10 DYNAMICS OF THE NEW ECONOMY
1. Periods of the Economy
Economy history is composed of four fundamental periods: Natural Economics Period, Agricultural Economics Period, Industrial Economics Period and New Economy Period. Each period is not an economic stage transitioned by meeting a few criteria, but they are social eras lasting for centuries, and seen impacts on every country at different times.
It transitioned from the Natural Economics Period that is non-resident, hunter and gatherer to Agricultural Economics Period by spreading seed on the soil. The most crucial factor that affects societies in the Agricultural Economics Period is geography. Civilizations that have suitable climate and soil for farming, various and nutritious regional farm products and adequate animal power to agriculture came into prominence.
Europe experienced a process that started in the fourteenth century and had been lasting for almost five centuries. Changes were not occurred by people to become modern systematically, yet intellectual, social and political changes in living conditions became obligatory. At the end of the process, Western Civilization got ahead of Eastern Civilization and Agricultural Economics Period replaced with Industrial Economics Period.
When computers began to be used for personal and institutional purposes in the 1970s, the transition to a new period started. This period, when the information and technology became production input and growth factor, is named as the New Economy Period. It includes important differences from the Industrial Economics Period in terms of social dynamics.
2. Transformation of Production
Along with the transition to the New Economy Period, the industrial robotics take the place of manufacture depends on human power. Logistics have become a more crucial factor for businesses that carry their productions to different points of the world due to low-cost labor. In the next stage, many mass-production jobs will come to an end with the widespread use of three-dimensional printers. As the production of products has become unique and personalized, the design will be stand out. While the need for technical services decreases with the self-repairing systems and software, efficiency in production takes the place of recycling. Naturally, the process will cause the unemployment of blue-collar workers.
Works in the field of new economy can produce much more added value by utilizing fewer resources. Businesses and countries which gave more importance to research and development, and allocate resource to them, and then transform them to patent and new enterprises are rising in the new era.
3. Energy Systems
Economics periods influence energy needs and resources directly. Instead of nuclear power that is energy resource in the Industrial Economics Period, five fundamental types of renewable energy took place in the New Economy. Countries that transitioned to the New Economy whose energy needs to be reached saturation point prefer to close their nuclear power plants rather than renew them when their life spans run out. Two of the renewable energy types; wind energy and solar energy, are shining out. Countries, which have less sunny days, are trying to carry the energy that they generate at different points in the world to their own countries with the off-shore systems.
4. Capital Inputs
Intellectual capital, with its business world aspect, includes producing added value, protecting people and nature, the transition from the profit maximization to the profit optimization and solving problems. It especially lends impetus to developing countries. With the democratization of education in some of the developed and developing countries, as well as intellectual capital, a new capital type needed to be giving attention is arising: psychological capital. Psychological factors need to be considering to actuate the qualified labor force, which is the most valuable asset of the New Economy.
Business processes are transferred to digital with cloud computing and software as a service model, applications are developed with the aim of remote working. Thanks to the investments in the field of information technology, time and place independent work period has begun. This process also disseminates the practices of sharing economy which provides effective and efficient use of resources. While co-production gains importance, the idea of open-source stands out in numerous fields from publications to the software.
5. Business Life
Jobs, manners and places of work are changing with the New Economy. The understanding of specialization in a field of the Industrial Economy Period is replaced by a multidisciplinary perspective. Term of employment in a work or a business organization is getting shorter. Instead of over costing work centers, co-working spaces are taking place, where they have powerful connections and creativity. Works that have done remotely have been starting to do remotely, and resources are routing to the other development fields. Fixed hours of work flex due to globalization of works, hours of work turn into working according to work state or working at specific times in a day.
6. The World Order
International relationships are crucial for businesses and countries. Good relations provide cost, time and quality advantages for goods and services commerce. Countries integrated into the globe or located on logistics lines due to their geographical location gain advantage. The businesses or countries that are open to global competition make progress. Well-known brands on an international scale take the lead in the competition and dominate the markets.
New forms of money are emerging that can circulate globally, and physical banking and cash come to the ending. It is seen that currencies with strong real effects will continue to be effective virtually.
Five big businesses, gathering data all around the world, take the place of five countries that have veto power in the United Nations. Global businesses that are aware of everything are taking the place of strong nation-states of the Industrial Economy Period.
International human mobility gains momentum. Even if borders are closed or put up walls, immigration will keep going to be one of the crucial issues of the new world. A part of people immigrated will not go back to their homelands. Adaptation, education and life of immigrants will be issues needed to thought by immigrant-receiving countries in the future, as well.
Although economies are compared with each other as their economic sizes, this does not make sense on its own. Determinants showing development level as public trust, human development, happiness, fair income distribution, per capita income, ease of doing business, information and communication technology development, budget transparency are more important than economic size for a society.
Creative and innovative initiatives occur from societies with free-thinking individuals. Information is one of the fundamental inputs of the New Economy Period. Businesses and countries, which eliminate the barriers to accessing information and provide a free-thinking environment, take advantage.
There is a direct connection between the rule of law and development. If there is the rule of law in a society, people trust each other and social justice. And that gives way to do business together, also securing initiatives.
Merit is indispensable for the development of businesses and countries. Merited people take corporations a step further. People give importance to working and learning in societies, in which merited people get the job they deserve. As there are merited people in an organization, no one organizes for a different purpose and disrupt the studies of this organization.
Public order must be established on fair competition. Instead of work and learning, corruption appears in societies without fair competition, so disappointed people’s productivity decreases and business or country suffers from that.
As the validity period of information is shortened, so education and training become a lifelong situation. It is observed that fields on information and communication technologies stand out in the New Economy Period. Businesses and countries that hold talents in this field gain a competitive advantage. In education, learning by doing and living comes to the forefront, which is not based on the central book and curriculum. Issues such as economics, law, and art related to real-life are included in education curricula.
Skills shortage means the current workforce could not meet the demands of the business life. Lots of businesses and countries face the skills shortage in the world. Education systems should be transformed in accordance with the New Economic Period, new business competencies should be integrated into education systems, Talent Development Institutions should be established worldwide to train the skills needed in a short time.
The countries which pioneer of development have transitioned to the democratic governance phase as an administrative phase. In the democratic governance phase, no one expects a redeemer; everybody participates in the decisions of institutions, takes responsibility, sees openness and accountability as not a problem, and builds inclusiveness.
Inclusive people are not afraid of competition and sharing information, seek their progress in synergies instead of others’ failure, believe in lifelong education and progress, educate people and opens up new ways for them, and open to innovative ideas.
Inclusive institutions protect rights and provide fair competition. Also, it supports people who creator, researcher and questioner, and triggers the rivalry. They are not prohibitive, but a contributor.
Individuals, establishments, businesses, non-governmental organizations, and governments should be inclusive for success in the New Economy Period.
Written by Mustafa Çetinkaya, it was translated into English by Translator Umut Serkan Tunç.