A New System for the Real Market as a Solution for the Current Economic Crisis

By Ho-Hyung (“Luke”) Lee

In the Industrial Age, one plus one equaled two, using simple arithmetic. However, in the Modern Information Age, one plus one could produce 5, 10 or even 20, given the possibility of geometric progression. Such integration or synergistic effects can be achieved relatively easily with the increased communication capability that has resulted from the development of IT and networking technology. Moreover, the global information exchange enabled by the World Wide Web has made them more broadly realistic.

However, this increased communication capability has greatly influenced and brought major changes to all participants in the market. Almost all of the individual units on the supply side have greatly increased their productivity and efficiency. As a result, the ratio of employment to investment has been reduced. On the demand side, consumer knowledge and recognition have increased greatly, and this is directly linked to the abrupt escalation in consumer needs and wants. It is likely that this pressed the increase in consumer spending on the demand side.

On the other hand, the efficiency and effectiveness of the market as a whole must not have changed much since there were no major changes in the existing market systems. Market systems are result of a series of individual actions that realize the market process. That is, no major changes were made in the consumption of products and services supplied from the supply side, and the increase of employment must have weakened.

It could be said that the market requirements for consumption and employment have increased in a geometrically progressive way together with the development of information, while the market results have changed only in an arithmetical way. This mismatch might have caused the chronic decline of consumer spending, and as a result, a serious imbalance and a vicious cycle between the supply side and the demand side must have occurred.

To prevent this vicious cycle, we have had little choice but to adopt expansionary economic policies. In the old market paradigm, these could increase the level of consumer spending to promote growth and prosperity, but in the modern information market paradigm, these have been adopted only as a stopgap to postpone the inevitable vicious cycle. In addition, these policies have caused the creation of bubbles in all parts of the equity market and have worsened the budget deficit at both the local and federal levels as serious side effects. Even more serious was our failure to effectively regulate the creation of numerous sub-prime financial products. Despite the potential risks of these products, we went ahead anyway, as they encouraged higher levels of consumer spending. All of these side effects and abnormalities contain the huge risk of lowering the level of consumer spending suddenly, which would force the economy into deeper recession.

It seems that these side effects and abnormal phenomena happening worldwide have been already significantly aggravated; and the possibility for these to be an economic tsunami is very high. Then, do we have to execute the exit strategies as soon as possible? Paradoxically, it is also expected that the execution of exit strategies would immediately decrease the level of consumer spending as well. It looks as if we are in a serious dilemma, and we have no solution to avoid the upcoming deeper recession.

To make things clearer, let’s go back to the fundamental question: Why have the market results changed in only an arithmetical way?

Because the distributions and deliveries of real (i.e., physical) products and services and the activities of providers and customers are directly restricted by time and space, there must have been many different and complex rules and standards for the transactions in the real market process. To construct an efficient transaction system or application, we should simplify the rules and standards first. We have developed numerous transaction systems and applications such as eBay and Amazon.com by simplifying the rules and standards through the use of IT and networking technology. Here, a serious mistake has been made, but nobody has recognized yet what that is.

The mistake is that in developing those systems and applications, we have tried to simplify the rules and standards only by manipulating (i.e., classifying or limiting, etc.) the constituent factors of the transactions such as products, services, providers and customers. Let’s look at some examples. E-Bay’s auction system is an effort to simplify the rules and standards by a product or a service, and Amazon.com’s E-seller system is an effort to simplify them by a company (i.e., a seller). However, they have made a mistake: giving up the opportunity of facilitating competition among providers. The developers of E-Bay’s or Amazon.com’s E-marketplace system or home shopping system have tried to simplify them by the character of products or services. In this case, only products or services that are not sensitive to the rules and standards can be efficiently traded through these systems. Some big companies have tried to simplify them by their buying powers to manage their purchasing alone (E-Buyer model). There are also many other cases, but almost all of them have this characteristic, which might be attributed to the desire to immediately increase productivity and efficiency. Because IT and networking technology have been mostly used only for this, the employment situation has continuously worsened in the market. Things have been wrong from the beginning. In this situation, the more the Information Age has developed, the more the employment situation has worsened, and policies aimed at the improvement of the employment situation have been unsuccessful. Moreover, in this situation, almost absolutely, geometrically progressive market results could not have been drawn from the market.  

We need to consider a basic question once more: Why have many different and complex rules and standards for the transactions been made in the real market process? Have they been made due to the constituent factors of the transactions such as products, services, providers and customers, or due to the restriction of time and space itself? I believe the latter is correct. In order to simplify them, the restriction of time and space itself should have been directly overcome. That is, IT and networking technology should have been used in such a way as to directly overcome the restriction of time and space. Unfortunately, there is no such case in the world yet.

We have experienced the synergistic effect in information with the Internet. It neither participates nor influences directly the activities of the constituent factors of the information transactions such as information providers, recipients and information itself. It simply provides direct, fast and efficient links to them. Because each member in the provider side can easily develop other applications on its own by using this communication infrastructure, it will be able to increase its own competitiveness by expanding its effectiveness in the open Internet. Numerous applications could be easily developed for information transactions, based on unlimited imagination. Information transactions are not restricted by time and space, so, it was relatively easy to develop a system like the Internet.  However, real transactions are directly restricted by time and space. Without overcoming the restriction of time and space, it would have been almost impossible to construct a system like the Internet in the real market process.

I believe that such a system can be easily developed for the real market process that will effectively overcome the restriction of time and space by appropriately using IT and networking technology. It will neither participate in the production activities of the supply side nor influence the consumption activities of the demand side directly, but provide direct, fast and efficient links to both sides. Because each member can easily develop other applications on its own by using this with other outsourcing service providers, it will be able to increase its own competitiveness by expanding its effectiveness in the open system. Numerous applications could be also easily developed in the real market, based on unlimited imagination. If it is developed and implemented in the real market, market results could increase, geometrically and progressively, and narrow the mismatch with the market requirements in the market. Such a system could be a real solution for the economic crisis which the world now faces.

The world economic crisis is getting worse, moving inexorably toward another Great Depression. We do not have time to delay action any longer. To stave off this impending crisis and revitalize the economy, the governments in the world must initiate and support the development of this new system and actualize it in the market as soon as possible—before it is too late.

             Ho-Hyung Lee (luke.h.lee@gmail.com) - Ho-Hyung (“Luke”) Lee is by training a lawyer, an international businessman and entrepreneur – and an inventor.  He is currently the president of Ubiquitous Market System, Inc. (UbiMS). Ubiquitous Market System is nothing less than a new synergy market system that will put us on the real path to prosperity.