Reading :: The New Global Economy in the Information Age

The New Global Economy in the Information Age: Reflections on Our Changing World
Edited by Martin Carnoy, Manuel Castells, Stephen S. Cohen, and Fernando Henrique Cardoso

In 1992, the Soviet Union had just collapsed, and the new Yeltsin government invited the authors to come to Moscow to advise it on political economic policy. A year later, their analyses were published in this book, which is an interesting time capsule of the period. It's also a place where Castells sounded themes that he developed in his later work.

As the authors argue in the collaboratively written introduction, "The first political casualty of the information age is the communist state system, based on a 1920s-model hierarchical industrial organization and incapable of incorporating new, flexible management of rapidly changing technology" (p.2). But they argue that it may not be the last casualty: Capitalist states are similarly vulnerable to the transformations that are underfoot, including a new international division of labor "based less on the location of natural resources, cheap and abundant labor, or even capital stock and more on the capacity to create new knowledge and apply it rapidly, via information processing and telecommunications, to a wide array of human activities in ever-broadening space and time" (p.6). The authors interpret the Reagan administration's response to the changing world thus: "The Reagan administration's 'solution' to increased international competition and informationalization was to deregulate such critical sectors as telecommunications, air transport, and financial services, to break unions and lower real wages, to decrease federal tax rates, and to redistribute income to the top 1 percent of income earners. The idea was to make U.S. industry more competitive through cheaper labor and to legitimize such action politically through lower tax rates. ... the emphasis is on cheap inputs, not higher productivity" (p.11).

The authors are not enchanted with this strategy. What was striking to me in the subsequent chapters, however, was that Exhibit A was the lack of US success and productivity compared to the Japanese, whose model was perceived as far superior, especially in Cohen's chapter "Geo-Economics." I remember the widespread fear that the Japanese were going to own the US - but looking back, the Japanese "lost decade" began in 1991, and they lost ground economically throughout the 1990s - falling prey to a bubble somewhat similar to the one we have just experienced in the US. Realizing that fact helped me to put the authors' assessments and arguments in a historical context.

In Castells' chapter "The Informational Economy," he analyzes the collapse of the Soviet Union and the changes in the global economy, arguing that "the increasingly important role of applied knowledge and information is a characteristic of advanced economic systems, transcending the historical characteristics of their modes of production" (p.16). He argues that

(1) "the greater the complexity and productivity of an economy, the greater its informational component and the greater the role played by new knowledge and new applications of knowledge" (pp.16-17);

(2) one strong trend is "the shift, in advanced capitalist societies, from material production to information-processing activities, both in terms of proportion of GNP and in the proportion of the population employed in such activities" (p.17). The "real transformation" is the information economy "wherein an ever-growing role is played by the manipulation of symbols in the organization of production and the enhancement of productivity" (p.17);

(3) another trend is "a profound transformation in the organization of production and of economic activity in general," a change that "can be described as a shift from standardized mass production to flexible customized production and from vertically integrated, large-scale organizations to vertical disintegration and horizontal networks between business units" (p.18). That doesn't mean the decline of the large corporation, but rather their organizational transformation leading to more flexibility and adaptability (p.18);

(4) a fourth trend is "a global economy, in which capital, production, production, management, markets, labor, information, and technology are organized across national boundaries" (p.18), meaning that "the national economy now works as a unit at the world level in real time" (p.19);

(5) and these all take place within a significant technological revolution, based in advances in information technologies. Telecommunications in particular create "the material infrastructure needed for the formation of a global economy" (p.19). Information technology is a critical factor allowing for flexibility and decentralization (p.20).

One result of these transformations, Castells argues, is the end of the Third World as a relatively homogeneous economic region (p.27). It gives way to a Fourth World of marginalized economies (p.37) - an idea that Castells later developed in terms of "black holes." Another, he hopes, is that of "leaner, smaller, more effective, high-tech-equipped, and information-oriented military forces" that would be "at the disposal of all major nations" for peacekeeping (p.42).

In the next chapter, "Multinationals in a Changing World Economy," Martin Carnoy considers the question of large multinational enterprises (MNEs). These MNEs are "attractive and usually necessary additions to any country's economy," but are also "footloose," without allegiance to a nation's development goals - and, in fact, frequently willing to shape national development goals to their own needs (p.46). MNEs, he says, are concentrated in four sectors: oil, autos, electronics and high tech, and banking (p.48). Carnoy notes that US and British MSEs tend to be antistate and more "footloose" than other MSEs, which frequently have some sort of nationalist association (p.86).

The fourth chapter, "Geo-Economics," is Stephen Cohen's assessment of "America's mistakes" and Europe's chance to avoid making them (p.97). The US, Cohen asserts, is not transitioning well to the new realities: it has "set out in the wrong direction," creating a less generous, just, and secure society (p.97). Cohen points to new international competition, particularly from Japan's "developmental state" (pp.98-100) with its answer to Fordism: "Toyotaism," with its measures for high-volume flexible production (p.111). The results are not good: a large trade deficit and an enormous national debt of ... $600 billion! (Ah, the good old days, when we only owned $600B. Currently it's $12,097,698,782,543.93.)

Let's skip to the epilogue. The authors, like so many authors, see hope for real change in a new President. "Bill Clinton's election signals the exhaustion of the laissez-faire economic model whose profoundly negative effects on American productivity and competitiveness we have documented and analyzed in this book" (p.161). Doesn't this passage remind you of Castells' pronouncements about Obama in his 2009 book?