[CAnet - news] Report on Digital Prosperity

For more information on this item please visit my blog at 
http://billstarnaud.blogspot.com/
-------------------------------------------

[Thanks to Dirk van der Woude for this pointer -- BSA]


Video: http://video.google.com/videoplay?docid=-2421206069506298295

Report: http://www.itif.org/files/digital_prosperity.pdf

Article below: http://www.govtech.com/articles/104479?id=104479&story_pg=1


Digital Prosperity
 
Mar 19, 2007, By Robert D. Atkinson & Andrew S. McKay 

Understanding the Economic Benefits of the Information Technology from the
Information Technology and Innovation Foundation.

In the new global economy information and communications technology (IT) is
the major driver, not just of improved quality of life, but also of economic
growth. Moreover, there are strong indications that IT has the potential to
continue driving growth for the foreseeable future. Yet, most policymakers
do not adequately appreciate this fundamental reality. In fact, after the
post-2000 economic dip many concluded incorrectly that the IT economy was
smoke and mirrors.

The reality is that while the benefits of new technologies are often
exaggerated at first, they often turn out to exceed initial expectations in
the moderate-to-long term. This is exactly what has happened with the
digital revolution. The digital economy is more than fulfilling its original
promise, with digital adoption rates exceeding even the most optimistic
forecasts of the late 1990s. The integration of IT into virtually all
aspects of the economy and society is creating a digitally-enabled economy
that is responsible for generating the lion's share of economic growth and
prosperity.

Notwithstanding the centrality of IT to economic growth, there have been
surprisingly few attempts to catalogue what is known about IT's impacts on
the economy. This report attempts to do just that by collecting, organizing,
and surveying studies and examples of IT's impact in five key areas: 1)
productivity; 2) employment; 3) more efficient markets; 4) higher quality
goods and services; and 5) innovation and new products and services.

In order to better understand IT's role in economic growth it is important
to realize that the digital economy is more than an economy conducted on the
Internet. Rather, it represents the pervasive use of IT (hardware, software,
applications and telecommunications) in all aspects of the economy,
including internal operations of organizations (business, government and
non-profit); transactions between organizations; and transactions between
individuals, acting both as consumers and citizens, and organizations. IT
has enabled the creation of a host of tools to create, manipulate, organize,
transmit, store and act on information in digital form in new ways and
through new organizational forms. And its impact is pervasive as it is being
used in virtually every sector from farming to manufacturing to services to
government.

Importantly, the "IT engine" does not appear likely to run out of gas
anytime soon. The core technologies (memory, processors, storage, sensors,
displays, and communication) continue to get better, faster, cheaper, and
easier to use, enabling new applications to be introduced on a regular
basis. Moreover, the adoption of digital technologies by organizations and
individuals continues to grow.

There is no doubt that the IT revolution has enhanced quality of life, from
improving health care, to making it easier for children to get better
information and learn more, to giving consumers more convenience in their
interactions with business and government and making it easier to measure
environmental quality. But while these and other benefits are important,
perhaps the most important benefit of the IT revolution is its impact on
economic growth. The diffusion of information technology and
telecommunications hardware, software, and services turns out to be a
powerful driver of growth, having an impact on worker productivity three to
five times that of non-IT capital (e.g., buildings and machines). In fact,
in the United States IT was responsible for two-thirds of total factor
growth in productivity between 1995 and 2002 and virtually all of the growth
in labor productivity.

While these productivity impacts from IT are among the highest in the United
States, most other nations have benefited from the IT revolution as well.
Economists have found significant impacts of IT on the productivity of firms
in many other nations, including Australia, Canada, Finland, France,
Germany, Korea, Japan, the Netherlands, and Switzerland. Moreover, while its
impact is not as large in most developing nations, IT is making a difference
there as well, in part because IT expenditures rose twice as fast in
developing nations from 1993 to 2001 compared to the OECD average. For
example, IT usage in China was responsible for 38 percent of the increase in
total factor productivity growth and 21 percent of GDP growth.

IT boosts productivity in a variety of ways. It lets organizations automate
tasks, freeing workers up to create value in other tasks. IT also has
widespread complementary effects, including allowing organizations to
fundamentally reengineer processes and lets organizations more efficiently
use capital and natural resources. IT also has a number of indirect effects,
which in turn spur higher productivity, including enabling larger markets
and better organizational decision-making.

