The New Economy – Driven by the Dual Forces of Globalisation and Icts

Nowadays many academics argue that we are living in the digital age away from the logic of industrialism. At the same time even the most conservative-oriented parts of the public cannot deny the impacts of Information and Communication Technologies on the economy, business and society. Some experts refer to the “new economy” as being weightless, in which the demise of manufacturing is balanced by growth of professional and knowledge work. Together with the rise of new service industries these are changes towards post-industrial era, facilitated by the global interconnectedness. Furthermore, technologies are seen as effective mechanisms for achieving organizational change and giving birth to new business models that prioritize information flows. The old bureaucracies are replaced by networked organizations which promote enhanced flexibility, mobility and higher employee satisfaction. The “death” of distance in the highly globalized world is fuelling the processes of outsourcing and offshoring in searching for the best possible business outcomes.

While this quite pervasive utopian view represents perfect “win-win” situation both at the macro- and microeconomic level, it is based on extremely contested pivotal points – the merits of globalization, technological determinism and the concepts of information and network society, epitomised in the new organizational forms. The most heated debate about the origins of the new reality still remains unsettled – is this the brand new economy, representing an epochal change or continuation of the well-established status-quo in the past. Nevertheless, the glorification of technology disregards the broader socio-economic context and the negative IT impacts upon society.

The world economy has become not only more volatile and complex but also more tightly connected (Dicken 1986, p.3). It could be described as a system in which new trends are being shaped by the processes of globalization and ICTs. Based on laissez-faire, free movement of capital and labour, democracy and deregulation this economy creates businesses without borders in a highly competitive environment where the national is no longer relevant. Companies, commodities and currencies are valued in the global financial markets, where prices are determined by information turbulences (Castells, p.156). Trillions of dollars in transactions from every place in the world are possible today because of the new technologies in place. In the emerging economy innovation constitutes the foundation of competitiveness which creates more innovation in a virtuous circle (Dutton et al. 2005, p.179). Multinationals are emulating for dominance while local factories are improving their business processes under the pressure of the big players.

In this game winner is not the bigger but the faster– the most adaptable to implement new technologies and knowledge. Namely human mind is source of wealth, power and economic growth in the modern informational realm. Battle for competitiveness includes battle for highly-skilled employees: not the generic routinised labour of the industrial age that only executes but the self-programmable labour with capacities to adjust itself to the new technological advances (Castells, p.158). Many experts claim that this is the post-industrial age, characterised with marked decline of agriculture and manufacturing and expansion of services, white-collar work and professional occupations. Bell claimed that the new needs of the wealthier will create never-ending supply of job opportunities in services and subsequent movement towards weightless economy (Webster 1995, p.35). This partly reasonable explanation of the services’ boom is clearly based on evolutionary assumptions.

Starting point for the increase in services is wealth squeezed out of industry and agriculture. In many developing countries like Taiwan internal land reform, deregulation and global capitalism encouraged services’ boom to secure an established interconnected economy: your grandparents were farmers and your parents were factory workers. Today you are IT worker not per se, but following natural order of things in which only completion of one stage is necessary but not sufficient condition for the next one. Despite the influences of ICTs on the economy, their biggest impact is upon the new forms of business and working practices. The 1950s was the period of large industrial factories when work was predominantly physical and key resource was capital. The 1970s microchip revolution didn`t result instantaneously in increased productivity – technology was seen as intangible and led not only to “productivity paradox” but even in counter-productivity (Brynjolfsson 1994, p.4). It also created “information explosion” both quantitatively and qualitatively. Nowadays information is crucial to the day-to-day conduct of life and business. Controlling technology in a volatile world is sense of security – as economic circumstances are scarried technologies seem to be more predictable.

Successfully implemented ICTs transform information flows and transform industrial enterprises to post-industrial. Old bureaucracies are replaced by new flattened hierarchies where physical power is knowledge work now. Cornerstone and vital resource for this change is information. Heightened presence and significance of information is distinguishing feature of the post-industrial society. Not only greater amounts of information are being used but the centrality of “theoretical knowledge” in play is crucial (Bell 1974, p.112). At the corporate level exercising coordination in large rigid vertical structures becomes extremely difficult task. Solution of the problem is networking. Small autonomous networks, equipped with knowledge and ICTs transform information and other resources in order to complete different objectives. After successful achievement of the tasks people and resources are flexibly reallocated to new networks with different issues. This business model resembles decentralised corporation. Team-working and collegiality replace division of labour and remove command and control of the middle management.

