Let's Read Again Schumpeter's

The world is living an extended period of radical changes, liberalized trade and increasing prosperity. But these developments produce upheaval in both domestic and international affairs

No doubt. The market economy is the most successful wealth-creating economy that the world has ever known. As the well-known Austrian economist Joseph Schumpeter pointed out, no other system has benefited "the common people" as much. Schumpeter delivers several examples in his famous book "Capitalism, Socialism and Democracy".
Capitalism, he observed, creates wealth through advancing continuously to ever higher levels of productivity and technological sophistication; this process requires that the "old" be destroyed, before the "new" can take over. Technological progress, the ultimate driving force of capitalism, requires the continuous discarding of obsolete factories, economic sectors, and even human skills. The system rewards the adaptable and the efficient; it punishes the redundant and the less productive.
This "process of creative destruction", to use Schumpeter' s term, produces many winners but also many losers, at least in the short term, and poses a serious threat to traditional social values, beliefs and institutions. Moreover, the advance of capitalism is accompanied by periodic recessions and downturns that can wreak havoc in people' s lives. Although capitalism eventually distributes wealth more equally than any other known economic system, as it does tend to reward the most efficient and productive, it tends to concentrate wealth, power and economic activities. Threatened individuals, groups or nations constitute an ever-present force that could overthrow or at least significantly disrupt the capitalist system.
Many citizens of the industrialized world and many people in other parts of the international economy have entered what several financial experts and economic commentators have called "the Second Great Age of Global Capitalism". The world economic and political system is experiencing its most profound transformation since emergence of the international economy in the 17th and 18th centuries. The end of the Cold War, the collapse of the Soviet Union, a stagnant yet enormously rich Japan, the reunification of Germany and its consequent return as the dominant power in Western Europe, and the rise of China and Pacific Asia, in combination to the euro and the weak dollar, are influencing almost every aspect of international affairs. Changes originating in earlier decades have also become more prominent.
These developments include the technological revolution associated with the computer and the information economy and the redistribution of economic power from the industrialized West to the rapidly industrializing and crisis-riven economies of Pacific Asia. The worldwide shift to greater reliance on the market in the management of economic affairs and what many call the "retreat of the state", are integrating national economies everywhere into a global economy of expanding trade and financial flows. However, it is the demographic revolution that will have the greatest long-term significance. The extraordinary population decline in the industrialized world and the explosive growth of population in China, India, other parts of Asia and elsewhere in the developing world will continue to significantly alter the global distribution of economic and, of course, military power.
These developments are having important consequences for the lives of us all. There will be many winners as global capitalism refashions almost every aspect of domestic and international economic affairs. There will also be many losers, at least over the short term, as international competition intensifies and businesses and workers lose the secure niches that they enjoyed in the past. Economic globalization presents both threats and challenges for the well-being of peoples everywhere. If individuals and societies are to adjust intelligently to the challenge of global capitalism, it is imperative that they understand the principal forces transforming international economic and political affairs.
Under these transformations in the nature of the economy and the world conditions, it is obvious that the future can be a difficult and tricky thing to predict. However, it is time the new economy constitutes an important reality, so the on-line future of most businesses is being lived today by the personal computer industry. Catalyzed by the advent of the Internet (or New) Economy, the PC industry is in the throes of a wholesale organizational reformation that will see a radical and fundamental restructuring of the four Ps of business: plant, practices, people and (value) proposition.
According to consultant Neil Weintrant, prior to the popularization of the Internet, the PC industry' s structure was typical of most industries. Products were limited, shaped and priced by an intricate series of inventory and manufacturing issues. This focus on the factors of production rather than on what buyers truly wanted motivated manufacturers to isolate themselves, relegating customer interaction to intermediaries such as value-added resellers. Product pricing and forecasting complemented the needs of resellers more than those of customers. But the way of doing business is dying a well-deserved death. Buyers now have more power than ever. The electronic world is one without boundaries. It is no longer necessary for your customer to walk down the street to compare prices and services. On the Web, your competitor is a mouse-click away.
As a result, manufacturing plants are being switched from build-to-forecast to build-to-order. Jobs for forecasters have been eliminated, while customer-support staffs have doubled or tripled in size. Product prices have been slashed. Even the basic value proposition, including the products themselves, has changed: distinct product models have been quickly supplanted by configurable platforms.
The lesson for all business: The market environment of the New Economy must be matched with a commensurate business restructuring, specifically around the plant, practices, people and (value) proposition. Industries need not look any further than these trends to predict their future. Their impact on the four Ps is inevitable. It is a new game. Evolve or perish.