In addition, IT boosts economic output by enabling more people to work. The
IT industry itself creates jobs, on average paying 84 percent more than
average jobs. Moreover, IT appears to be playing a key role in reducing the
severity of the business cycle, allowing the economy to run at full capacity
more of the time. Additionally, IT makes it easier for more people to join
the workforce, including disabled people and people who cannot work
full-time, but who can work part-time or from home.

Our standard of living is not just a function of higher levels of
efficiency, but of the quality of products and services. IT is helping
organizations boost quality. IT enables more information about quality to be
collected, giving organizations greater opportunity and incentive to boost
quality. IT also makes it easier for organizations to design more customized
products and services, which by definition are of higher quality because
they more closely fit the desires of consumers. 

Finally, IT is making it easier to create new products and services. IT
gives researchers powerful new tools that make discovery easier. Moreover,
IT boosts innovation by giving users more of a role in shaping innovation,
in part by making research more collaborative.

In short, IT is the major driver of today's global economy. But just because
IT has been the leading engine of growth does not mean that policymakers can
afford to be complacent. Ensuring that societies fully benefit from the IT
revolution means that policymakers must devote the same, if not higher,
level of attention to it than they currently give to more conventional
economic policy areas, such as managing the business cycle. While this
report does not lay out a detailed IT policy blueprint, it offers five key
principles policymakers around the globe should follow if their nations are
to fully benefit from the digital revolution.

1) Give the Digital Economy Its Due: Economic policymakers need to view IT
issues not just as narrow IT policy, but as the centerpiece of economic
policy. This means putting issues of digital transformation at the front and
center of economic policy.

2) Actively Encourage Digital Innovation and Transformation of Economic
Sectors: The private sector will drive much of digital transformation, but
government can play a supportive role. Government should support research in
emerging IT areas. IT should also use a wide array of policy levers,
including tax, regulatory, and procurement policies, to spur greater IT
innovation and transformation, particularly in key sectors like health care,
education, transportation, and others influenced by public policy. Moreover,
government should lead by example by leveraging their own IT efforts to
achieve more effective and productive public sector management and
administration.

3) Use the Tax Code to Spur IT Investment: Investment is how IT innovations
are diffused throughout the economy. Because IT seems have a much larger
impact on productivity, tax policies should focus on spurring additional
investment in newer generations of IT.

4) Encourage Universal Digital Literacy and Digital Technology Adoption:
Ensuring that societies take full advantage of the IT revolution will
require that the large majority of citizens participate in the digital
economy. National governments need to work in partnership with the
for-profit, non-profit, and state and local government sectors to help
citizens use and access technology.

5) Do No Harm: Making digital transformation the center of economic policy
means not just supporting IT, just as importantly it means avoiding harming
the digital engine of growth. All too often well-intentioned policymakers
consider laws and regulations that would slow digital transformation.

While the emerging digital economy has produced enormous benefits, the best
is yet to come. The job of policymakers in developed and developing nations
alike is to ensure that the policies and programs they put in place spur
digital transformation so that all their citizens can fully benefit.


Dr. Robert D. Atkinson is president of the Information Technology and
Innovation Foundation and former director of the Progressive Policy
Institute's Technology and New Economy Project. He is also the author of
"The Past and Future of America's Economy: Long Waves of Innovation That
Power Cycles of Growth" (Edward Elgar: 2005). Andrew McKay is an honors
student in Economics at Swarthmore College, class of 2007.

A full copy of this report can be found at
http://www.itif.org/files/digital_prosperity.pdf

The Information Technology and Innovation Foundation (ITIF) is a non-profit,
non-partisan public policy think tank committed to articulating and
advancing a pro-productivity, pro-innovation and pro-technology public
policy agenda internationally, in Washington DC and the states. Recognizing
the vital role of technology in ensuring American prosperity, ITIF focuses
on innovation, productivity, and digital economy issues.


-------------------------------------
To SUBSCRIBE:
send a blank e-mail message to
[email protected]

To UNSUBSCRIBE:
send a blank email message to
[email protected]
-------------------------------------

These news items and comments are mine alone and do not necessarily reflect
those  of the CANARIE board or management.


-----------
[email protected]
[email protected]
www.canarie.ca/~bstarn
skype: pocketpro
SkypeIn: +1 614 441-9603


_______________________________________________
news mailing list
[email protected]
http://lists.canarie.ca/mailman/listinfo/news