Namely the break-up of large bureaucracies is one of the paradigm shifts in the digital age. Horizontal networks with their speed and efficiency are incompatible with the rigidity of old vertical integration. Group responsibility becomes more important than close managerial supervision. Employees in the flexible firm are seen as “portfolio workers” with transferable skills. They are better educated to deal with the advanced technological innovations. No longer tied to the traditional organisations they are given the opportunity to be hired on flexible contracts. They have control over their life and more choice rather than job for a lifetime in the old bureaucracies. Career prospects are project-based and practically boundaryless: you choose your path according to your interests and aspirations. Dealing with information work, solving issues and communicating with people are seen to be more satisfactory than routinised job in large industrial factories of the previous era. Moreover, ICTs are allowing significant movement to mobile work and flexible lines “work-home” in “all-the-time-everywhere” office (Hill et al 1996, p.300), giving birth to the so-called “itinerant labour”.

Mobile work provides improved work-life balance while technologies are delivering effective substitution of face-to-face communication and remote managerial control. The romantic view of working from home was unimaginable before but now information technologies are bringing it into reality. It is beneficial with increased productivity of employees and offers significant opportunities for women with children and disabled people. Another important innovation of the digital age is the process of business outsourcing of IT-enabled services. Big multinationals are aiming to deliver the best services at the lowest possible costs. Technology makes it easier to outsource many administrative and other activities to lower-cost locations (White et al 2004, p.30). Due to the nature of work, it could be exercised practically anywhere there is Internet connection or phone line. While MNCs benefit from cost advantages, they are stimulating developing economies, creating new capital and labour markets and even whole industries.

Typical example of the latter is India, where the outsourcing industry is flourishing. In the UK outsource companies could be the saviour for the future government`s spending cuts plans (Gray 2010, p.17). Outsourcing is typical example of the multilateral impacts of information technologies – they are compressing time and space, interconnecting different industries and even countries in information networks that combine resources to produce profitable business outcomes. ICTs have brought many benefits, but they also pose many challenges. The whole theoretical and practical framework is based around unprecedented interconnected world but the idea of local communities untouched by the outside world in the past is a fantasy (Wolf 2004, p.99). Some academics would argue that modern economy is not truly global but regionally clustered around Europe, North America and East Asia. It is often described as an economy determined by consumers’ choice, but in fact consumers are limited in their choices between the pervasive multinationals whereas local businesses are destroyed. Genuine MNCs are relatively rare and the bulk of trade is conducted within their domestic economy.

The ubiquitous information richness does not signal a new type of society which differs substantially from the past (Webster 1995, p.50). Knowledge work is very vague concept, because it is practically everywhere and there is no work that could be done without particular knowledge. Furthermore, supporters of the weightless economy neglect the fact that material work lies beneath the intangibility. Growth of services is often referred to the increasing number of “McJobs” which is nothing but routinised activity. Mobile work, with its convenience and distance puts pressure on the employee: expected to be available 24/7 and to deliver instant responses. Despite these limitations, probably the biggest threat is imposed upon the society. The issue of “information privacy” relates not to the data only, but to the orthodox sense of security that needs to be protected (Finnegan et. al 1987, p.136). Major problem is one of social exclusion and personal isolation of people without computer literacy or equal access to Internet.

There is possibility of division between people with vastly different cultural and educational resources. Last but not least, the conceptual framework is based on the notion that technology determines society and drives change. On the other hand, it is really about how people use the technology and apply it: sometimes even one bridge with his low overpasses could be built to restrict buses as a result of social bias and prejudice (MacKenzie and Wajcman 1999, p.30). Mutual shaping between technology, organizations and society is evident today. This reciprocal process, despite having many benefits, also poses many threats to the modern world. It encourages innovation, growing productivity and flexibility, but at the same time delivers disadvantages for particular parts of the society. Whether or not this is ephemeral state of the world or continuous trend is a question whose answer will be delivered only by the time.