Michael Goldhaber on 10 Oct 2000 03:53:03 -0000

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[Nettime-bold] Re: <nettime> What ever happened to the New Economy?

Geert, your point is well taken, but the question remains whether the
"new economy"  that might emerge with the internet is really the dot-com
economy, as pundits who think in what are basically old-economy terms
would have it, or whether it is an economy that works on new principles
entirely. If the latter, the possible Internet recession, while likely
to be painful for many, may offer space for the truly new economy to
grow even faster. Now that the net is in place, a serious
old-new-economy downturn could lead to much greater use of the net for
non financial transactions, sharing, and other, not necessarily good,
but certainly different things. If so, the predominant features of this
new economy may come into clearer sight soon. The question is  whether
it will be the so-called gift economy, which sounds very egalitarian,
or  what I have been terming the attention economy, which includes a
kind of basic inequality between stars and fans, or perhaps something

(I haven't seen Mandel's book, nor a digest of it, but was already
ruminating as follows when  I heard of it) While it is always difficult
to make accurate economic predictions of any kind, there are some
obvious reasons to think that we may be nearing a sharp slowdown in the
old economy. Perhaps the following points are not too gnomic to make
sense. (Disclaimer: like most other people, I would be hurt financially
if these predictions are correct.)

1) The old-new economy is propelled by US growth, which in urn is in
large measure the result of so-called "virtuous " circle, in which rises
in stock prices induce business growth which then induces more spending
and thus more growth. Much of this spending is categorized as business
expenses, but also as more of the public anticipates owning or actually
own stocks, there has been  a rise in discretional  spending. as the
stockmarket rises, money also flows from other economies to the US,
adding to apparent US purchasing power. But the percentage of the world
who can invest much of anything in US stocks still has some limit. Once
it is reached, growth must slow down or even reverse, a reverse that
then can be accentuated by the withdrawal of money form the markets,
perhaps partly to pay off debts incurred for previous purchases. as this
happens, discretionary spending could begin a sharp decline. After all,
there is little made in the US that anyone actually needs. ( Though the
perception of what is needed might of course differ.)

2) Much of US economic strength has in my opinion resulted form the
great strength of US pop culture in infusing the world. But
old-new-economy corporations  have tried to capture that creativity as
revenue streams, subjecting it to the vacuity of marketing and focus
groups, and basically what sells, thus strangling the golden goose.
American culture is thus becoming less and less worth paying attention
to, except on the fringes.

3) As recent college graduates, engineers, tech types  and MBAs have
joined the new dot-com gold rush, other industries necessarily get the
"failures" and on the whole they will be poorly served by them. Thus
older industries, already challenged in terms of products and services
partly supplied by the new ones are further challenged by a lack , not
so much of competence as confidence.

4) Someone on nettime( sorry for forgetting who) last week mentioned
Kondratieff long waves, certainly a  semi-mystical concept in
themselves. If such long waves occur, the question is why. In my book
"Reinventing Technology", 1986, I argued that could be a consequence of
an older technological 'paradigm" of economic life  coexisting for a
while with a newer one, until the new one is sufficiently built up to
replace the old completely. Then, jobs and fortunes connected with the
old paradigm dry up, and there is a downturn. Whether the 70's was such
a time (as was argued last week) is debatable. In any event, now or soon
might be.

5) Ever higher productivity, if real, eventually leads to saturation, no
matter how eager consumers are. You can't at all rationally spend your
time consuming ever more, and as a small fraction of the world has the
obligation to do exactly that to sustain the boom, a bust must come.

Suppose a bust does come, and that, for the reasons mentioned above, it
is severe. Keynesian policies which partially ended the last Depression
are pretty much abandoned. even if they could be relearned, the
essential trick for ending depressions has to be putting effort into
making something basically not in competition with private enterprise.
War and preparation for war was ideal from that respect, if no other.
The destruction wrought by actual war also led to the necessity for
rebuilding what would have sufficed nicely otherwise. But current
war-making capacities would destroy the human race if used full out.
Additional capacities beyond what now exist seem hard to justify. So
what kind of Keynesian spending would work? Even art competes with the
entertainment industry, if only for attention. If all this is so, and if
something else doesn't save the day for capitalism, a new economic
system based on different premises has to emerge, if the future be other
than lasting despair.

Or maybe the long boom will still just perc along, happy all the time.


Michael H. Goldhaber

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