Challenges of 21st century economy

Capitalism is in disarray. It is on its deathbed. It is dying slowly. It is already dead. But, since most other alternative economic systems seem still to be in a formative state, capitalism, although brain dead, is being kept on the ventilator by its champions who continue to find comfort in denial.
One such champion of capitalism, German thinker, Wolfgang Streeck, has recently written an interesting book (How will capitalism end?)that discusses the issue through the prism of political economy. The author agrees that capitalism is disintegrating because as an economic regime, it is increasingly unable to deliver on its own promise of continuous expansion within a largely stable society. This disintegration is coming about because it has been too successful for its own good as in effect, it has managed to neutralize the bargaining power of the labor, outwitted the constraints of regulations and removed from the economic equation the factor of social good.
So there are no checks and balances of the kind that in various periods in the past have generated both less economic volatility and more social stability. The cooperation that had existed between democracy and capitalism has now turned into conflict.
This conflict has already been resolved in capital's favor as the social contract is now effectively being transformed into one in which, as Streeck says, economic power is political power, "with one-dollar-one-vote replacing one-citizen-one-vote. ..."
Associated with this, there has been a shift in the nature of states in developed countries from the classical "tax state" that taxes the rich to redistribute downwards and provide essential services to the people; to the "debt state" that loses some of its ability to tax and seeks to provide services through enhanced public debt; to the "consolidation state", for which fiscal austerity is the driving force, and which is fundamentally antithetical to democracy. It is now almost commonplace to note that "turning the economy over to a combination of free markets and technocracy makes political participation run dry [page 141]" - and it provides easy explanations for the rout of social democracy and the rise of right-wing anti-establishment forces. But despite these reactions, "the arenas of distributional conflict have become ever more remote from popular politics [page 93]."
This weakening of social, political and institutional constraints on capitalist advance has generated five systemic disorders, according to Streeck: stagnation, oligarchic redistribution, the plundering of the public domain, corruption and global anarchy. In turn, the symptoms of this decay are exemplified in the advanced capitalist countries in three broad tendencies.
First, there is a persistent decline in rates of economic growth, often described as "the new normal" or "secular stagnation", which matters crucially because capitalism exists in order to expand in economic terms. Second is the fact that this decline is accompanied by a concomitant and persistent increase in indebtedness, across households, companies and governments, because so much of the relatively anaemic growth of the recent past has had to be generated by credit expansion.
These two features are strongly related to the third: the massive increases in income and wealth inequality within capitalist societies across the world. Falling growth, rising debt and increasing inequality are hardly news anymore, but taken together they point to a morass from which the system cannot extricate itself without fundamental transformation.
But it is not capitalism alone that is dying. Even globalization has begun to be losing its lustre. But unlike capitalism awaiting a replacement, globalization is already being substituted with internetization.
According to Constantine Passaris, Professor of Economics, University of New Brunswick(Forget globalization Internetization sums up our global economy better, published in collaboration with The Conversation on 22 December 2017 in Weekly Agenda of World Economic Forum) the word globalization has lost its relevance with the emergence of the new global economy of the 21st century. In fact, it's become an anachronism.
Globalization describes the international outreach of countries for the purpose of economic, social, political and cultural liaisons. Global linkages between countries through military conquest, colonization, multilateral free trade agreements and cultural exchange existed in an uninterrupted continuum in the evolving history of humankind.
Historically, however, the process of globalization has taken different forms, and its meaning has changed and mutated since it was first used in English in the 1930s.
For lack of a better word, the term received an extension to its lifeline until the end of the 20th century despite the profound structural changes and technological advances that began to take place in the 1980s.
Therefore, globalization has come to be used to represent "modern" 20th century economics and social processes, including the instant exchange of money enabled by internet technologies.
"Yet because of its varied historical use, globalization does not truly reflect the electronic and digital empowerment that has been unleashed by the information technology revolution.
"Therefore, globalization is not an accurate descriptor of the 21st century and the internet-driven transformational change sweeping the international economic landscape.
"And so I have coined the term internetization which I believe should replace the concept of globalization.
"Internetization is the contemporary face of globalization. It includes the modern tools of electronic globalization and embraces the digital connectivity and empowerment of the internet and the World Wide Web.
"Although we could widen the term globalization to include internetization, I believe it is better to replace the word globalization altogether because the long duration of its usage has given birth to evolving definitions and the creation of a plethora of different nuances.
"If we embrace this new term, internetization, within our modern economic vocabulary, it will permit a more accurate description of the engine which drives our new 21st-century global economy. By using the term, we will acknowledge the information technology revolution that's profoundly altered the structural parameters and the modus operandi of most national economies.
"The role of information and communications technology in the new economy has been pivotal. This is particularly true of the changing structure of international production.
"More specifically, information and communications technologies, or ICTs, have altered the production function, enhanced productivity growth, facilitated innovation, spearheaded the transmission of ideas and extended the reach of economic and social interactions.
"The revolution of information and communications has given us tremendous capacity for connectivity. Time and geography are irrelevant. Communications have sped up and reduced the time required for connectivity to nanoseconds. Geographical boundaries have melted and become increasingly more porous and insignificant in terms of social, economic and political outreach.
"The new economy is built on a culture of innovation and an emphasis on creativity. Indeed, the signature mark of the new global economy is new ideas, new technologies, new products, new directions and new initiatives.
"In this context, firms are integrating the production and marketing of goods and services across national borders. International economic transactions that were formerly conducted between independent entities are now being internalized within a multinational corporation.
"Electronic financial transactions are the modern face of banking. The new technological infrastructure has empowered services to be delinked from production and performed remotely.
"In this contemporary venue, the market for a growing number of internationally integrated but geographically dispersed business enterprises is global rather than national. Indeed, ICTs have displaced the physical market with the virtual market of the internet for business-to-business and business-to-consumer transactions.
"The 20th century economy was about resources under our feet while the 21st century economy is about the resources between our ears. In this context, human capital has emerged as a country's most valuable economic asset. Indeed, the linkages between education, economic growth and prosperity are significant.
"Internetization has had a profound impact on formal education, lifelong learning and public education.
"It's created a more level playing field for educational opportunities and achievement. Both instructors and students, regardless of their geographical location in Western countries or "Global South" countries, as well as schools in the poorest neighborhoods and those in affluent neighborhoods, can theoretically access the same high-quality educational material.
"Furthermore, internetization has also enabled professionals, scientists and many other specialists with an effective and convenient manner for maintaining and updating their professional qualifications through electronic accessibility to lifelong learning.
"However, the profound impact of internetization is not limited to formal education. It also embraces public education and lifelong learning. Indeed, internetization serves as a catalyst through the digital delivery of public education and electronic resources to create better-informed citizens.
"In short, the word globalization has reached the end of its natural life. Indeed, its extended tenure in the economic literature has resulted in a lot of semantic baggage that detracts from an effective dialogue on the contemporary academic landscape.
"In addition, globalization fails to adequately describe the digital connectivity that is the hallmark of our civil society and the new global economy. Judging by the frequency of use of the new word internetization among economists and interdisciplinary researchers in recent scholarly publications, it's also gaining currency in academic circles."