The Rhetoric of the New Economy

AUTHOR

László Fekete

ABSTRACT

At least on the surface, the rise of the global network economy seems to accomplish the predictions of a long-held and widespread utopianism, which still attributes the transformation of the well-established economic paradigm to the general use of the new information and communications technologies. According to these once-futuristic ideas, the impact of the new information and communications technologies on economic organizations and the rules of economic interactions brings about the rise of the global network economy, thereby creating infinite and boundless growth, knowledge-based production, increased productivity, an optimal allocation of resources, and the perfect competitive market system. This utopianism also manifests the political, social, and cultural messages pertinent to the network society and its moral values. These sets of values are restrictively identified as constitutive of the new economy but will in fact change all spheres of life, not just the economic organizations and the rules of economic interactions. This new metaphor first appeared in the influential oeuvres of professional futurists, but it began to be popularized by the American business media in the mid-1990s. The term new economy quickly became the distinguished catchword of political and popular discourses. Shortly thereafter, professional economists began asserting the analytical soundness of the new economy. Criticism of the over-simplification of current economic trends almost totally disappeared from the economic literature. Meanwhile, the “eternal” constellation of the most important attributes of the new economy – steady, high and smooth growth rates, business-cycle resistance, the unlimited opportunities of financing new investments by issuing company bonds and stocks, low interest rates, high corporate profits, low inflation, declining unemployment rates, increasing multi-factor productivity as a consequence of the synergy of the application of the new communication technologies and organizational change and etc. – suddenly disappeared in April 2000 and the economic actors have had to face the well-known problems again. Before April 2000, few economists discussed critically the soundness of the speculations about the astonishing effects of the use of the new information and communications technologies on economic growth and corporate profits. Among these few was American economic historian Robert Brenner, who stated the following about the long-term performance of the American economy in his book – The Economics of Global Turbulence – published in 1998: “Nevertheless, there has been scant improvement in economic performance to accompany the rise in profit rate: indeed, in terms of growth of aggregate output, investment (capital stock), productivity, and wages, the boom of the 1990s was the weakest of the postwar epoch.” In opposition to the critical views, there was almost unanimous agreement among the political and professional advocates of the new economy, of the new epoch beginning in the mid-1990s, and they rewrote the well-established rules and principles of the economic textbooks.

The different predictions and forecasts relevant to the new economy are not confined to the economic issues. Even the technical analyses express the obvious political, social, and cultural aims and moral values linked to network society. In this way, the new economy is supposed to designate the future way of life, which translates into the social and economic autonomy and freedom of the individual; a perfect competitive market with low entry barriers, where the contractual transactions of equal, informed and cooperative parties takes place; the abolition of bureaucratic interventions and regulations of the states. The advocates of the new economy expect to overcome the political, mental and physical barriers that continue to hinder the fulfillment of the above-mentioned aims via the new information and communications technologies and the creation of network society. This political agenda is not especially novel. These notions have served as the basic tenets of legitimating the representative political system and the rationality of the self-regulating market for a long time. As normative rules of the political and economic systems, they are still on the list of outstanding debts of the liberal democracies. This political philosophical tradition appears to inadequately reflect the reality that the social and economic interactions of individuals take place inside large political and economic organizations whose disciplinary and punitive rules do not allow too much freedom for the autonomy, choice and integrity of the individual actors. In spite of the well-known political circumstances, the rise of the global network economy brings about the strong conviction that economic interactions in the network economy are based on mutual, cooperative, informed and transparent communication, which counteracts the negative welfare effects of unequal bargaining power, the opacity of the intentions of the parties, opportunistic behaviors, monopolies, market failures, negative externalities and etc. The economic transaction based on the communication of informed parties is supposed to lead to the fulfillment of the moral values in the forms of trust, confidence, the transparency of intentions, cooperation, reciprocity, fair distribution, general welfare and etc. As Alan M. Webber, the founder of Fast Company, says: “The new economy begins with technology and ends with trust.” These moral gains purportedly associated with the use of the new information and communications technologies are verbal ammunition for the conservative communitarian moral philosophy and liberal contractarianism alike.

While a transformation in the rules of economic interactions in the global network economy certainly exists, it does not follow a clear path toward fair, cooperative and consensual agreements or trust-based relationships as imagined by the contractarian or communitarian advocates of the new economy. Briefly, the new rules are based on neither the communitarian virtue of trust nor on fair contracts between equal, cooperative, self-interested and informed parties. The new rules of economic interactions represent some kind of corporative “private legislation” which usually interferes with the interests and general welfare of clients, customers or consumers.

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