The problem with new money

Pundits of the New Economy were unanimous: ‘Exciting, vibrant and dynamic’. It promoted the free transfer of knowledge, the breakdown of traditional information powerbases and acknowledged information as the new capital. It was sold using utopian rhetoric: a society with more wealth and more time in which to spend it. Consequently, we invested. We really invested.

The numbers of people in the Western world who owned shares rose dramatically in the New Economy. In Australia, the Federal Government made the most of the New Economy vibe and sold off half of our national telecommunications company. After an initial flurry, Telstra has rarely risen beyond its initial offered price because the New Economy was exposed. Hits on a website are not customers because they don’t pay; information is only valuable in a capitalist economy when it translates into a tangible cash transaction. The New Economy was fuelled by speculation. In many cases, well-spun company reports and creative accounting kept boards and shareholders in the dark. As Henwood suggests, when the company share price is climbing astronomically, shareholders are the last people to ask what is going wrong. In their eyes, everything is going splendidly.

Irreverent US economic journalist Doug Henwood was not impressed by the New Economy. Particularly, the fanaticism of its promoters, many that managed to profit nicely, despite its collapse. The ideas promoted by leading economists over the last decade are still around. After the New Economy is Henwood’s attempt at ‘kicking the thing while it’s down, to make sure it won’t get up again’.

Henwood traverses the novelty of a rapid expanding economy, through its absurdities and failures to regard its impacts and implications. His tongue-in-cheek style and pursuit of the hypocrisy of key players and organisations puts him in the same realm as Naomi Klein, author of No Logo. And, though economics is not quite as appealing as culture jamming to young left wing activists, many would do well to read After the New Economy with the same fervour. Henwood does not let those of us poorly versed in economics flounder in a sea of figures. He carefully explains how economists distort language and create concepts to serve their own narrow purposes. This book is as much about educating people in basic economic theory and practice, as it is denouncing the New Economy.

Though written for a United States audience, this book is relevant to all Western nations. It explores whether we’ve really experienced a technological revolution, compared to the dizzy heights of 100 or so years ago where the car, telephone and electric light arrived. It examines work, wealth distribution and the New Economy’s impact on income and class division. Interestingly, Henwood is a defender of globalism, but spends too much time discussing the difference between globalism and internationalisation—especially as this topic is covered more effectively elsewhere. Still, it is a concern that obviously dominates his thinking, and informs the book.

The most promising aspect of After the New Economy is its driving philosophy. It is economics with equity and social well-being at its core. Henwood notes: ‘It’s one of the paradoxes of capitalism that the richer a person or society gets, the poorer they often feel.’ He goes on to demonstrate that in many Western nations this is actually the case. We are comparatively poorer because wealth distribution is so askew.

Henwood is appealing for a realistic approach to the economy. He wants economists to create economic policy that serves everyone, not the GDP or market forces, but income, jobs and more ethical wealth distribution. Our world always has new economies; they cycle around regularly. Doug Henwood obviously hopes a few people will flick through the pages of his book and realise that they can control the economy’s destiny in a more realistic way.

After the New Economy, Doug Henwood. The New Press, 2003. isbn 1 920 76918 8, rrp $29.95

Daniel Donahoo is an Ozprospect fellow. Ozprospect is a non-partisan public policy think-tank.

 

 

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