Chapter 10 "New Economy": A Proposition That Cannot Be Ignored

You may find it strange to read the condensed history of the "new economy" in a book about Sino-American integration.What do the World Wide Web, AOL, and mobile phones have to do with "Central America"?The answer is: they are inextricably linked. We seldom associate the history of the development of the "new economy" with "Central America," which largely reflects the way we understand the world.For the sake of simplicity and clarity, we often separate different areas of our lives: diplomacy from economics, relationships from politics, where to eat from pensions... Examples of this are a lot of.In all newspapers or websites, there are separate sections for science, business and sports.There are many different sub-columns under these columns.So someone who is very interested in baseball will probably never read the racing news.This division can simplify our analysis and understanding of this complex world.Sometimes this division makes sense.Knowing where the best restaurants are in Houston, London or Tokyo doesn't need to focus on the Olympics.But sometimes simplification comes at a price, distorting our understanding of the world.

Whether as an economic phenomenon or as a technological phenomenon, the "new economy" is a prerequisite for the development of "Middle America".Had it not been for the communications and information revolution of the 1990s, the United States and China might have developed close ties, and the international economic order might have evolved as it has for centuries to become more global rather than national.After all, neither the establishment of the European Union nor the formation of the World Trade Organization is the result of the development of the Internet, just as the establishment of the United Nations was also before the birth of the Internet.But the "new economy" made integration between nations possible without government planning and without full awareness.

The "new economy" has triggered various innovations, but for "Middle America", the most important innovation is information technology.The development of information technology has the ability to break up traditional supply chains, creating intertwined links between regions separated by geographical distance.For most of the 20th century, the factory model was the dominant mode of industrial production.If a Japanese automaker wanted to set up a factory in the United States, it would have to copy the Japanese production system in the United States and make cars in a similar way.The same goes for the retail industry.If a retail company wants to open stores in other parts of the world, then the new stores also need to be operated as domestic stores.Sometimes, a lack of creativity is the reason for this.More often than not, however, pragmatic ideas are at play as well.The factories of the same enterprise in different countries have to survive independently, and the managers have to find ways to do so, and all they know is the original method.So, no matter in which country a new factory is opened, managers will replicate the same production model.

Of course, there are exceptions to any rule.Before the 1990s, the vast majority of supply chains adopted the centralized management of one company or the mode of imitating the management of the country in different regions.Sometimes this model works well, and sometimes it doesn't.But that's the only way it works.In almost any case, it is easiest for an enterprise to set up a factory close to the commodity sales market, otherwise the cost will be too high to bear.Even if a company wants to standardize the operation and management of enterprises and markets located in different regions, it will encounter many obstacles, including differences in laws and regulations in various regions, and the lack of global standards for production technologies and tools.The result is that, on the one hand, the production mode of enterprises is fixed; on the other hand, there are huge differences in products in various regions.In essence, even the largest multinational companies do not have a global supply chain, they just have their own branches all over the world, and the profits of many institutions must be returned to the head office in the end.

The technological revolution of the 1990s brought about fundamental changes in how companies operate globally and how goods are produced.New information technology has made higher levels of real-time communication and long-distance data transmission possible.Changes on the factory floor are the simplest example. Before the 1990s, factory managers needed to work not far from the factory premises, usually in offices that could oversee the workshop.Managers can correct documents, but they also need to inspect the work in the workshop to solve problems and ensure the normal production.However, thanks to the development of information technology in the past 20 years, managers in the middle of Illinois, USA, can now understand the production situation of the factory in Shenzhen, China, and understand things better than what they saw in the factory 20 years ago More.Thanks to the application of inventory tracking software, companies can now set up a central database that can be accessed by their different users located all over the world to know where and how much is in stock.In this way, companies can manage global supply chains and production networks in a way that was completely impossible in the past.

However, to gain popularity, these technologies need to be widely used, and to be widely used, these technology products need to be attractively priced.This meant scaling up production, which was one of the reasons capital and investment flooded into "new economy" companies in the 1990s.Early on, many saw the inherent potential of the Internet and wireless communications products in the commercial and consumer markets.What these products require is investment.Since the 1990s, investment has a unique channel-the stock market. On August 9, 1995, Netscape, which once perfected the Mosaic browser, went public. The opening price per share was $14, and the closing price rose to $75 per share that day.This became a symbol of the prosperity of the "new economy" in the United States.Although it is not the first time for Netscape to go public among American Internet companies, its listing is a relatively eye-catching one, which has played a powerful role in promoting the "new economy" to become the center of American popular culture.The U.S. stock market rose rapidly starting in 1990 and witnessed the climax of the bull market in the late 1990s. In March 2000, the Nasdaq index, which is dominated by technology stocks, rose from less than 1,000 points in 1995 to more than 5,000 points, reaching a peak.But it wasn't the five-fold rise in stock indexes that marked the era, but the convergence of the Internet and the stock market to dominate pop culture.The birth of the Internet made it possible for individual investors to buy and sell stocks online for the first time, leading to a huge increase in stock market trading volume.The Internet also provides a fertile soil for cultural development, and a large number of journalists, editors and writers have devoted themselves to the new media of the Internet.

