This article appeared in The New Democrat (July/August 1995)
D
emocrats, the devastation visited upon you last November isn't over. The technological forces transforming the American economy have just begun reshaping American politics. Just as the tearing down of the Berlin Wall marked a new epoch in world affairs, the Democrats' debacle (which followed the collapse of the wall five years to the day) opened a new era in American political affairs.But this new era will not be Republican. Over the next five years, the same forces that shattered the Democratic coalition will tear the Republicans apart. By the turn of the century, long-familiar political boundaries dividing left from right, Democrat from Republican, will seem as anachronistic as Checkpoint Charlie.
To fully grasp the implications of this political transformation, one must first understand the unprecedented economic forces in motion today. Consider this fact: Every week, without pause, one billion microchips flow from factories around the world. Before the year 2000, it'll be two billion a week. Twenty-five years ago, the number was zero.
Microprocessors, DRAM memory, SRAM memory, ASIC chips, micro-controllers, electro-optical converters, and a menagerie of other specialized chips pour out of assembly facilities to be immediately stuffed into personal computers, cellphones, pagers, faxes, satellites, CAT scanners, camcorders, cars, and an ever-expanding list of intelligent machines.
Services that we take for granted -- paying by credit card at a gas pump or drawing cash from an ATM in Prague -- were inconceivable when Neil Armstrong set foot on the moon. The Internet. Desktop videoconferencing. Genetically engineered foods. Sometimes it seems as if history's fast forward button is jammed. What was technically impossible yesterday is here today -- and it's cheap. What's more, FedEx will gladly deliver it to your door tomorrow morning.
The Politics of Plenty
What's does this have to do with the future of politics? Everything. Thanks to the near-miraculous capabilities of microelectronics, we are vanquishing scarcity. The central dogma of the dismal science -- that there's never enough of anything to go around -- is being turned on its head.
Consequently, the venerable politics of class warfare, which inevitably result from an economic reality in which a fixed amount of goodies must be divvied up among too many grasping hands, is dying, along with conventional economic thinking. Stunning technological advances are shoving aside the gloomy politics of "limits to growth" ane replacing them with the politics of plenty.
Remember when all the economic experts agreed that oil prices would surge well past $100 per barrel? Well, while they were busy polishing their input/output tables, Silicon Valley engineers were busy figuring out how to embed a computer program in a sliver of silicon and slap it onto an auto engine. In just 20 years, fuel economy has more than tripled thanks to electronic fuel injection and aerodynamic car bodies sculpted by microchip-packed supercomputers. Today, adjusted for inflation, oil is cheaper than ever. And with millions of American workers now commuting by phone instead of by car, the once powerful OPEC allies are doomed to sit atop unwanted oceans of crude for centuries. Such is the power that flows from the microchip.
Since the computer-on-a-chip was invented in 1971, the cost of computing has plunged 10 million-fold. That's like being able to buy a brand new Boeing 747 for the price of a large pizza. Never before in human history has the cost anything dropped so far so fast. And given the technical knowledge we already possess, we will witness another thousand-fold cost plunge in the next five years.
If the price of crude oil were to drop a thousandfold -- from $20 to two cents a barrel -- every forecaster would predict an enormous economic boom. Lower prices for gasoline, heating oil, and the energy absorbed in making industrial products would free consumers to buy goods and services now beyond their reach. As the cost of basic necessities plummetted, living standards would surge.
Airlines, electric utilities, and other major oil users would have a field day. But the oil industry's competitors, coal mines and solar energy firms for example, would be wiped out. Job losses and bankruptcies would devastate the energy sector while the rest of the economy grew by leaps and bounds.
The price of oil isn't about to plunge. But the collapsing cost of information is affecting the economy much the same way. From pharmaceuticals to finance to the media, America's information-intensive industries are red hot. The Sunday newspaper classifieds are choked with ads begging for workers with advanced information-technology skills. The economy is spontaneously reorganizing itself around the profits generated by cheap information, just as it once organized itself around cheap energy.
The losers this time are those who cannot or will not participate in the Knowledge Age economy. High school drop outs are five times as likely as college graduates to face long-term unemployment. Never before has the income gap between educated and uneducated Americans been as wide or fast-growing. Like illiterate peasants in the Age of Steam, today's unskilled are being left behind by the new economy.
Like the steam engine, the microchip deserves both the blame and the praise for these inescapable trends. But it is not widely appreciated that the forces unleashed by the microchip dwarf those that launched the Industrial Age.
In a way not seen since Gutenberg's printing press ended the Dark Ages and ignited the Renaissance, the microchip is an epochal technology with unimaginably far-reaching economic, social, and political consequences possible. To recast an old economics term, information technology has the highest possible "multiplier effect" of all technolgies. Combined now with the radical collapse in information cost, this multiplier effect is just beginning to stimulate the most powerful tsunami of economic growth in all human history.
We are already seeing entirely new industries sprouting up. For many decades, the "economic pie" will grow faster than the population, and the widespread rise in living standards will make appeals to class warfare sound increasingly absurb.
Moldy Metaphors
Economic growth of such magnitude is beyond historical experience and hard to imagine. But our inability to grasp the economic and political implications of the microchip revolution stems from something other than a lack of comparable experiences. The real reason, I think, is that most of us are blinded by an outmoded Machine Age mindset.
We aren't the first generation to suffer such profound technological disorientation. Of the mid-19th century farm families who were thrust into the burgeoning cities, the English poet William Thackeray was moved to write, "We who lived before the railroads and survived out of the ancient world are like Noah and his family out of the Ark." With the microchip propelling us into the Knowledge Age just as the steam engine drove our ancestors into the Machine Age, we too find ourselves in a strange new world without a mental map to guide us.
