THE NEW ECONOMY:THE NEW ECONOMY:Human Capitalism?Human Capitalism?

Klas Eklund IUCISD, Istanbul

June 22, 2001

WHAT IS THE WHAT IS THE NEW ECONOMY?NEW ECONOMY?

• New technology and globalisation• Sounder macro policies• Economies work better, old relations are

stretched -• but “old” theories can still be used• The new economy is not only IT, certainly

not dot.coms• Even though stock market bubble burst

the underlying changes remain

IT - AN INDUSTRIAL IT - AN INDUSTRIAL REVOLUTIONREVOLUTION

• The third, after steam and electrical/ internal combustion engines

• Great effects when the new technology conquers more sectors. Decades before fully ripened

• No idea of future effects or where they will come

• The IT sector in a narrow sense is not very important

GLOBALISATIONGLOBALISATION

• Trade expansion, tariff reduction, direct investments

• Free capital flows, international capital market

• New technology changes trade-off between quality and quantity

Result: Stiffer competition, faster productivity growth, larger markets,

higher speed, cultural integration - and less room for national economic policy

““THE GOLDEN THE GOLDEN STRAITJACKET”STRAITJACKET”

• Low inflation policy, more independent central banks

• Stricter fiscal policies: Rules and targets

• Deregulation• International co-operation and rules• Straighten up and join the club - or

pay a price to stay outside!

STRUCTURES CONVERGESTRUCTURES CONVERGE

• Collapse of the planned economies• Problems of the “Scandinavian model”• Problems of the “Asian model”• Successes of the “Anglo-Saxon model” • Mobile tax bases imply pressure of

convergence of taxes - capital, labour, consumption

• One major currency in Europe. Long-term trend toward fewer currencies?

MACRO EFFECTSMACRO EFFECTS

• Higher growth... – New technique, developmental blocks, clusters

of innovations– Investment and capital rationalisation– Higher productivity - at last

• …without high inflation– Transparency & stiffer competition– Empowered consumers– Lower transaction & distribution costs

• Difficult question: What is permanent and what is transitory?

THERE WILL BE PAINTHERE WILL BE PAIN

• Gains: Productivity, growth, benefits to consumers

• But: Old structures threatened– Creative destruction– Regional, sector-wise and individual effects– New gulfs and inequalities - which old-fashioned

redistribution policies cannot handle

• Unemployment effects depend on flexibility of labour market

• Bubbles and crashes will follow• Risk of political backlash?

UNDEMOCRATIC?UNDEMOCRATIC?• Globalisation opens closed societies, unseats

dictators! • Helps women’s liberation• More narrow room for stabilisation policy

– Restrictions are not new– But they work faster now

• Globalisation does not prohibit national politicians from making decisions – but costs become more visible – the political tool-box becomes less efficient

• The alternative? That politicians have the right/power to set all prices and rates?

• What is the market: An external force - or all of us?

““HUMAN CAPITALISM”?HUMAN CAPITALISM”?

• New economy threatens old structures• Human capital rules

– The new economy is meritocratic– Anti-racist, anti-clerical, anti-chauvinist!– Human capital rules first through competence– then through ownership

• Old class structures and gulfs change character– Traditional labour/capital division still exists

and spreads to new countries– but becomes less important in the ”core”

countries and in leading industries

NEW POLITICSNEW POLITICS

• Communication is swifter– Easier to find each other– Lower costs

• Politics changes shape– Flatter organisations also in politics?– Speed!– Virtual and global debates– Electronic polling - and voting?– Traditional media loses some power

• Public sector efficiency enhanced– Better information– Lower costs

PROBLEMSPROBLEMS

• The digital divide– But must new media be available to all

before anybody is allowed to use them?– Don’t let the god become enemy of the best

• A new class society? “Netocracy”?• Subgroups instead of open discussion?• Too rapid communication - no room for

thought? – A high frequency reality cannot only have a

low frequency political system

CHALLENGESCHALLENGES

• Old parties, structures and activities are threatened– they must renew policies and methods

• But this is not a threat to democracy - rather a chance to develop democracy!

• The real problems– Medialisation– Stale parties and meetings– Unattractive to young people

can partly be addressed by IT