Night Hawks Tapes

• The new economy is a global economy.
According to MIT professor Paul Krugman, author of Peddling Prosperity, there’s nothing more to the global economy than trade in goods, services, capital, labor, and information. “That’s it,” he says. “There is no more mystical sense in which we have a global economy. We are living in a world which is about as integrated, give or take a few measures, as the world of the 19th century.”
Mr. Krugman, I beg to differ. The new economy is as different from the old economy as a Sea-Doo is from a penny farthing bicycle or e-mail is from the Pony Express.
Just as the bipolar geopolitical world has disintegrated, giving way to a new, dynamic, and volatile global environment, economic walls are falling as well. This phenomenon is related to rise of the new economy. As Peter Drucker says, “Knowledge knows no boundaries.” There is no domestic knowledge and no international knowledge. With knowledge becoming the key resource, there is only a world economy, even though the individual organization operates in a national, regional, or local setting.
Linked to this, and despite the efforts of old paradigm warriors fighting for protectionism, free trade zones are growing in North America and the Pacific Rim. Global customers demand global products. Work is performed globally by exploiting cost advantages of traditional input factors such as labor and raw materials. New economic and political regions and structures (such as the European Union) are leading to a decline in the importance of the nation-state.
As the world economy continues to globalize, the need for stay-ahead management becomes even more crucial. Ad hoc alliances, strategic partnering, and, above all, information technology will be vital for the future. Collaboration is going beyond the old boundaries. “Collaboration in business is no longer confined to conventional two-company alliances, such as joint ventures or marketing accords,” says Benjamin Gomes-Casseres, associate professor at the Harvard Business School. “Today we see groups of companies linking themselves together for a common purpose. Consequently, a new form of competition is spreading across global markets: group versus group.”
Globalization is both chicken and egg. It is driven by and driving the new technology that enables global action. Computer networks allow companies to provide 24-hour service as customer requests are transferred from one time zone to another without the customer ever being aware that the work is being done on the far side of the world. Networks enable smaller fIrms to collaborate in achieving economies of scale. Software development can be conducted on networks, independent of location. The office is no longer a place, it is a global system. Technology is eliminating the “place” in workplace. Home may be where the heart is, but increasingly the office is anywhere the head can be connected.
“These connections will empower us and enhance freedom and democracy. Citizens will be able to communicate—both send and receive information—on a previously unimaginable scale,” said Anne Bingaman, assistant attorney general in the U.S. Department of Justice. “When you think about this, recall scenes from Nazi-occupied Europe of women and men crouched around the wireless, desperate to learn and tell the truth. Or think of citizens behind the iron curtain, searching the short-wave bands for Radio Free Europe or the BBC. And imagine how much more difficult an oppressor’s job is when people yearning for freedom have access to digital computer networks.”
There are few better descriptions on how the new economy is a global one than that cited by former Citicorp chairman Walter Wriston. He’s seen it all. As late as the 1960s, communications between bank staff in New York and their colleagues in Brazil were akin to an adventure. There were so few international lines that once they’d got one, they’d hang onto it even if there were nothing to say, so that when the time came to exchange information, they had an established connection. In Wriston’s words, what happens today is “global conversation.” More than 100 million telephone calls are completed every hour, using 300 million access lines the world over, and the number of calls will triple by 2000. “The entire globe is now tied together in a single electronic market moving at the speed of light,” says Vriston. “There is no place to hide.”