The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [77]
Many private sector organizations have responded to the economic imperatives of introducing ICTs. For example, most large corporations have “delayered,” and outsourced many activities to other organizations. The kinds of conglomerates so greatly admired and successful in the 1960s and 1970s broke themselves up into component parts because the advantages of centralizing such varied activities dwindled away. However, many others have not changed as much; the ICT-related “productivity miracle” has by-passed large numbers of companies. I wouldn’t want to overstate the adaptability and effectiveness of business. We’ve certainly not reached a nirvana of empowered and fulfilling employment. There are many companies that are as hierarchical as ever and place no reliance on a highly skilled and motivated workforce. Still, the transition to a business structure appropriate to the weightless economy is under way in the private sector, especially in competitive industries open to international trade. The profit motive has acted as a strong imperative for change.
This is much less true of public sector organizations—a point to which I’ll return below. They tend to be organized still on a hierarchical model, with employees not allowed to take advantage of the flexibility and new capabilities created by new technologies. Initiative isn’t so highly valued, and there is often also a presumption of uniformity in public services, rather than the customization people have come to expect in their private transactions. However, this will have to change given the huge pressure on public finances, described earlier. Improvements in public sector efficiency on the scale needed will depend on a productivity boost from the technologies, and that in turn will depend on changing the structure of the organizations and the requirements on employees. An effective public sector will also consist of high trust organizations.
GLOBALIZATION
One of the most striking changes in business structures is the move toward networks of companies working together—in effect, complicated supply chains which coordinate closely with each other. These extend across several countries even for quite small companies. Big multinationals in particular have extremely complicated structures dispersed around the globe, and a sophisticated product such as a car or mobile phone consists of many components manufactured all over the world before being assembled and shipped to their final destination.
For globalization is part of the process of the reorganization of the economy triggered by the drive to use ICTs effectively. The globalization that occurred in the late nineteenth and early twentieth centuries was an exchange of capital for raw materials, usually on favorable terms for the imperial sources of capital. That of the late twentieth and early twenty-first century has been different in character. Although the majority of cross-border trade and investment so far consists of rich countries increasing their economic links with each other, developing countries, especially the BRICs, account for a rapidly growing share of world production and trade. The OECD countries’ share of world GDP declined from 65 percent in 1975 to 55 percent by 2005. During roughly the same period, its share of world exports declined from 73 percent to 67 percent.21
The geographic scope of production has greatly increased, therefore, both in terms of the growth of trade and investment and its geographic distance. Very few manufactured products, and a declining proportion of services as well, are made in one country any longer.