The pillars of the new economic system are automated intelligence, unlimited bandwidth communication, and biotechnology.
It is not hard to imagine, within the span of this century, a new economic system emerging that is so different it may no longer look like an "economy" at all. Clearly, there is rapid, qualitative change going on that makes it reasonable to think that we are at the threshold of a very different world economic order. At some point quantitative difference becomes qualitative. Scientists tell us that chimpanzee genes and human genes are 98 percent identical. That 2 percent difference obviously transformed this planet, and put a few footprints on the rest of the solar system to boot.
I'm tempted to say that even though this is a "new" economy, basic economic principles still apply: supply, demand, competition, trade, profit, and so on. But already, it is clear that knowledge accounts for a far greater share of economic value added than the traditional, material factors of production: land, labor, and physical capital. Conventional economic notions of scarcity don't apply, or apply very differently, to so-called "intellectual capital" than to physical stuff.
The novelist Neal Stephenson imagines materials science that enables any product to be created locally from a pipeline of elemental goo -- as easily, say, as one now can print any document on an inkjet printer. So manufacturing "labor," already shrinking in importance, practically vanishes.
Moreover, genetic science is on track to transform both the quality and span of human life to the point where it becomes questionable what "human" means anymore. Supposedly artificial intelligences increasingly will create new art, science and technology without human effort. But when abundant wealth can be created without a necessary role of individual persons, what becomes the basis to distribute income? What does "income" even mean?
If these ideas seem fanciful, just look at the music industry right now. Music can be digitally produced anywhere by just about anyone. You can get programs that can author music of any style you pick. The ability to copy and distribute music without limit and without payment is now out of the box and out of control. The whole industry now is seriously wondering whether anyone soon will be able to make any money from music at all. I think that could be a harbinger of the whole "New" economy. The pillars of this New Economy are automated intelligence, unlimited bandwidth communication, and biotechnology.
Suppose globalization is the stepping stone to the New Economy, meaning: the removal of nationalist, ethnic, racial, cultural, etc. barriers to trade and migration; unification of currency and language; protection of intellectual and real property rights; and democratic governance. Well, clearly, the "united states" (literally) have had about a two-century head start over most of the world in developing that sort of political economy.
I think it is a mistake to view this as some sort of triumph of American culture. There is no American culture, any more than there is an American race or religion. The "united states" were designed from the outset as a microcosm of what we now call globalization. America is a great power in a political economy in no more or less the sense that Silicon Valley is a great power in digital technology: a local concentration of experience with a set of design principles.
If it turned out that baseball were crucial for economic competitiveness, no one would be surprised to see America initially in the lead. Nor would anyone suppose that others, with practice, could not master baseball just as well.
The stock market is one of many markets undergoing important, maybe even drastic change in technology and form. It continues to be important for the same reason it ever was: as the ultimate arbiter of the economic value of enterprises. The only way to know what a company is really worth to people is to allow people to buy it. That role is enhanced at the moment because the nature of "value" is in flux. Knowledge or intellectual capital is thought to be more important to the total value of an enterprise than it was in the industrial era. But how much, in what ways, how to account for it, and even if that is so are open questions. The stock market today is the stage on which the struggle to find answers to these questions is being played out.
Lewis J. Perelman is president of Kanbrain Institute, and executive editor of the monthly newsletter Knowledge Inc. He is currently Acting CKO of Engenia Software (http://www.engenia.com). This essay was adapted from an interview by Rene Decol for Sao Paulo Stock Exchange Magazine.