Internet Economy vs Classic Economy: Struggle of Contradictions

Limits of defining the notion “Internet economy” have been obscure for a long time, bereaving the interested people of the possibility to form a clear idea on its as of a specific direction of modern economic theory. A lot of studies of modern authors are devoted to the sense and specifics of Internet economy—their results are publishes in peer-reviewed international journals and books. Some authors define Internet economy as a completely new type of economic system that possesses unique (revolutionary) specific characteristics. Others think that Internet economy is a new stage of evolution of economic systems that follows post-industrial economy (or knowledge economy that is sometimes distinguished as a latter system). Other scholars state that Internet economy is just a concept and new possibility that appeared with emergence and distribution of Internet-technologies and that is not yet realized in any country of the world and will not be reflected in the real world anytime soon. Especially peculiar features of Internet economy that stimulate such metamorphoses include: intense use of the systems of electronic payments, low level of constant expenses, Internet economy’s founding on the law of increasing feedback, capability to provide opportunities for creative expression of a personality within personality’s functioning, etc. Internet environment, as a core of functioning of Internet economy, influences directly and indirectly the whole totality of landmarks of online business activities, among which the most important ones are commerce, marketing, stock markets, government, insurance, consulting, mass media, investing, banking, education, tourism, hosting, money, providing, freelance, logistics, etc.

Unlike the traditional product, Internet product has its specificity expressed in non-material nature; low level of information carrier; connection to its source; unlimitedness of distribution and application; exterritoriality; multiple meanings of consumer characteristics; single character of purchase and multiple character of use; durability and relative aptitude to moral ageing of information. Internet economy is peculiar for two points of balance that denote balance in the market of licensed products and counterfeit products. As a result, licensed products suffer from reduction of demand, which leads to decrease of the volume of their manufacturer’s profit, as at a certain point its large share starts to go to manufacturers of counterfeit products. At that, “pirate” activities have also a positive side, as the price set in this market is closer to the notion of “justice”. Any price the value of which exceeds the volume of marginal costs leads to profit of manufacturers of information counterfeit. Mutual estrangement of commodities that are manifestation of average equivalent labor expenses is replaced by the phenomenon of expenses distribution. The wider the circle of those interested in consumption of information resources for the purpose of desobjectivation, the larger the total volume of specific expenses spent for their production. Thus, relations of Internet economy are a system of quickly developing interaction that is something larger that a phenomenon that goes beyond the authority of the main economic laws: cost, marginal usefulness, demand and offer, and decreasing feedback of production factors.

Internet economy improves (simplifies, accelerates, and raises effectiveness) of business processes and processes of purchasing and stimulates achievement of various socio-economic goals. That’s why it is not only a preferable form of economic activity organization but a means of solving the actual issues of society and economy. Internet economy cannot be characterized as the sole panacea from the existing drawbacks of the classic economy, as it is related to its own specific problems and threats, which can even exceed its potential advantages. Therefore, for the purpose of maximization of profits from creation of Internet economy and bringing down the problems of its creation and threats appearing with its formation to the minimum, it is necessary to use the corresponding theoretical models of Internet economy depending on the goals and existing socio-economic conditions. There are not substantial limitations for creation of Internet economy depending on the production specialization or the stage of the national economy development. Each modern economic system can select the best theoretical model of Internet economy depending on the existing socio-economic conditions, advantages that it wants to reach, and drawbacks with which it’s ready to exist or can eliminate.

The sense of Internet economy is seen by its basic principles: freedom of entrepreneurial activities. Another principle is domination and active development of small entrepreneurship, domination of service sphere (mainly trading) in the structure of GDP, i.e., development of the economic system according to post-industrial type, domination of Internet deals, and transformation of transaction relations in favor of their Internetization, minimization of transaction costs, achievement of optimal ratio of demand and offer in sectorial markets, availability of the corresponding infrastructure, based on the developed system of online payments and the system of Internet navigation, active involvement of economic system in the process of international globalization and integration taking place in the global economy, internationalization of economic activities, and high share of international business activity in the structure of entrepreneurship. All public product and, accordingly, production, being in a situation of intensive development of development of Internet economy, come into the stage of their division into two full parts: information sphere, where intellectual products are directly created, and material sector within which common products and services are issues that are characterized by limitation and that are a basis of monetary exchange. Each of the stated elements cannot work without the viewed parts in the conditions of evolution of the “new” economy. Internet assets are inclined to create a so called dot com bubble that grew in late 1990s, reached its peak in 2000, and disappeared in 2001. That time was peculiar for establishment and quick development of commercial Internet projects that were expected to have large scale.

Despite the key role of market self-management in the current Internet economy, the main load is set on the state. While in certain countries, which economic systems’ necessary preconditions formed by themselves, Internet economy formed spontaneously, the process of its development in most countries is a manageable process and requires active interference of the state. The process of building Internet economy includes four successive stages. At the first stage, an institutional platform for Internet economy is created. The second stage supposes creation and development of necessary infrastructure (except for institutional infrastructure that was created at the previous stage): technological, financial, HR, and transport and logistical. The third stage is related to propaganda of Internet entrepreneurship and conclusion of deals on the Internet. The fourth stage supposes control over the functioning of the Internet economy and correction of the course of its development. The necessity for regulating Internet economy emerges due to two interconnected reasons: growth of cyber crimes and instable development of Internet economy, as well as its high aptitude to economic crises. The most perspective methods of Internet economy management include tax regulation, inflation regulation, formation and development of necessary institutes, creation and development of corresponding infrastructure, and stimulation of innovative activity. Evaluation of effectiveness supposes comparing profits and costs for their achievement. As to Internet economy, it is possible to distinguish four main advantages as compared to classic economy: larger rationality, smaller transaction costs, larger innovative activity, and bringing state management down to the minimum—these advantages determine corresponding approaches to evaluation of its effectiveness.

The general climate for formation of Internet economy in modern Russia could be characterized as rather favorable. It is determined by presence of corresponding preconditions. Firstly, there is actively developing infrastructure for creation and conduct of Internet entrepreneurship. Secondly, there is strong institutional environment of conduct of Internet entrepreneurship and conclusion of Internet deals. Thirdly, there are positive shifts in development of the market situation of Internet trade. Thus, on the one hand, demand for Internet products grows. The first stage of formation of Internet economy in Russia was appearance and full (mass) distribution of computers and the Internet. At the second stage, the systems of electronic payments and training of personnel for Internet companies emerged and developed. The third stage of formation and development of Internet economy in Russia was connected to creation of normative and legal basis of electronic state order, e-commerce, etc. The fourth stage was peculiar for start and expansion of Internet companies and their presence in most sectorial markets. The fifth stage included popularization and growth of trust to Internet deals and growth of demand for products of Internet companies. The sixth stage supposes creation and support for high effectiveness of the state control system of Internet economy. An optimistic scenario of further development of events supposes timely strengthening of the institutional environment and development of necessary infrastructure (for which the announced expenses are used) and quick growth of consumers’ trust to Internet deals. According to the realistic scenario, it is delay of the institutional environment and development of necessary infrastructure as to market’s needs and slow growth of consumers’ trust to Internet deals. Pessimistic scenario includes strong underrun of the institutional environment and development of necessary infrastructure and consumers’ mistrust to Internet deals.