Our old economic paradigm is incompatible with the Knowledge Age. We need radically new thinking. As social commentator Peter Drucker recently put it in The Atlantic Monthly, "We need to develop an economic theory appropriate to a world economy in which knowledge has become the key economic resource and the dominant, if not the only, source of comparative advantage."
Can Machine Age economics be salvaged? For an answer, just consider the language that defines conventional economic discourse -- on the left as well as the right. The economy is always "losing steam" or "picking up speed." Congress tinkers with "broken market mechanisms," while the Federal Reserve "primes the pump," "fine-tunes the engine," and "puts the brakes on inflation." Indeed, whenever new technology shows signs of creating new jobs and rewarding productive workers with higher real wages, we concluded that "the economic engine is overheating."
The philosopher Ludwig Wittgenstein once wrote that "the limits of our language are the limits of our reality." Human beings cannot conceive of, much less discuss, an idea unless we have a word for it. How, then, can we understand a growing economy when we insist on describing it as a machine? Have you ever seen a machine grow?
New technologies are making the impossible possible, yet we cling to a Machine Age metaphor that precludes intelligent discussion of economic growth. As The Economist put it, "Economists are interested in growth. The trouble is that, even by their standards, they have been terribly ignorant about it. The depth of that ignorance has long been their best-kept secret." The culprit is the "economy as machine" paradigm.
Recognizing the limits of the economy as machine metaphor, I put forward a new view of economic life in my book Bionomics: Economy as Ecosystem. Bionomics argues that a market economy is remarkably similar to an evolving rainforest. Populated by organizations rather than organisms, the economic rainforest is a staggeringly complex network of relationships -- competitive, symbiotic, predatory, and parasitic. Just as organisms undergo endless rounds of mutation and natural selection as they adapt to particular ecologic niches, organizations go through innovation and market competition as they reshape themselves and their products to fit specific market niches. Neither the natural nor the economic rainforest was planned. The mind-numbing complexity of each system means that neither can be controlled by some central authority. Both economies and ecosystems evolve spontaneously.
From the bionomic perspective, technological evolution is the ultimate source of economic growth. By applying an ever-expanding stockpile of scientific knowledge to real-world problems, human beings squeeze better results from less input. More from less -- without limit. For example, instead of devastating the planet by smelting the mountains of copper that would have been required to create a global communications network, we've turned beach sand into microchip-packed satellites and optical fibers. In a bionomic economy, new technical know-how substitutes for labor, energy, and materials. Costs fall. Living standards rise. The growth of the virtual rainforest -- otherwise known as the market economy -- is limited only by our curiosity and creativity.
Democrats' Unkept Promise
Tangible evidence of economic growth makes the politics of scarcity obsolete. Voters who once rallied to class warfare rhetoric are busy loading software on their home PCs. Non-unionized but highly skilled and well paid, the sons and daughters of 1960's shop stewards are debugging local area networks and reprogramming voicemail systems. Arguments that had resonance for their parents strike them as quaint, if not absurd.
Of course, there are Americans who long for the days when corporate chieftains commanded rigid white-collar bureaucracies. But most have adapted to the freedom, challenge, and responsibility of working in smaller, leaner, entrepreneurial outfits where the boss is in the next cubicle, keyboarding an urgent fax.
Other than the poorest 20% of Americans, whose illiteracy prevents their participation in the Knowledge Age, everyone senses the promise of the new economy. Some of the workers who lost jobs in steel mills and middle managers who lost sinecures in corporate headquarters may want to return to the Machine Age, but they too know there is no way back.
Having experienced profound change firsthand, Americans want their government to be as cost-efficient and agile as the organizations that employ them. Sensing the opportunities the new economy holds for their children, they want a lean, responsive government, one that will nurture, not retard, the advance of the Knowledge Age.
This was the unkept promise that got Bill Clinton elected in 1992. In truth, it was a promise no Democrat could keep. Whatever his own views may have been, the liberals who control the party still believe in the Machine Age mantras of class warfare. Despite the "liberal" label, they are deeply conservative defenders of the status quo. They see the economy through Machine Age eyes and cannot imagine how the "economic engine" could function without legions of bureaucrats and politicians manipulating the levers of taxes and subsidies, and regulations in the central control room. For as long as they live, they will never grasp why the politics that worked so well for so long lost touch with the American people.
Last November, the voters tried once again to drag their government, kicking and screaming, into the Knowledge Age. Eventually -- most likely by 1997 -- they will succeed. And that is when the real trouble will start for Republicans.
New Political Battle Lines
After the bulk of the Contract with America is in place, and assuming entitlements will be contained and the budget balanced, the factions that constitute the Republican party will splinter into two coalitions -- the progressives who want to forge ahead into the Knowledge Age and the conservatives who yearn for Machine Age stability. When the strains become irreconcilable, the Republicans will split and new alignment of American politics will emerge.
Together, New Democrats and progressive Republicans will pursue a pro-technology, pro-growth, market-oriented, decentralist agenda. Liberal Democrats and conservative Republicans will counter, attempting to reassert federal power in a campaign to reverse the social dislocations brought on by the Knowledge Age. Already left-leaning activist Jeremy Rifkin and several conservative religious groups have announced an alliance to stop the biotechnology industry by forbidding patent protection for new genetic sequences. This is the first of such improbable alliances, not the last.
America's major political parties will probably still be using the labels "Democrat" and "Republican" in the year 2001. But the causes galvanizing those parties will be only distantly related to the issues which divided them during the 20th century. The new battle lines of American politics will be drawn between the decentralizers and the centralizers. We will see a struggle between those want to speed technological advance and economic growth by shrinking government's power still more, and those who want a strong federal government to reimpose order and stability on a world racked by wave upon wave of mind-bending change.
Which side will you be on?
Copyright 1995 The Bionomics Institute
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