By the late 1990s, the "new economy" had become a cultural obsession. An article in early 2000 put it this way: "It's called the 'new economy' for the simple reason that no one has ever seen a time like this: growth and innovation created unprecedented job opportunities and drove productivity levels to New highs, and driving the economy forward ... This is a time when everything seems to be getting better, faster, cheaper, more accessible, and more and more profitable." It is an intoxicating an illusion of reality, an illusion that is not real, but, for a time, it is joyful.

In many ways, the “new economy” is America-centric.While European countries have also seen a frenzy of investment in internet and telecommunications companies, the tone of the "new economy" is largely set by Wall Street and Silicon Valley.This also involves the participation of ordinary Americans. In the late 1990s, it seemed like everyone was investing in the market, talking and paying attention to the market.The fiery degree of stock trading of emerging Internet companies has created the prosperity of the Internet economy.Taxi drivers, bus drivers, waiters, secretaries and schoolteachers all discuss stock market conditions at length and with the same enthusiasm as investment bankers.More people are trading stocks directly than ever before, and the frenzy sends further gains in the stock prices of popular companies, which in turn lead to even greater frenzy. In 2000, the number of US shareholders had reached 100 million.

As for the overall situation in the world, few Americans care about it.During the Cold War, foreign affairs were the central topic of public discussion and concern in the United States. Now that the United States has come out of the "Cold War" period, people pay attention to the market and new technologies, and rarely pay attention to other things.People are so focused on the stock price movements of Apple or Microsoft that they don't have time to think about public policy or the state of the world in general.Of course, this is just an overall view.There are still Americans who pay close attention to other things, and there are still millions of Americans whose daily life is not affected by the ups and downs of the stock market and the ups and downs of the "new economy".Still, the "new economy" is such a culture of obsession that, during Clinton's "Lewinsky sex scandal," a member of Congress once complained that the American public paid far less attention to stocks than outweighed the concerns of the U.S. government.Of course, unlike the general public, in 1998 and 1999, the US government mainly focused on Clinton's "Lewinsky sex scandal".Never before has the American government looked so seedy, so out of touch with the public discourse, as it has at this time.While Americans are following Clinton's impeachment developments as they are other celebrities, they're not all that concerned with government affairs.

It all goes to show that few Americans are paying attention to the dramatic changes that have taken place in China.It is true that the US State Department, the White House, think tanks and universities have experts on China issues. Sometimes China issues will appear in the news. For example, in May 1999, the US bombed the Chinese embassy during NATO’s bombing of Yugoslavia.The bombing of the embassy aroused the anger of the Chinese. Many Chinese did not believe the "mistaken bombing" claimed by the United States, because with the advanced technology and experience of the United States, how could the American military make such a low-level mistake?This has also made many Chinese realize that although China has achieved tremendous economic development, it is still at a disadvantage militarily, and China needs to strengthen its comprehensive national strength.At that time, the relationship between China and the United States was in a rather delicate period, and the bombing happened just after Zhu Rongji's visit to the United States.The purpose of Zhu Rongji's visit to the United States was to win the support of the United States for China's entry into the World Trade Organization, but this visit failed to achieve the planned progress.The U.S. Congress raised objections, and Clinton was powerless because of the "Lewinsky sex scandal".

As we will see later, this crisis threatened the development process of "Central America" ​​and nearly derailed it.But in the United States at the time, the crisis went unnoticed.News of angry Chinese chanting anti-American slogans in Beijing surfaced for a few days, but the American public quickly turned their attention away from the incident.They focus on the stock market and the Internet. The "new economy fever" has created an illusion that the United States is both rich and powerful.Like all good illusions, this illusion also contains a lot of real ingredients.The material lives of many Americans have indeed changed positively, thanks to a sharply rising stock market, lower inflation, and new jobs.A small number of people have gained a lot from it, and it is this small number of people who have attracted a lot of attention.The American society at that time felt that if one person became a millionaire every day because of the development of the Internet economy, then 20 people had the hope and dream of becoming a millionaire.Regarding the global power of the United States, Americans realized that with the end of the "Cold War" and the disintegration of the Soviet Union, there was no conventional military force in the world that could pose a threat to the global status of the United States.Although the overall population size and per capita wealth of the EU countries are similar to those of the United States, the cohesion of the EU is more an aspiration than a reality. However, although the "new economy" has become the development direction of American popular culture, there are still tens of millions of Americans who have not enjoyed the benefits brought by the "new economy".In fact, 50 million people in the United States live in poverty, or struggle on the $17,000-a-year poverty line for a family of four, and even if a family of four earns a few thousand dollars above the poverty line, it doesn't mean There will be no more problems financially or you can live a prosperous life.Traditional employment in U.S. manufacturing has declined since the 1970s, although new jobs created in other sectors, notably technology and health services, have to some extent masked the impact of the decline in manufacturing jobs. pain, but the trend of declining traditional employment opportunities continued into the 1990s.Some of the new jobs are in high-tech manufacturing, but most are not.Therefore, the problem arises. New employment opportunities do not exist in traditional manufacturing where people lose their original employment opportunities. A worker who has been engaged in manufacturing for many years often does not have the ability to switch to a "knowledge worker".