“In our time it is not only the market which has its own life and rules over man, but also the development of science and technique.”
Erich Fromm, The Sane Society, Greenwich, 1955
The last decades of prosperity were mostly due to advances in information technology. When microprocessor controlled machines became widely available in the 1980’s much less skilled workers were required in the factories. Highly sophisticated manufacturing work could be transferred easily to other countries, the skill was in the machine! Productivity was increasing with minor or even negative investments. Typically microprocessor controlled machines were even less expensive than traditional man operated machines and could produce goods faster and with better quality. Communication with eMail was used only within large companies and was restricted to text documents displayed on green screens. I remember that sending a fax with an engineering drawing from development to a manufacturing site early 1980 required the same type and brand of fax machine on both sites. Even fax machines were not compatible at that time! The low speed and limited quality of communication made complicated value chains with many subcontractors expensive and not very reliable. Thus production e.g. at the car manufacturers was done mainly in house. When Personal Computers were introduced to the market even small companies and their employees could apply computing technology to all kinds of processes from design to manufacturing at at much lower cost than the large companies, which were relying mostly on large mainframes and highly inefficient internal processes.The Internet added almost unlimited communcation capabilities between arbitrary business partners world wide enabling sophisticated and fragmented value chains and management schemes. The IT expansion was driven by dramatic increases in computing and communication power at the same or even lower prize. In old days such a major improvement in overall productivity would have required huge reinvestments of the profits to apply advanced technology. However, this was not the case for the past prosperity cycle industry because IT technology became always cheaper. Thus profits were not invested in goods and infrastructure. Most large companies could increase their revenue by streamlining their processes and optimization of their management and value chain without need of new capital from shareholders. Most successfull companies e.g. like IBM were even buying back their own shares because they could not identify profitable business opportunities. The work force did not get a large part from the additional income from the advanced IT infrastructure (why should you pay people more money if you know you will not need them in the future)- the money mostly was used to drive new virtual business in the banking system with “banking products” .
The communication capabilities over IT networks allowed banks to reduce the transaction delay especially in the inter bank trading. In old days there was always a time of increased risk between the start of a transaction and the confirmation of the partner bank. This was limiting the amount of risk taken but also the number of active transactions in the banking system. With online trading transactions could be “confirmed” within seconds creating an illusion of safety in the banks. By the end of the trading day all deals were “balanced” in the electronic booking systems – why should anybody be concerned? These games could be played as long as the real economy was running well but came to a screaming halt, when people realized that the real economy was not capable to expand further because the refinement of current businesses does not provide much additional growth. The “banking technology” resulted only in virtual business creating negative value for the society.
Recession is a typical companion of mature technology and organisational infrastructure. A new widely accepted growth opportunity and vision is required to escape from recession. What are the technology candidates for the “new deal” in the post IT area? The vision “save the earth climate” could easily absorb large amounts of investment and provide jobs but has limited immediate returns to the people. Reducing the energy consumption with more efficient cars and insulated houses and replacement of oil with solar and wind energy is more like a cost reduction program and not really a new business. “Developing the third world” could be another vision. However, the plan to make money from “colonies” never worked for England, UK or France and others in history. China has even reversed the initial idea of a colony – it has more investments in the USA than western companies have investments in China! There is also no new major emerging technology in the labs of universities or companies. There is no other choice: THINK.
