Apocalyptic Internet economy
Published: 17 Apr 2000 16:27 BST
As tech stocks reach the vertical stage of their nosedive, we might reasonably ask whether the endless talk over the last six months of an e-commerce revolution, and a new knowledge-base economy are justified. And if not, aren't there quite a few companies and governments who will have to admit that they got it completely wrong and have led their citizens and workers down a dead end path? And what does the growth of global corporate entities mean for us and the way we live our lives?
Big questions. The very issues anti-capitalist protesters are grappling with right now outside the G7 conference in Washington. I hope the leaders inside are doing the same. Maybe, to get our heads straight on these issues, we need to address them one at a time:
Knowledge based employment? Well, yes, It's true that in the Western world, more and more of us are knowledge workers. It is also true that less and less of us are making things. Does this worry you? It worries me. Yet these things are still being made. Only now the manufacture has been moved to other areas of the world where labour is cheap and regulation is less extreme. Is this exploitation? Yes I suspect it is. Can is last forever? No it can't.
Our 'knowledge based' economy relies of the lack of knowledge of others. But clearly this won't last. Already India is showing the way forward for so-called third world economies. It has built a word-class software industry, with workers who command near parity incomes with the West. The Far East and China are capable of doing the same. So unless the West has worked out its survival plan when this happens, won't we be destined to future failure? To lose our knowledge advantage, just as we lost our manufacturing advantage previously.
Is there a new economy? No question. The Internet and global connectivity have changed what is possible when buying and selling products and services. Price transparency, disintermediation and more choice for consumers are all here to stay. Look at what has happened to UK car prices if you doubt it. But we are mostly talking here about real products which still have to be manufactured and delivered to us. So this is a sales and marketing revolution. It might affect parts of the retail and promotional chains, but has relatively little impact on how products are made.
Is this the end of the stock market? No, actually here we have a great example of the new economy in action. And its pretty ugly: Stock holders are now free to make purchase decisions which are as ill informed as they like thanks to the disintermediation of stockbrokers and advisers. Just go to a brokerage only web site and buy and sell what you want. And small traders (the likes of you and me) have been delighted to do so, amplifying the natural tendency of stock markets to operate as a betting medium rather than investing one. Buy high and sell higher has been the mantra of recent months. This mechanism may receive a nasty jolt this week, but don't be deceived into thinking it will ever go away.
Once the pain of recent days is over, we'll see the same momentum trading coming back with a vengeance...
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