Global InformationTransformation in economics information
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Transformation in economics refers to a long-term change in dominant economic activity in terms of prevailing relative engagement or employment of able individuals.
Human economic systems undergo a number of deviations and departures from the "normal" state, trend or development. Among them are Disturbance (short-term disruption, temporary disorder), Perturbation (persistent or repeated divergence, predicament, decline or crisis), Deformation (damage, regime change, loss of self-sustainability, distortion), Transformation (long-term change, restructuring, conversion, new “normal”) and Renewal (rebirth, transmutation, corso-ricorso, renaissance, new beginning).
Transformation is a unidirectional and irreversible change in dominant human economic activity (economic sector). Such change is driven by slower or faster continuous improvement in sector productivity growth rate. Productivity growth itself is fueled by advances in technology, inflow of useful innovations, accumulated practical knowledge and experience, levels of education, viability of institutions, quality of decision making and organized human effort. Individual sector transformations are the outcomes of human socio-economic evolution.
Human economic activity has so far undergone at least two fundamental transformations, as the leading sector has changed:
- From nomadic hunting and gathering (H/G) to agriculture (A)
- From agriculture (A) to industry (I)
Beyond industry there is no clear pattern now. Some may argue that service sectors (particularly finance) have eclipsed industry, but the evidence is inconclusive and industrial productivity growth remains the main driver of overall economic growth in most national economies.
This evolution naturally proceeds from securing necessary food, through producing useful things, to providing helpful services, both private and public. Accelerating productivity growth rates speed up the transformations, from millennia, through centuries, to decades of the recent era. It is this acceleration which makes transformation relevant economic category of today, more fundamental in its impact than any recession, crisis or depression. The evolution of four forms of capital (Indicated in Fig. 1) accompanies all economic transformations.
Transformation is quite different from accompanying cyclical recessions and crises, despite the similarity of manifested phenomena (unemployment, technology shifts, socio-political discontent, bankruptcies, etc.). However, the tools and interventions used to combat crisis are clearly ineffective for coping with non-cyclical transformations. The problem is whether we face a mere crisis or a fundamental transformation (globalization→relocalization).