought to have some important advantages because they can establish robotized manufacturing without as large a work-force displacement as in some countries. Canada in particular has an abundance of natural resources and space for potential habitat. Like the United States, it is positioned both on the old Atlantic trade routes and on the new Pacific ones. It also has considerable experience in both transportation and communications technologies--essential prerequisites for information age leadership. However, it had had decades of poor government management at bot the national and provincial level, and so has squandered most of its natural advantages. Australia likewise iscould be well positioned for the new trading realities, has substantial natural resources, and a people with a reputation for adaptability and innovation. The downside for both is that if the climate continues to warm as it has done recently, important agricultural lands could become too dry to use, costing them important economic leverage. Both will also need to establish visionary economic and political leadership; electorates do not necessarily make the wisest or most appropriate choices of governments, and even the best of these can lose office for reasons that have nothing to do with their technical expertise, management ability, or vision. Canada also has the handicap of its continuing identity and unity crisis; if it does splinter into two or more parts, no one of these can expect to be significant players on the world scene.

Even the rest of old-world Europe need not fare badly in the future, for the information age does not require absolutely that a nation be a manufacturer of goods so much as a manager of that manufacture and of the flow of information. This can be done even if there are no industrial-age style trade routes, just as Japan was able to establish industry without many raw materials of its own. Indeed, a unified Europe could constitute a large enough market as to be virtually self-sufficient in technology. On the other hand, such unity has never come easy to the Europeans. Lacking the threat of the Soviet Union, they may revert to their age-old hobby of cutting each other's throats.

Indeed, since the first version of these materials was written in 1988, that is exactly what happened in Eastern Europe. There is no particular reason to suppose that it cannot happen in Western Europe as well. Lest the author seem to boast of inappropriate prescience, however, it should also be noted that the earliest versions of this book mentioned Indonesia as a dawning world power, but that nation continues to be hampered by its own government; has not progressed socially or economically; and probably will not until some time after its system of governance has substantially altered.

It is also important to note that in recent decades Western industrialized nations have adopted many Marxist ideas, and their people are less free than they once were. That is, the trail of failure and death left by radical egalitarianism throughout the last century has not dampened the desire of Western intellectuals to tread this path again. This desire has given rise to some stifling of creativity and free speech, denial and revision of actual history and literature thought to be embarrassing, and a repudiation of the moral basis for law. History would caution us that these nations could easily drag themselves back from whence they came, passing the mantle of civilization to others in a rather short time.

The biggest winner might be China. Rich in resources, people, and innovative spirit, she could be poised to move from an inefficient agrarian society to the information age in a single leap. China has the potential to become the leader of the Pacific Rim economies in the near future, taking the baton from the United States and Japan, which have shared it since the Second World War. China is not without political problems, or its own unity issues, however, and it remains to be seen whether it can fare any better as a free nation than it has under communism.

It is worth noting that the Pacific region has the U.S., Canada, Australia, Japan, South Korea, Taiwan and China, all of which are mentioned in most projections as economic leaders of the next few decades. Clearly, a dramatic shift in trading patterns from the Atlantic to the Pacific is indicated, not so much reflecting any absolute decline in volume on the older routes, but massive gains on the newer ones. One local region in North America that may have much to profit is the Vancouver-Seattle port complex. Over the medium term these two could grow together into one of the world's largest trading hubs. They could become international centers for banking and information as well, because of their strategic location on the trade and communication routes of the future. They could together handle thousands of times their present volume of trade goods and raw materials, but of course with much more automation, and relatively fewer human longshoremen.

Other countries with potential for gains include Brazil, Argentina, and South Africa--providing the first two can become politically and fiscally stable and the last can rid itself of the ghosts of ruinous racial policies without disintegrating into chaos. These and a handful of others could move into a modified industrial age comparable to the 1950s and 1960s in North America, but with many of the benefits of high technology added. There will be other countries that will surprise all analysts by how well they do, and there will be some of the apparently favored few that do not succeed, but instead slide back into either genteel poverty or outright chaos.

