Along human history there were periods in which advanced technology and changes in business management generated both social and economic upheavals. These events do not only bring forth an increase of productivity in a leading economic sector but they also offer solid instruments for all social-economic sectors, producing such major transformations so that we can speak about an economic revolution or the emergence of “a new economy”. Nowadays we are the witnesses of a transition period towards “a new economy” often called “Knowledge Economy”.new economy, productivity, knowledge economy, information economy

Mircea Udrea

English

Research Papers in Economics

  82 
 
 
A NEW ECONOMY? 
 
Mircea Udrea
∗ 
  
 
Abstract 
Along human history there were periods in which advanced technology 
and changes in business management generated both social and economic 
upheavals. These events do not only bring forth an increase of productivity in a 
leading economic sector but they also offer solid instruments for all social-
economic sectors, producing such major transformations so that we can speak 
about an economic revolution or the emergence of “a new economy”.  Nowadays 
we are the witnesses of a transition period towards “a new economy” often called 
“Knowledge Economy”. 
 
Along human history there were periods in which advanced technology 
and changes in business management generated both social and economic 
upheavals. These events do not only bring forth an increase of productivity in a 
leading economic sector but they also offer solid instruments for all social-
economic sectors, producing such major transformations so that we can speak 
about an economic revolution or the emergence of “a new economy”.  Nowadays 
we are the witnesses of a transition period towards “a new economy” often called 
“Knowledge Economy”, “E-economy” or “Digital Economy”.    
„For leading countries in world economy, the balance between knowledge 
and resources inclined so much that knowledge probably became the most 
important factor to determine the living standard, more than land, tools or labour. 
Nowadays the most developed economies are based on knowledge” 
1.  
We leave in an information era.  The cycle of development and 
implementation of new technologies is permanently reducing. The number of 
Internet users worldwide is continuously increasing. More than 50% of the Gross 
Domestic Product of the developed countries’ economies is the result of the 
production and dissemination of “knowledge”.  We witness a transition from “the 
industrial era” to “the information era”.  
As compared to matter or energy, information  presents distinct 
characteristics. It is never original, it can be copied on and on and it does not 
                                           
∗ Mircea Udrea is Director, Program Coordination Division, CERONAV – Romanian Maritime 
Training Centre 
1 World Development Report,1999. 
Romanian Economic and Business Review – Vol. 2, No. 4   83 
depend on location. Information never “gets old” and it can be combined 
unlimitedly. A very important characteristic of the information is that it is highly 
condensable.   
 The  Internet proves an evolution of the academic world which is today 
stimulated especially by the computer industry.   In essence, the Internet is a 
communication system representing an alternative to telephony.  Also, with regard 
to the use of standards it is one of the rare exceptions in computer industry which, 
along its history, hasn’t generated opened and generally accessible standards. But 
the standards which allow communication by Internet are opened and accessible 
to anyone and they are not the private property of companies. This standard makes 
the Internet, both software and hardware, independent from its producer.   
In the last two hundred years, the neo-classical theory of production 
identified only two production factors: labour  and capital. Knowledge, 
productivity, education and intellectual capital were considered as exogenous 
factors. The economist Paul Romer from the Stanford University, together with 
other economists tried to explain the causes of a long-term economic growth 
(exactly what happened in the USA economy between 1980 - 2000) by 
developing a new theory on economic growth, as the traditional economic models 
could not coherently explain it. Starting from the results of the models developed 
by the supporters of the neo-classical theory of production like Joseph 
Schumpeter, Robert Solow and others, Romer proposed a modification of the neo-
classical model by introducing the technology  (and implicitely knowledge  on 
which it is based) as an inherent factor of the economic system. Knowledge 
became the third production factor in the most developed economies. 
“Knowledge Economy” is that in which the generation and use of knowledge 
are predominant in creating welfare”. During the industrial era, welfare was 
created by the use of machines which replaced and multiplied the human labour 
based on energy consumption. In information era, “workers based on knowledge”, 
the so called “symbol analysts” are workers operating more with symbols than 
operating machines. Among these, there can be included not only IT&C 
specialists but also architects, bankers, designers, researchers, professors, political 
analysts and others. In advanced economies such as that of the USA, more than 
60% of workers belong to this category of “knowledge workers”.  
  Research, marketing, advertising, sales, client assistance and other non-
productive activities became major aspects of business management. This 
tendency towards a non-productive company profile reflects itself in business 
strategies based on quality management, information technology, client-oriented 
strategies, brand support, re-invention of technological processes. In terms of 
employed labour force, four of five USA workers were employed in non-
productive sectors in the year 2000.  
  The economic order which dominated between 1938 and 1974 was based 
on the production of goods, oriented towards a standardized production, managed   84 
by a rigid hierarchical structure, preoccupied mainly by the reduction of costs and 
oriented especially towards domestic markets. These factors represented the 
beginning of prosperity for the majority of the national economies.   
Nowadays in the most developed countries a New Economy has emerged: 
a knowledge economy based on innovation, an economy in which the key of 
success and creation of new work places is given by the extent to which the ideas, 
innovation and technology are implemented in all economic sectors.  
Better said, the New Economy is a new model of management rather than 
a new technology. One of the major structural changes in the New Economy is the 
degree in which the dynamism, permanent innovation and rapid adaptation have 
become norms.  
Enterprise and initiatives brought along the risk. Almost one third of work 
places permanently change each year in the USA economy (either they have 
recently appeared or will be soon eliminated). This is an effect of the new 
technologies but also of the increasing competition – as a result of the 
globalization.  
„Competitiveness – as Ricardo Petrella highlighted – became the only real 
objective – sold, disseminated and defended – of the dominant economy in 
Northern parts of the planet”
1. While in Economics the competitiveness represents 
only a facet of economic actors behaviour, in the context of markets supposed to 
be competitive, it is no longer a means. It became the prior objective not only of 
companies but also of states and society in its entirety.  
The successful experiences of the United States of America regarding the 
economic growth and creation of new work places, based on the new information 
and communication technologies, demonstrated the viability of the new economic 
approaches. 
Counting on the advance in mobile communication and digital television, 
the European Commission set up the bases for the development of the information 
society and creation of the new economy through a coherent and programmatic 
approach. Thus, on the European Commission initiative, at the special meeting of 
the European Council of March 2000 in Lisbon, there was presented and adopted, 
as programmatic document, the thesis “eEurope – an information society for all”. 
  The main objective of this programme is to offer an advantageous 
environment for private investments in order to create new work places, to 
stimulate productivity, to bring up-to-date the public services and to offer anyone 
the opportunity to get involved in global information society.  
In order to revive the partnership for development and creation of work 
places, as a new start of the Lisbon strategy, the European Council, convened in 
the spring of 2005, defined “the knowledge” and “the innovation” as main motors 
                                           
