The New Economy is the name given to the young industries and technologies?most obviously the Internet?that have captured the minds of entrepreneurs, fueled dizzying rises in stock markets and now promise a clean, shiny prosperity for all. But look at who's behind the New Economy and what it stands for. It's a disturbing exercise, because it's largely the work of scam-smitten speculators, Third Way politicians and Brave-New-World scientists.
First, the speculation. The boom in tech stocks is around five years old, and most people have learned to roll their eyes with mild disapproval at the soaring share prices of dot-com companies. Like me, they stopped making heartfelt protests about the bubble long ago because it sounds Scrooge-like at a time when the Dow brings Christmas every week. Yet what was once a rich man's mania has become an epidemic. Trading volumes are smashing records as everyone piles into the market, chasing an ever-decreasing number of stocks. Last year, the gain in the S&P 500 index, which tracks the prices of 500 stocks, could be accounted for by a mere 31 companies. Margin debt?the money investors borrow to buy stocks?has leapt roughly 50 percent in the past six months. These are truly 1929-type numbers.
It's not just America going mad. The market value of Nokia, Finland's mobile phone maker, is now $265 billion, nearly twice the size of the country's entire economy. And Hong Kong police earlier this month had to restrain crowds signing up for Internet flotations.
Capitalism often goes crazy and markets periodically swoon. But the New Economy is more than just another incidence of speculative excess; it's doing lasting damage by distorting the traditional values of capitalism and replacing them with socialist ones?like a blanket disregard for profitability and an obsession with Growth Rates that is reminiscent of the Five Year Plans. Barron's in March published a survey showing that 51 public Internet companies could easily run out of cash in the next 12 months. That's a burn rate to shame any socialist government. In fact, the New Entrepreneurs have much in common with what Yugoslav dissident Milovan Djilas once dubbed the New Class, the communist apparatchiks who took over in Eastern Europe after the war: "The new class is voracious and insatiable, just as the bourgeoisie was. But it does not have the virtues of frugality and economy that the bourgeoisie had." Indeed, some tech companies are run with the flippancy of a frat house. Last summer, for instance, the chief executive of software seller Beyond.com appeared on tv just in his boxer shorts to promote his ailing company.
The New Economy has also become a magnet to lefty politicians. One reason is that it's a huge source of funds. Two high-tech companies that made large donations to the Democrats have benefited hugely from favorable regulatory decisions backed by the Clinton-Gore administration, the Boston Globe recently reported. For her ludicrous Senate bid, Hillary Clinton received donations from the bosses of two women-focused websites, Oxygen.com, which promotes voluble new-age chat show host Oprah Winfrey, and iVillage, which is making huge losses trying to build an "online community" for chicks.
With the wiliness of a tech entrepreneur, Tony Blair is using the New Economy as an excuse to launch more of his intrusive and unnecessary policies. "Helping people in the New Economy, managing change for them, is not about protection, but empowerment," he droned in Davos in January. And whereas pink politicians used to simply throw money at problems, they now throw technology, something that surely makes computer companies, eyeing large government orders, very happy. Even America's famously dysfunctional education system can be cured by the New Economy, according to Clinton and Gore, who strongly back initiatives to get more computers in schools. But David Gelernter, the celebrated Yale computer scientist who was nearly killed by a Unabomber parcel bomb, had this to say about that approach: "Children are not being taught to read, write, know arithmetic and history. In those circumstances, to bring a glitzy toy into the classroom seems to me to be a disaster."
But most worrying of all, the New Economy has enabled frightening scientific advances that will make Luddites of us all. Indeed, they've made a very persuasive Luddite out of one of the brightest pioneers of the New Economy, Bill Joy, chief scientist of Sun Microsystems, a genuinely successful tech firm. With the passion of a Saul-turned-Paul, Joy recently wrote an essay for Wired that rails against innovations that "are being developed almost exclusively by corporate enterprises" in an age of "triumphant commercialism," his terms for the New Economy.
Joy's fears center on genetics, nanotechnology (in which objects are created through the manipulation of molecules and atoms) and robotics. In as little as 30 years, these sciences could be helping us live to 120. Think that's freaky? Well, Joy also says that genetics, if allowed to progress along current lines, could spawn a super-race. And reengineering plant life may even create an inedible, omnipotent weed that could choke out other life on the planet. Yes, I know this sounds utterly outlandish, but when someone as sane as Joy says all this, it's hard to write it off.
Now, this Silicon Valley figure who has lived on the cutting edge for many years is making a very conservative-sounding clarion call: "The only realistic alternative is relinquishment: to limit the development of the technologies that are too dangerous, by limiting our pursuit of certain kinds of knowledge." He's onto something: It's time to unplug the New Economy?while we still can.
Peter Eavis is a reporter for TheStreet.com.