NEW YORK (TheStreet) -- There were very significant market corrections at the end of last week. The Dow Jones Industrial Average plummeted Friday by 3.1%, while the Nasdaq slid 3.5% and the U.K.'s FTSE 100 index fell 2.8%. Enough said. Why?

Because China's economy is clearly slowing, and it may turn out that the economic growth rates the Chinese government has been reporting for the last few years weren't accurate.

There is also a serious real estate bubble bursting and a credit crunch in China, and the currency had to be devalued.

Surprise, surprise, China too is subject to all the normal features (the ups and downs) of any country who dabbles in capitalism.

The fact that China is a state capitalist system may have helped for the first 20 years in getting its industrial machine going, but it now means all those old arguments of economists on the right such as Friedrich Hayek, Milton Friedman and Robert Nozick are becoming relevant for China.

In other words, an economic system overly controlled by the state tends to lead to multiple issues: overproduction (building factories for the sake of it); the state's natural inability to read market signals; mismanagement of credit; cronyism; failure of real ownership rights/the rule of law; and -- above all -- good old abuse of state propaganda (i.e., lying about economic statistics).

This is not to say that one should endorse strong libertarian or pure capitalistic values either. We have seen in the U.S. the mess that financial capitalism got us into in the 2007 credit crisis and the need for (appropriate) market and financial regulation. But what is clear is that the Chinese-style industrial output model has become old-fashioned.

This topic has been addressed in some detail already in this article, which argued that China, and not Greece, was the real story. This is becoming abundantly clear now.

It's not yet clear whether this is just a blip in the stock market's recent bull run or the beginning of a real correction. 

Meanwhile, the Federal Reserve is no doubt in a big quandary. Just when the U.S. central bank policymakers were at last preparing to raise interest rates, they may have equity market crash on their hands.

Indeed, the prospect of the Fed rate increases may already be adding to anxiety in the market (or they were already baked in?).

In any event, the Fed would not really want to fuel a dramatic equity market collapse by material rate rises. Of course, if the market can just gradually come off a bit and calm itself the Fed would rather like that -- a market bubble may defuse itself naturally while the Fed can revert to focusing on managing the real economy. Unfortunately, markets rarely do things gradually. Sharp falls and rises are more the norm.

The problem (as we know) is not really in the U.S. economy, which is showing solid, if not stellar, performance. The economy grew at 2.3% annual pace during the second quarter, and unemployment stands at 5.3%, while the banking system has been restabilized.

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The U.K. similarly seems to have crept out of recession. One business group has just forecast 2.6% annual growth this year, unemployment is around 5.6% and there a no signs of inflation.

Even the eurozone, with all its currency and structural problems, is growing slowly and is certainly out of recession.

Nevertheless, we are massively dependent today on Chinese industrial output (for many of our goods), so maybe it is starting to become true that when China, not just the U.S., "sneezes, the rest of the world catches a cold."

Maybe. Still, it doesn't seem clear that China has achieved sufficient economic clout to cause a global recession in the way that U.S. downturns certainly can, and have, done.

But again, it is not really the question of whether the bull market run has ended that seems central. Instead, recent events seem like more evidence that an economy based on mass production of relatively simple goods (i.e., China) will just no longer cut it in today's global information economy.

This recent article showed the decreasing role of industrial output in generating further growth, certainly for the Organisation for Economic Co-operation and Development.

Much serious academic work has been done on this. Mass production is indeed slowly going the way of agriculture. It is just becoming cheaper and cheaper to produce basic goods, requiring less and less labor, such that mass industrial manufacturing is unlikely to be the source of global economic growth of the 21st century. The production by the Chinese of simple, poor-quality products for quick profits, with working capital constantly being squeezed to keep costs down, is just not a century-winning strategy.

In fact, while we may or may not be heading into a period of equity market turbulence, all this could be a good sign for the OECD. Information technology and the information revolution has not added to global GDP as much as everyone expected to date.

But now it might finally be the time for the information age really to show its colors. As China's industrial production miracle fades (perhaps?), we may see the hard evidence that the next phase of global growth is the IT and information revolution. A revolution led by Silicon Valley and the high-tech powerhouses of the OECD.

Here's an interesting quote from a Chinese writer who recently visited a major global technology fair:

"...products exhibited by foreign [non-Chinese] companies were large in size but refined in their details. They were carefully-designed, innovative, and difficult to manufacture. Chinese products, on the other hand, looked old-fashioned, clumsy, low-tech, and unpolished  There were 6,500 exhibitors from 65 countries and regions and more than 180,000 foreign visitors. However, barely anyone visited Chinese booths. Some visitors reacted with impatience when Chinese vendors tried to introduce their products to them."

Again, we are gazing at crystal ball, but there is a material hidden positive in this (potential) market correction for the Western and advanced economies. The future belongs to those who will control information, high technology, and the knowledge economy. And that is the West, not the East.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

Jeremy Josse is the author of Dinosaur Derivatives and Other Trades, an alternative take on financial philosophy and theory (published by Wiley & Co).