1 Ricardo Petrella – “Europe between competitive innovation and new social contract”, 
International Social Science      Journal, March, 1995   85 
for a durable development and stated that it is essential to build an information 
society for all in which IT&C is used on a large scale, in public services, small 
and medium enterprises and housing.   
 To address the fundamental technological changes, the European Council 
considers that a pro-active policy is necessary. Digital convergence requires a 
concurrent policy and the need to adapt the institutional and regulation framework 
where necessary so that they be in accordance with the new digital economy.   
The Commission proposed a new strategic programme, i2010 – 
Information European Society 2010, defining the general policy framework. This 
programme promotes an open digital economy, based on competitiveness and 
considering IT&C as the decisive factor in development, creation of new work 
places and life quality improvement.   
  Our new intellectual instruments – modern IT&C – enlarge and focus the 
mental power in a way similar to that in which the instruments produced by the 
Industrial Revolution increased the physical power. IT&C is the strongest 
instrument discovered so far which permits any of the previous instruments to 
refine and increase their utility.   
  The rapidity with which this technology passed from laboratories to real 
life and its development dynamics are unprecedented in human history. The 
development and infiltration of this technology in all economic and social fields 
require a detailed approach not only of the legal aspects but especially of those 
regading the social and economic organization.  
The term „new economy” refers especially to actual changes of the 
economic activities as a result of using digital technologies, which ensure the 
access to, processing and storage of information in a cheaper and easier manner.  
The new economy is characterized by the intensification of knowledge inclusion 
in the new products and services, and the emphasis on learning, innovation, 
globalization and durable development.  The huge amount of information changes 
the way in which the markets are functioning, enabling the enterprises 
restructuring and the appearance of new opportunities for obtaining value by fully 
using the available information. 
Nowadays we are the witnesses of a transition period towards “a new 
economy” often called “Knowledge Economy”, “E-economy” or “Digital 
Economy”. The new economy develops within groups of peoples (nations) 
generating a new society model, the so called “information society”.  The two 
notions, the new economy or knowledge economy and the information society, 
are interdependent and they cannot exist separately.   
“New economy” has a strong global character. It is a net of networks 
which crosses the national state boundaries. This fact requires, not necessarily 
common regulations, but harmonization, consistency rules allowing the economic 
networks to operate as a single large global system.    86 
The close and regulated markets turned into open electronic markets, 
interconnected by means of networks similar to the railways and roads in the 
industrial era. The present data networks play the same role within the 
international data and information changes as the goods and passengers transport 
infrastructures. The difference is that roads and railways are palpable realities 
while the electronic networks remain, by their nature, invisible. Even less tangible 
is the information transfer by these means.  
In the New Economy, the economic success will be more and more 
determined by the extent to which it will respond the technological challenges, 
innovation, entrepreneurial initiative, education, specialization, development of 
new skills and competences, but especially the transition of all organizations – 
private or governmental – from bureaucratic hierarchies to educational networks. 
In this sense, there are a few strategies to be followed, which are particularly 
important for the political decision factors:  
1.  investments in labour force training;  
2.  investments in an infrastructure generating innovation;  
3.  promotion of a client-oriented governing system based on innovation; 
4.  support in turning the economy into a digital economy;  
5.  support in civic cooperation.   
 
 
 
 
 
 
 
 
 
 
 

A new economy?

http://www.rebe.rau.ro/RePEc/rau/journl/WI07/REBE-WI07-A10.pdf

A new economy?

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