Many other third world nations will continue to make absolute progress toward agricultural success and even industrialize to an extent, but it is difficult to forecast anything but relative economic loss for many of the politically unstable, overpopulated, badly divided, or resource-poor regions of the world. For just as an industrial revolution must be built on a sound base of agriculture and established financial, political, and physical infrastructure, so also must high-technology revolutions be built on their proper bases. At the very least, such revolutions require an innovative spirit, a commitment to extensive education, political stability, and at least some previous industrial success. Too many countries lack some or all of these qualifications and do not seem to be obtaining them. It may therefore be a long time before the benefits of the industrial age--let alone those of the information era--come to the majority of the people in many parts of the world. Such benefits are not easily sharable with people who are not ready for them or who do not want them, but are locked into a more primitive society and economy. That is, high technology cannot simply be developed in one part of the world and transplanted to another. Without the proper groundwork preparation, the seed will not take; even with much hard work, it might mutate and grow into a very different form than in the place that it originated. Moreover, techniques that in a democracy enhance freedom and the quality of life may be used elsewhere to destroy both. It cannot, therefore, be just assumed that technology transfer will take place. However, if it does not, disparities in living standards will grow larger, and this would be destabilizing to world peace. Thus, the successful countries may find that it is in their self-interest to find ways to encourage other countries to adopt the new techniques in some form--to gain markets, if nothing else.

Finally, there is the economy of Russia and its former satellites and puppets in South Central Asia, Eastern Europe, and Cuba to consider. As much as any countries in the world, the former Soviet Union and its allies have been wedded to the industrial age and to its paradigms--and even this without much success. Only a new found openness to allowing profound change on a large scale could allow these nations to prosper in the information age. It was the very prospect of such changes, and the fact that the people were aware of them taking place elsewhere, that revealed to them the essential economic and ideological bankruptcy of their nations. Whatever value Marxism may have had in the industrial age, it was too rigid to cope with the information era, and collapsed with its advent. Its problems are especially well illustrated by the economies of countries such as Hungary, Romania, Poland, and the former Czechoslovakia, Yugoslavia, and East Germany, all of which ran up enormous debts and fell on hard times. Poland's economy has rested on steel and shipbuilding, and the same shift away from such activities is taking place in Europe as in the United States. Since what is needed in this sector can be undertaken more efficiently elsewhere, no amount of planning could revive these industries to their old glories. Similarly, the Russian determination after World War II to punish what it controlled of its enemy's territory left East Germany in economic shambles. Its people were not ignorant of the economic contrast between their nation and West Germany, and when their Soviet masters lost the will to terrorize them into submission, the unification of the two Germanys became inevitable, creating a new candidate to dominate the European community, if not the world economy. It remains to be seen, however, whether even united Germany, let alone the rest of Eastern Europe, can soon recover from the ravages of Marxism and become important players in the next civilization.

Another consideration at the international level is the degree to which some nations may feel threatened by the shifts in global trading patterns. Those that allow old trade and industries to die and foster the formation of the new in order best to take advantage of the changing world economy will likely enjoy continuing prosperity. Those that attempt to protect whatever they think they already have behind high tariff barriers, or that subsidize the inefficient and bail out the incompetent will probably find their trade deficits growing and their relative prosperity declining. Those that indulge in trade protectionism out of nationalistic or xenophobic motives will damage not just their own people, but the prosperity of other nations as well.

For example, Canada and the United States have a trading relationship of a size and complexity that dwarfs any other. Yet special economic and political interests continually threaten to damage this relationship, especially during election years. Such actions are not only counter to long-run self interest; they oppose information age realities and threaten the prosperity of all the world's peoples. Openness, cooperation, and trust are by necessity the watchwords of the future. There will be little economic sufferance of the closed,the suspicious, or the unfair traders.

On the other hand, protectionism could induce trade wars that result in a new world-wide depression, substantially delaying the advent of any new economy. Even when the dangers of such behaviors ought to be well known, history suggests there is a significant possibility that politicians might want to adopt the most irrational course of action, and that the populace will be sufficiently ignorant of history to allow them. That is, the optimistic economic scenario is not the only possible one.

Whether or not the world's economy both modernizes and globalizes, so that individual and regional economic disparities are reduced, government and corporate leaders will face many serious issues in population, employment, health care, and wealth distribution--and unlike other times, they will not be able to keep their people ignorant when other people are more prosperous than theirs. This alone will force them to provide a different quality of leadership--one that is both accountable and result-oriented.

The political implications of these geographic economic problems will be considered in more detail in the next chapter. For now, having looked at institutional change at the macro-economic level, it is time to focus attention on business organizations.

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