After reading The Great Crash it is hard to not feel that we are the cusp of another economic depression – the parallels between today and 1929 or almost eeire. Much like the last crash, a whole slew of business models, technologies and ways of thinking are simply going to become obsolete (or at least, not-profitable).
For example, I was talking to an American friend whose partner had been laid off by a bank and they were talking about what expenses they were going to try to eliminate. High on the list? Their land line and cable television. Low on the list? Cell phones and their high speed internet. This may finally be the beginning of the end for the old copper wire – this will accelerate a trend begun about a decade ago in which households have no fixed phone line. Indeed, Reuters is reporting that:
In the first half of 2008, 17.5 percent of households were wireless only, up from 13.6 percent a full year earlier…
…Service providers such as Verizon Communications, AT&T Inc, Qwest Communications International and others have seen a steep increase in customers cutting the cord on their home phones.
Qwest said recently that the trend was exacerbated by the weak economy as some customers were disconnecting home phones to save money.
It makes sense. Why keep a land line when you can just use your cell, or even Skype for free when you are at home?
What this means is that connectivity has never been more important to people – not just for social, but also for professional reasons. Can anyone imagine a professional, creative classer or service sector employee, under the age of 35 looking, for a job without an internet connection? Impossible. The simple fact is that a robust telecommunications network – specifically, access to the internet – is today what an electrical, phone or road network was in the 1930’s. That means, if you want to help invest for the economy of tomorrow, help bring the costs of accessing the internet today – and make sure everyone can get access.
At the moment, one reason why costs are high is because providers have agreed to build their networks out, even to “unprofitable” parts of the country. If the government provided – or helped to provide – such access internet access could be rendered cheaper and service could be improved.
My biggest fear is that here in Canada and the in United States the call for a “new” New Deal with result in a stimulus package that looks a lot like the new deal of the 1930’s – with big infrastructure projects receiving the bulk of the money. The fact is, unlike in the 1930’s new roads aren’t going to generate the same returns over the next 50 years like they did back then – there will be marginal returns at best and negative returns at worst. What we need to identify the infrastructure that is going to guide the next economy, not the last one.
And be afraid, because one thing is almost certain, the next economy almost certainly doesn’t include an auto sector of even remotely the same size or structure. (Think how much ZIP car reduces the need for cars.)



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