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A TCI Book Review

Shifting Gears - Thriving in the New Economy

Nuala Beck
HarperCollins, Toronto, 1992


Beck begins her book talking about her confusion with some old economic truisms ● that economics is all about the allocation of scarce resources, and operates according to a law of diminishing returns. Based on what she could see, the economic booms of the past have been fueled by abundance, not scarcity ● of cheap steel. of cheap energy, and now, by cheap microchips. She talks, accordingly, about a 'law of accelerating returns' (p.16), and rails against the established institutions (such as Statistics Canada) for continuing to measure the economy in terms of old and irrelevant economic indicators, such as steel output.

In this book, she discusses her concept of the "new technology economy", which is characterized by access to cheap microchips, as distinct from the old era of "mass manufacturing", which was characterized by cheap access to energy, particularly oil. (The associated chart summarizes her thinking about the three stages of economic growth in recent times.)

 
Economy
1
Commodity (C)
2
Mass Manufacturing (M)
3
Technology (T)
Era industrial revolution to 1918 1918 to 1981 1981 to ??
Key Factor cheap steel cheap energy, especially oil cheap chips (microchips)
Four Engines ● textiles
● coal
● steel
● railroads
● automobiles
● machine tools
● housing
● retailing
● computers and semiconductors
● health and medical
● telecommunications
● instrumentation
Infrastructure ● railroads
● shipping
● telegraph
● highways
● airports
● telephone
● telecommunications satellites
● fiber optics
● LANs and WANs
● radio frequencies
Leading Economic Indicators ● pig iron production
● railroad operating
income
● inner tube production
● coal and coke production
● textile mill production
● cotton consumption
● industrial production
● capacity utilization
● machine tool orders
● retail sales
● housing starts
● auto sales
● computer production
● electronic components
production
● instrumentation sales
● high tech trade balance
● knowledge-intensive employment growth
● medical starts

A key ingredient of the "new economy" is what she calls a "knowledge worker", which is someone in either of these occupations:

  • professionals (doctors, engineers, accountants)
  • engineering, scientific and technical workers
  • senior ranks of management
She has calculated the ratio of "knowledge workers" to employees in each industry, and determined that those industries best positioned for growth in the new economy are those with the highest ratios. She has also developed a number of interesting ratios that assist in her analysis of companies' ability to compete, such as:
  • peak-to-growth ratio (p.157)
  • patent-to-stock price ratio (p.160)
  • research-to-development ratio (p.161)
  • technology spending ratio (p.163)
  • global penetration ratio (p.166)
These are the sorts of new indicators that she believes are appropriate for measuring the new economy.

She ends the book with a short prelude of the fourth economy ● which she labels the "engineering" economy (the E circle). This newest economy will be fueled by cheap genes, and its engines of growth will be genetic engineering and biotechnology, artificial intelligence, space, and new materials.


IF YOU HAVE ANY COMMENTS ON THIS REVIEW (I.E. DISAGREEMENTS, ADDITIONAL PERSPECTIVES, ETC.) OR SUGGESTIONS FOR FUTURE BUSINESS BOOK REVIEWS, WE'D LIKE TO HEAR FROM YOU! CONTACT US AT jlinton@consulttci.com
 


 

 

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