New Economy, New Myth The ‘New Economy’ has been criticised greatly of late, and after the specu- lation and hype that surrounded the Internet bubble and so on, this is hardly surprising. This book, first published in French and updated here, however, treats the ‘new economy’ as discourse – one that is often misleading. In order to understand what happened during the Internet bubble and the fuss that surrounded it, a central element – intellectual speculation – needs to be understood. New Economy, New Myth treats this speculation as a form of ‘ultra-free market’ thinking. According to this line of thought, the Internet and the digital revolution – whose importance to major innovations are by no means denied – are acting as a sort of Trojan horse in spreading market deregulation across the globe. With so much having been written about the new economy, this book employs a mixture of academic rigour and readable prose and comes as a welcome relief. It will be intriguing reading to those interested in the Internet bubble – and the hyperbole that surrounded it. Jean Gadrey is Professor of Economics at the University of Lille 1. He is the author or editor of over twenty books on economics and socio-economics. Contemporary political economy series Edited by Jonathan Michie Birkbeck College, University of London, UK This series presents a fresh, broad perspective on the key issues in the modern world economy, drawing in perspectives from management and business, politics and sociology, economic history and law. Written in a lively and accessible style, it will present focused and compre- hensive introductions to key topics, demonstrating the relevance of political economy to major debates in economics and to an understanding of the contemporary world. Global Instability The political economy of world economic governance edited by Jonathan Michie and John Grieve Smith Reconstructing Political Economy The great divide in economic thought William K. Tabb The Political Economy of Competitiveness Employment, public policy and corporate performance Michael Kitson and Jonathan Michie Global Economy, Global Justice Theoretical objections and policy alternatives to neoliberalism George F. DeMartino Social Capital Versus Social Theory Political economy and social science at the turn of the millennium Ben Fine A New Guide to Post Keynesian Economics Steven Pressman and Richard Holt Placing the Social Economy Ash Amin, Angus Cameron and Ray Hudson Systems of Production Markets, organisations and performance Edited by Jonathan Michie, Jill Rubery, Brendan Burchill and Simon Deakin New Economy, New Myth Jean Gadrey New Economy, New Myth Jean Gadrey First published in French in 2001 by Flammarion: Paris. English Language Edition first published in 2003 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 Routledge is an imprint of the Taylor & Francis Group This edition published in the Taylor & Francis e-Library, 2003. © 2003 Jean Gadrey All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Gadrey, J. New economy, new myth / Jean Gadrey. p. cm. – (Contemporary political economy ; 9) Includes bibliographical references and index. I. Title. II. Contemporary political economy series ; 9. 330.12′2–dc21 2002028358 ISBN 0-203-22275-X Master e-book ISBN ISBN 0-203-27715-5 (Adobe eReader Format) ISBN 0–415–30141–6 (hbk) ISBN 0–415–30142–4 (pbk) For Nicole, Christophe and Anne-Sophie Contents Preface to the English-language edition ix Acknowledgements xiii Introduction 1 1 The new economy: back to the roots 5 2 Beyond the limits of maximum growth? 17 3 New technologies, new growth? 25 4 The new employment: services and flexibility 43 5 Market diversity and regulation 61 6 The limits of the market 77 7 New modes of governance for firms and financial markets 95 Conclusion 111 Postface: what is left of the ‘new economy’? 117 Notes 131 Bibliography 139 Index 143 Preface to the English-language edition As far as the new economy is concerned, things change quickly, so quickly in fact that some people are wondering whether we should not already, in 2002, be talking of the ‘ex-new economy’. This is not my own view: my subject in this book is the new economy as a discourse, one that is often misleading and placed at the service of powerful private interests. There are good reasons to suppose that this myth will endure for some time, longer in any event than the vicissitudes of the NASDAQ, and indeed for as long as its propagators are in positions of economic and ideological strength or until capitalism devises some alternative economic and intellectual fad. In the autumn of 2000, just as things were starting to go downhill, one of the advocates of the new economy at the time of its take-off in the United States, Michael J. Mandel, economics editor of Business Week, published a well-informed book, The Coming Internet Depression.1 Without abandoning the notion that a genuine, lasting revolution associated with ICTs and the Internet is taking place and that new rules are radically changing the economy, Mandel highlights the risks posed by the chronic instability of this new system and proposes several slight improvements, notably the strengthening of the insti- tutions for monitoring and regulating the global financial system. The present book, written just before the start of the downturn of March–April 2000, is based on different hypotheses to those adopted by Michael Mandel and takes a more sceptical view of the new economy that is supposed to be emerging and the major industrial revolution linked to the Internet that is supposedly taking place. It is true that the Internet and the software revolution have intro- duced new elements, but we are very far from a radical change in economic practices, production, consumption and ways of life. It is probably because they overestimated the extent of the change in the rules of the economic game that most of the start-ups established during the boom years 1997–2000 have subsequently become ‘start-downs’. x Preface However, my book focuses primarily on another argument, which is that, another element, namely unprecedented intellectual speculation, needs to be brought into play alongside technological and stock exchange speculation in order to understand what happened during those slightly crazy years. This wave of intellectual speculation is essentially a variant of ‘free-market’ thinking, one that is both ‘ultra-free-market’ and ‘high-tech’. According to this line of thought, the Internet is acting as a sort of Trojan horse in the spread of deregulated markets – unencumbered by state intervention – across the entire world; the markets affected are not only those for goods and services (including health, education and culture) but also labour markets and those for social protection, as well as capital markets of course. It is mainly this thinking that this book seeks to attack, not in order to question the obvious ‘virtues’ of markets but to highlight their diversity and limitations, even in the area of the new technologies. The first edition of this book was published in France during the summer of the year 2000, when belief in the magic properties of the ‘new economy’ was still very widespread. A second, paperback French edition was published a year later with a postface that took stock of the debates that had taken place between the summer of 2000 and the spring of 2001. This English-language edition of the book takes over the contents of the second French edition with a few additions inserted at the end of 2001 for the benefit of English-speaking readers. These readers may take the view that my ideas are influenced by a Continental European and Nordic way of thinking and, more specifically, by French culture. They would be correct: I acknowledge these influences, without seeing in them a source of superiority. I believe in the theoretical and political benefits of an open debate between researchers from different cultures, provided it is sufficiently well argued and calmly conducted. At the same time, however, I am happy to have found a number of American and British researchers, whom I cite in this book, who are putting forward ideas similar to mine, drawing of course on their own arguments and cultures. I am thinking in particular of Robert Kuttner, whose superb book Everything for Sale: The Virtues and Limits of Markets, published in 1997, provided much of the inspiration for the last two chapters of my book. This clearly indicates that the ideological foundations of the ‘new economy’ discourse for the most part preceded the rapid development of the Internet. They were simply reactivated in support of the infatuation with this new technological tool. Other American analysts have also influenced me considerably. One is Robert Reich, particularly for his exceptional lucidity in analysing the excesses of the American model of capitalism in the 1990s. Two others are the econo- mist Robert Gordon and the sociologist Manuel Castells (even though, in certain respects, I would distance myself from some of his diagnoses). Although Preface xi I am not a neoclassical economist and favour a more ‘socio-economic’ approach, I very much admire the thinking of Kenneth Arrow and Amartya Sen, whose work admirably illustrates the fact that giving priority to moral values and a sense of social justice and the public good can bring together economists with very different theoretical approaches.