Does a different productive mode generate a different type of competition? That is an apt and urgent question to ponder in this 21st Century of breathtaking technological changes. Not only is the Fourth Industrial Revolution unfolding so boldly with artificial intelligence (AI) as its spearhead, but also we find far more countries demanding global attention because of their various productive capacities than can be accommodated in such traditional boxes as developed, developing, and underdeveloped, or industrialised, mining, and agricultural, or even emerging, frontier, Next Eleven, and other such categories. Hypothetically, the more variegated the playground players, the more the types of competition likely. If so, we need to come to terms with them, if only to break stereotyping tendencies.
A recent Economist article, "A boom like no other" (May 26, 2018), underscores this theme. It noted how competition had shifted from a "swarm of small firms attacking incumbent" corporations/entities to "less than a dozen tech firms" battling it out there today. The article does not hit the argument on its head (perhaps because it had other issues demanding greater attention), but when it compared the top-five firms on the eve of the 2008-11 Great Recession with today's, we get a more palatable taste of what may be at stake.
It observed how the proportion of foreign profits of total profits (presumably of U.S. corporations) had fallen from 32 per cent to 20 per cent, and that the top-five firms then (Chevron, Verizon, AT&T, Exxon/Mobil, and General Electric, in that order), represented a mixture of manufacture and services, as opposed to the top-five today (Amazon, Alphabet, Apple, Intel, and Microsoft, from top to bottom), all of which dab into the information industry in one way or another to make their profit. Turning to profit, the fifth largest corporation today, Microsoft, makes more investment ($5.1 billion) than the top firm then, Chevron's $4.5 billion. It is not that the Great Recession produced more consumers and opportunities than before, but the monopolising effect seems to be more evident and perspicacious now than ever before. The typical consumer's purchasing power need no longer be measured by such hardware possessions as a house, automobile, electronic gadgets, or clothing, but by portable software proficiency suitable for hand-held contraptions. At heart is a significant shift from manufacturing towards information-based service-sector economy, which makes it easier to digest why the previous 'swarms of small firms' in the competitive playground have been downsized to commanding 'tech firms'.
Pushing the point, if one were to compare and contrast the broad brushstrokes of the 2008-11 recession to the most dominant one of the 20th Century, the 1929-39 Great Depression, we can better capture what the sways and shifts have been. Then it was a shift from agricultural to manufacture as the economic mainstay, measured in terms of both contribution to the gross domestic product (GDP) and employment proportion. For example, one-third of US citizens then lived in the countryside, until the advent of tractors and other forms of farm mechanisation drove them off, so that less than 5.0 per cent live in farms today. True, they did not instantly find urban jobs, but the Great Depression catalysed the advent of assembly lines, and with them, infrastructures to facilitate the automobiles that would soon dwarf society.
World War II not only expanded production, but also internationalised tastes, consumption, and production, until, by the 1950s and 1960s, the above example of automobiles produced its own 'swarm' when the fittest of US auto-makers (by now reduced to the Big Three), faced foreign competition. A similar trajectory accompanied electronics, eventually even apparel. In the gush of merchandise flows, not enough attention was paid the Third Industrial Revolution whose hallmark was computer-based, the Internet.
Only with the end of the Cold War and the simultaneous but independent (well, conceivably overlapping) democratisation waves did the Internet take off big-time. When it did, it released the trickle that became the flood of information-driven industries displacing manufacturing counterparts: this was not a quid pro quo this-for-that exchange, but one meandering its way through wage differentials, as domestic champions shifted off-shore until too many home job losses weighed in against the profit-maximisation process. To cut a long story short, an expanding 'national pie' allowed larger income proportions to be diverted to service-sector purchases and products, while demands for off-shore corporations to return as 'national champions' in industrialised countries exposed (a) the limits of manufacturing, (b) the hi-tech promises, and (c) the far more exclusively generated, monitored, and consummated services produced.
'Swarms' of firms may have produced consumer swarms, but since the shift from manufacture to hi-tech also involved fewer top-level players, an oligopolistic flavour became inevitable. Competition would be less extensive but far more intensive; yet at the same time, the typical 'innings' each top-gun player dominated also shrank, from the minimum of at least one generation (for manufacturing assembly-line, or hardware, which takes time to build and replace) to far shorter software innings (since upgraded programs is almost a constant function). In other words, more money can be made now with hi-tech at the commanding heights, but the claim of each and every leader is far more fickle than ever before. If it took 80 years from one pathfinding/path-breaking depression to another, we may not have to wait that long anymore for the next.
This also implies competition will become more unpredictable: the hi-tech stalwarts will continue to be few, but both the spurious and multiple markets will guarantee 'swarms' of sorts will turn up.
Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global
Studies & Governance at Independent University, Bangladesh.