RE: Is IT growth slowing?

["Klasovsky, Nick" <nklasovsky -at- nordson -dot- com>]

Groan....

Connie Giordano Says:

"I do believe that much of what has occurred in the last few months is media
hype.  But, being in North Carolina, which has an interesting mixture of
financial powerhouses, old-fashioned manufacturing and a growing IT
industry, I have begun to realize that there is more than the usual media
hype going on. I wonder how much of the economic downtown is really caused
by displacement of whole sectors of the economy--we are moving to an
information-based economy at an incredible rate. Companies founded in the
manufacturing economy not only have to deal with the change in the basis of
the economy but also upgrading their infrastructures to support their little
niche, then some painful displacement is going to occur.

At the same time the old economy is being displaced the information economy
has to mature--kind of makes for interesting times to say the least.  But if
the IT industries follow the old manufacturing model, then those companies
that deliver added value will survive, those that merely deliver product are
likely to evaporate or be absorbed.  

So history repeats itself again ......."

Groan. According to Connie, manufacturing is just a little niche in the
economy, doomed to displacement by the "information economy". SOunds to me
like a typical statement by a totally blind to the world "New Economy"
dreamer. 

Niche as compared to what? Manufacturing still supports most of the world's
population with jobs that pay more than the service sector. Is there room in
the elitist "information industry" for the great uncomputerized, PDA-less
hordes?

"But if the IT industries follow the old manufacturing model, then those
companies
that deliver added value will survive, those that merely deliver product are
likely to evaporate or be absorbed."

"Added Value" implies that there must be something to add the value to. If
the companies that deliver product evaporate, how does added value exist? If
they don't evaporate but are absorbed, where do they go? Absorbed into what,
the ether?

The New Economy philosophy is another example of the muddled thinking of
those who sit in front of CRTs for way too long every day....they can't see
the world around them except through a computer...reminds me of the ad a TV
maker was running a year or two ago...a couple and their young son walk up
to lookout point over the Grand Canyon, and there sits a TV showing the same
view as that spread out in front of them. The kid runs over to the TV and
sits down in front of it, saying "Wow, Mom and Dad, look, it's the Grand
Canyon." Behind the TV is the real Grand Canyon, in all its glory, but the
kid (the New Economist) thinks what he sees on the TV is the real thing,
instead of the physical world in front of him. Sad, sad, sad. 

Those who tout the "information economy" as the wave of the future seem to
think that we in this country don't need to manufacture anything, that we're
better off letting other countries do it for us. That's the kind of
stick-your-head-in-the-sand thinking that's going to bury us. What happens
when the rest of the world's countries develop their own "information
economies" as they are rapidly doing, while keeping their manufacturing
bases? They won't need anything from us, but we sure will need their
manufactured products. How will we pay for them...with bytes? How much
information on the Internet is worth as much as a real, physical product?
Not much, apparently, or people would be paying a lot more for access than
they are now, and there wouldn't be so many Internet-based companies
failing. Most purchases made on the internet are physical products. Somebody
makes that product...and there's a lot more people getting paid to make,
transform, or handle physical products than there are people building web
sites or creating new software.

The present economic downturn started when investors in the stock market
finally realized that the New Economy stocks they paid so much for were
basically worthless, that the New Economy was not built on rock, but sand,
not of steel and concrete, but pure vapor. Billions of dollars evaporated
into thin air. Why? Media hype, New Economy booster hype, irrational
optimism. No economy can afford to lose so much money without a
downturn...and the "little people" who work in the factories, in
construction, in service industries, are scared, because they read about
layoffs every day, they see their jobs, the ones you deem so non-essential,
being exported to other countries. They cut back on their spending, so now
there's less money circulating through the economy. Next thing you know,
people are getting laid off, so there's even less spending going on...and so
on.

I suppose you could say that everyone "consumes" information, but I would
argue that information is a discretionary expense for the majority of
consumers. If I'm right, then an "information economy" is a house of cards.
I can go days without logging onto the internet, watching TV, or picking up
a phone. Where does that leave the information providers? If information is
only a tiny part of my budget, where does the rest go? If the manufacturing
sector of the US economy continues to shrink as it has been, we will end up
like the rest of the third world countries...importing so much more than we
export that we end up on the IM and World Bank dole, always on the brink of
financial disaster, never being able to save enough to dig our way out of
the hole we dug for ourselves. We've been lucky so far....but its luck, not
good planning that got us where we are today. 

One last question...how many $15-20/hour jobs does the information economy
provide right now for low-skilled workers with high school educations? How
will the information economy replace the high-paying manufacturing jobs lost
when manufacturing companies move overseas? Will the displaced workers all
be able to write technical manuals, or develop GUIs or software? I doubt it.


Nick Klasovsky
nklasovsky -at- nordson -dot- com


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