Every crisis ends in such a moment. The last crisis, which began with the stock market crash of 1929, ended with the Bretton Woods agreements of 1944. In each case, once the widespread debacle bottoms out, the speculators of the old era are reined in, expectations are reset, and new business and government elites start to rebuild the world’s governing institutions. After World War II, the locus of power and influence was the oil economy. Rockefeller family interests influenced the governance of companies, governments, and supranational institutions (such as the International Monetary Fund, the Council on Foreign Relations, and the Trilateral Commission) for many years. The United Nations headquarters in New York is built on former Rockefeller real estate; the World Bank’s first president, John J. McCloy, had been a Rockefeller-connected lawyer and a family friend. The symbols of elite power, including the Rockefeller-built World Trade Center, were all linked to oil.
Only with a similar restructuring can a new period of extended growth, a golden age, be ushered in. This time, the leaders will be linked to silicon. IBM, Intel, and Microsoft will be more important in the next two decades than Exxon or the World Bank. IBM’s deep engagement with national and regional economic planners, particularly in emerging economies like China and India, will probably become the prevailing model for corporate growth.
When deployment begins, general assumptions about business shift accordingly. Financial capital, which is relatively indifferent to particular technologies, becomes less of an economic force. Businesses depend more on industrial capital, derived from profits from the sale of goods and services. Executives with a greater interest in long-term stability than in rapid returns are placed in charge of global affairs.
There are clear signs that this is happening now. Financial regulations are being put in place around the world to improve market monitoring, limit leverage, and mandate heftier reserves. Wall Street’s leaders (and their equivalents in the City of London and bourses elsewhere) are undergoing a fundamental reassessment. Far too much has been lost by far too many individuals, in both money and reputation, to allow a widespread return to the old fast-and-loose investment casino. It is no longer practical for financial institutions to operate by rewriting risk “insurance” over and over again, in an opaque market without established rules. To be sure, new schemes are always being hatched, but the people who run Wall Street (traditionally scions of wealth) have lost confidence in these interloping “smart guys.”
One telling indicator of this shift from speculation to real growth is the official attitude toward bubbles. In the 1990s, the U.S. Federal Reserve, under Alan Greenspan, took a hands-off approach to speculation. Now the Fed is discussing what actions it might take to cool off overheated markets in advance, and is admitting that its earlier approach to bubbles and risk management was a mistake. New authority is being sought by regulators such as the U.S. Commodity Futures Trading Commission and its European counterparts. And, although some on Wall Street will surely object, the most powerful of the houses, Goldman Sachs, has ex-employees in key Washington positions who are pushing for the new rules. Many believe it is in the interest of Goldman and others to rein in “rogue” trading activities, since this would not only make returns more reliable, but raise barriers to entry in the industry.
The Emerging Silicon Economy
Goldman Sachs will probably be part of the new Silicon Establishment, along with dominant enterprises in information and communications technology and others involved in deploying these technologies. For the first time in decades, a commonality of purpose and shared reservoir of knowledge will bridge the many differences among governing bodies. Many people have lived their adult lives without responsible and capable leadership; to their surprise, the next 30 years will be a time when authority — both in government and in business — can be trusted. Companies such as Microsoft, IBM, and Intel have matured during the past 20 years, weathering conflicts — IBM’s near breakup, Microsoft’s antitrust battles, Intel’s confrontations with other chip manufacturers — that threatened their corporate existence and forced them to reconsider their core strategies and redefine their long-term goals. Meanwhile, major government agencies, such as the U.S. Army, the U.K. National Health Service, and various ministries in emerging market governments, have become the most significant and sophisticated buyers of large-scale information technology in the world today. Both customers and manufacturers have learned to factor life-cycle costs and long-term plans into their decisions.