W. Brian Arthur, in a report for McKinsey, writes that we are witnessing enormous fundamental changes to the global economy: “in fact”, he writes, “it may well be the biggest change ever in the economy.” This change is due to what Arthur calls “the second economy” or a “digital economy” that exists alongside the physical economy. It goes beyond the changes the media is fond of discussing: the rise of social media, mechanization, and the movement of job opportunities to Asia. Writes Arthur,
Now this second, digital economy isn’t producing anything tangible. It’s not making my bed in a hotel, or bringing me orange juice in the morning. But it is running an awful lot of the economy. It’s helping architects design buildings, it’s tracking sales and inventory, getting goods from here to there, executing trades and banking operations, controlling [the] manufacturing [of] equipment, making design calculations, billing clients, navigating aircraft, helping diagnose patients, and guiding laparoscopic surgeries. Such operations grow slowly and take time to form. In any deep transformation, industries do not so much adopt the new body of technology as encounter it, and as they do so they create new ways to profit from its possibilities…I think that for the rest of this century, barring wars and pestilence, a lot of the story will be the building out of this second economy, an unseen underground economy that basically is giving us intelligent reactions to what we do above the ground. For example, if I’m driving in Los Angeles in 15 years’ time, likely it’ll be a driverless car in a flow of traffic where my car’s in a conversation with the cars around it that are in conversation with general traffic and with my car. The second economy is creating for us—slowly, quietly, and steadily—a different world.
Quite so. Those who wring their hands and moan about the good old days are utterly and totally out of synch with the dynamism and sheer, explosive opportunity of the present day. While humanity faces a host of dangers, short term and long, we are simultaneously moving into an unparalleled era of opportunity.Our world is changing; that’s one of the foundational goals of this blog: to take daily news and developments in the global political economy and put them in their place in the grand mosaic of our time.Capitalism marginalizes those who do not understand the world and how it is changing, and gives opportunities to those who do. No one knows what our economy will look like in twenty years time, but those who can think about the world intelligently now, recognize new opportunities, and seize the initiative, can grow into global leaders down the road, fundamentally changing our politics, businesses, and way of life.And on a more practical note, they will invent the jobs of the future and build the careers of the future.The fundamental fact about the emerging new economic order is that it is going to be a much richer world than the old blue social model could ever offer. The vastly enhanced efficiency of manufacturing, energy use and organization that the information revolution brings with it means that human beings will spend much less energy and time on fulfilling their basic biological needs, and much more time exploring and fulfilling more complex and personal goals. As a species, we will spend less time in the coal mines and more time in the theater, less time chopping cotton and more time writing novels.Reshaping our social institutions and our mental habits to capitalize on the vast and unprecedented opportunities of the information revolution is going to take a lot of time, energy and creativity. The pain and drama of the shift will absorb our political system — and painful as it will be in the US, it is likely to be still more disruptive and difficult elsewhere.But unless we get it profoundly wrong, these are birth pangs, not death agonies. The millennial generation will build a new world, and it will be an extraordinary place.