Academic journal article Australian Journal of Social Issues

The Economic and Social Dimensions of the New Economy

Academic journal article Australian Journal of Social Issues

The Economic and Social Dimensions of the New Economy

Article excerpt


Originating in the United States, the term `new economy' has become increasingly fashionable in Australia among the media, policy makers and scholars alike. The low level of the currency, for instance, has been blamed on the fact that Australia is perceived as an `old economy' (S. Lewis 2000). The Federal Government is even discussing the possibility of creating a Department of the New Economy (Taylor & Lewis 2000). Definitions of exactly what is meant by the term are, however, difficult to come by; and it remains an elusive concept (cf. OECD 2000).

In this paper I outline three key dimensions of the new economy debate. Clarifying these dimensions is important in order to demystify some of the hyperbole that surrounds the concept. It is also important for understanding some of the social implications that may be associated with the phenomenon as well as for devising appropriate policy responses.

What is the new economy?

At the level of popular usage the notion of `new economy' is often used to refer simply to companies which are involved in the internet and communications technology (Barrowclough 2000). It is also used as a term of contrast with so-called 'old economy' companies or industries such as mining, traditional manufacturing and transport. Key indicators of the `new economy' in this sense include the extent of internet access and usage in society, the production and use of information technologies, and the extent of e-commerce. Depending on which indicator one examines, Australia can be seen as either at the vanguard of the new economy or lagging behind. For instance, in terms of individuals' internet usage Australia ranks in the top five countries (Bryan & Potter 2000). Indicators often seized on as evidence that Australia is lagging behind include its poor performance in terms of the production and export of telecommunications equipment (Narin et al. 2000).

At a more specialised level the term is used to refer to the broader implications of information technology for the economic and social structures of society (Castells 1996). In this context it is used interchangeably with `knowledge economy', 'information economy' and `network society'. The increasing internationalisation of the economy also forms part of this discourse insofar as it is argued that the new technology has facilitated globalisation. This use of the term particularly emphasises the importance of education in providing workers with the range of skills they will need in the new economy (OECD 1996). Advocates of the new economy in this sense of the term in Australia include Alan Oxley (2000), Mark Latham (2000a, b) and Lindsay Tanner (1999).

Three dimensions of the `new economy'

The key dimensions of the `new economy' debate -- relating to both popular and specialised uses of the concept -- are most easily approached by way of three questions:

* Is there something qualitatively different or `new' about recent trends in the economy?

* What are the main economic consequences or outcomes said to result from this new economy?

* What are the main social consequences or outcomes?

Is the new economy the third industrial revolution?

The first dimension of the debate concerns whether we are witnessing the emergence of a new technological paradigm that will be similar in impact to that of the steam engine and electricity in earlier centuries. Do technological changes in the economy, such as information and communication systems, mobile telephony and biotechnology, herald the arrival of a third industrial revolution?

Proponents of the `yes' case are gathering support among well-respected scholars as well as the popular press. In his latest book, MIT economist Lester Thurow (1999) claims that a third industrial revolution is occurring, at any rate in the US. The economic landscape is changing so rapidly that traditional ways of `building wealth' need rethinking. …

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