1. THE NEW ECONOMY: Human Capitalism? Klas Eklund IUCISD, Istanbul June 22, 2001

2. WHAT IS THE NEW ECONOMY? New technology and globalisation Sounder macro policies Economies work better, old relations are stretched - but “old” theories can still be used The new economy is not only IT, certainly not dot.coms Even though stock market bubble burst the underlying changes remain

3. IT - AN INDUSTRIAL REVOLUTION The third, after steam and electrical/ internal combustion engines Great effects when the new technology conquers more sectors. Decades before fully ripened No idea of future effects or where they will come The IT sector in a narrow sense is not very important

4. GLOBALISATION Trade expansion, tariff reduction, direct investments Free capital flows, international capital market New technology changes trade-off between quality and quantity Result: Stiffer competition, faster productivity growth, larger markets, higher speed, cultural integration - and less room for national economic policy

5. “THE GOLDEN STRAITJACKET” Low inflation policy, more independent central banks Stricter fiscal policies: Rules and targets Deregulation International co-operation and rules Straighten up and join the club - or pay a price to stay outside!

6. STRUCTURES CONVERGE Collapse of the planned economies Problems of the “Scandinavian model” Problems of the “Asian model” Successes of the “Anglo-Saxon model” Mobile tax bases imply pressure of convergence of taxes - capital, labour, consumption One major currency in Europe. Long-term trend toward fewer currencies?

7. MACRO EFFECTS Higher growth... –New technique, developmental blocks, clusters of innovations –Investment and capital rationalisation –Higher productivity - at last …without high inflation –Transparency & stiffer competition –Empowered consumers –Lower transaction & distribution costs Difficult question: What is permanent and what is transitory?

8. THERE WILL BE PAIN Gains: Productivity, growth, benefits to consumers But: Old structures threatened –Creative destruction –Regional, sector-wise and individual effects –New gulfs and inequalities - which old-fashioned redistribution policies cannot handle Unemployment effects depend on flexibility of labour market Bubbles and crashes will follow Risk of political backlash?

9. UNDEMOCRATIC? Globalisation opens closed societies, unseats dictators! Helps women’s liberation More narrow room for stabilisation policy –Restrictions are not new –But they work faster now Globalisation does not prohibit national politicians from making decisions –but costs become more visible –the political tool-box becomes less efficient The alternative? That politicians have the right/power to set all prices and rates? What is the market: An external force - or all of us?

10. “HUMAN CAPITALISM”? New economy threatens old structures Human capital rules –The new economy is meritocratic –Anti-racist, anti-clerical, anti-chauvinist! –Human capital rules first through competence –then through ownership Old class structures and gulfs change character –Traditional labour/capital division still exists and spreads to new countries –but becomes less important in the ”core” countries and in leading industries

11. NEW POLITICS Communication is swifter –Easier to find each other –Lower costs Politics changes shape –Flatter organisations also in politics? –Speed! –Virtual and global debates –Electronic polling - and voting? –Traditional media loses some power Public sector efficiency enhanced –Better information –Lower costs

12. PROBLEMS The digital divide –But must new media be available to all before anybody is allowed to use them? –Don’t let the god become enemy of the best A new class society? “Netocracy”? Subgroups instead of open discussion? Too rapid communication - no room for thought? –A high frequency reality cannot only have a low frequency political system

13. CHALLENGES Old parties, structures and activities are threatened –they must renew policies and methods But this is not a threat to democracy - rather a chance to develop democracy! The real problems –Medialisation –Stale parties and meetings –Unattractive to young people can partly be addressed by IT