The New Economy | Is the Internet really the engine for economic growth

In the past 15 to 20 years, a sublime phenomenon has been taking over our world. Some call it the web, some the net, and some, like me, simply call it the INTERNET. Until the beginning of the 2000’s, the phenomenon was said to be the solution to all problems, the revolution of the twentieth century. With the possibilities that the new information technology package offered, the world was said to be on the fast track towards ending such evils as hunger, poverty, unemployment, and towards a better and more prosperous future. The opportunities for growth seemed limitless. Now it is time for a recapitulation: Is the increasingly Internet-dependent World headed towards a bright and dandy ‘cyber-future’, or into a concrete wall? Is this Internet thing really all that?

The Daze of Novelty

Bill Clinton, former President of the United (1992-2000)

" We are working to promote competition and to remove regulations in the high-technology communications business, speeding the development of an information superhighway that will connect our businesses, classrooms, libraries, hospitals and clinics as we approach the 21st century."

It is a fact that the new dimension of Information technology brought by the Internet era has generated a great deal of revenue and successes, in the world of high finance. The Internet was the precursor of a new way to view our world: A world of system connections. The hopes were so high on such a groundbreaking occurrence, that the deregulation of the “high-technology business” made its way to the top list of President Bill Clinton’s new economy plans, at the end of the last century.

John Gantz, Senior Vice President,
Chief Research Officer, IDC

“Information technology is both an industry and a modernizing force. In most countries, IT spending grows at two to five times the rate of overall economic growth. To the extent that the spending is on locally produced products and services, the industry provides employment, tax revenues and a generally expanded industrial base. As a modernizing influence, the use of IT leverages investments in other capital, called "capital deepening" -- such as human capital, production equipment, etc. This in turn can increase a country's overall productivity and output per capita. .

Building an IT ecosystem within a country relies on efforts both by IT suppliers and governments. Governments help to provide stable infrastructure within which an IT industry can grow, as well as education and skills development for the IT-using populace. The IT vendors bring new products to the local market, establish delivery channels, and service and support networks, usually employing nationals.

Evidence supporting the notion that IT is an engine for growth can be seen in the IT Economic Impact Study -- which tracks IT spending and growth, IT-generated tax revenues, and IT employment in 28 countries. More academic studies -- such as one produced by Dedrick, Gurbaxani, and Kraemer of the University of California, Irvine, last year -- point to overwhelming evidence that IT deployment drives economic output and GDP (gross domestic product) growth for local economies.

Often noted as the symbol and greatest example of success of the ‘Internet economic revolution’ – as it is sometimes referred to – is the NASDAQ stock market. Here is a stock market, symbol of the old economy, which decided to be based and rely entirely on the technology of the future that they believed the Internet to be. Quoted at NASDAQ are a very large number of enterprises that have the opportunity to participate in a market of a virtually unlimited number of participants. With the Internet as a basis, the IT world has allowed for the development of networking technology capable of dispatching and receiving orders and information from the four corners of the World, thus creating never before attained market reaching possibilities for NASDAQ. Along with success of NASDAQ, was the dot.COM boom of the end 1990’s, with the rush for Online business. Overall the Internet was seen as the highway to financial heaven on earth.

Mitigating views

Where are we today? Well, the NASDAQ is still up and running amid several critics, and a certain number of shakedowns. The once blooming dream of the Dot.com businesses are now fading away, and a hint of bitter reality comes knocking at the door. Marxist sympathizer Marc Roberts was railed when, at the beginning of the millennium, he stated that :

Interestingly enough, in a column that is entitled the New Economy, run in the New York Times , Susan Stellin – who has spent most of the last three years reporting on the new economy, and several aspects of the Information Technology revolution – seems to expose a similar yet milder mitigated view of the new economy. In several articles, she acknowledges the tremendous potentials of the Internet, while also shining a light on the excesses brought by exaggeration.

Have we been fooled?

In the recent months, due to the apparent ailing state of the dot.com business – predicted by the Marxists, and the decrease in the pace of growth in the NASDAQ, and the apparent inability of the new economy to adapt to a changing human environment, the people who believed in the revolution feel a sense of betrayal. Titles such as “Dead as a Dot.COM” in the news only contribute to further the panic. The so-called new economy might not have been ‘all that’. Author of The Death of "e" and the Birth of the Real New Economy , Peter Fingar suggests that the new economy was only going on half solid bases. In a support of his corporate program on Business Process Management, Fingar explains that the current problem with the new economy, is the failure of people to realize “that the Internet is about business transformation, not a Web site --that what's Really New in the Real Economy.” Author Kevin Kelly of New Rules for the New economy takes the argument in a similar yet slightly different direction, when stating that there was a need for people to see the Internet as the new and most advanced step in the human endeavor to build networks among themselves. In his words, in order for the new economy to yield results, people need to realize that “the net is the total collective interaction of a trillion objects and living beings, linked together through air and glass.”

One thing is sure, with the exception of the Marxists, and with the addition of a few qualifiers, these thinkers are mostly optimistic about the potential of the Internet as an engine of the economy. The difference seems to lie in whether not it should be the sole engine, with an increasing number of thinkers stating they would rather not. Many of their arguments seem well grounded in truth. In terms of networking for instance, it is very interesting to see that some of the most successful web based companies are those that have attempted to serve as inter-connection and networking enhancers, such as search engines Google, and Yahoo. Both these have reached such a level of worldwide popularity and establishment, that words have been coined after them. The level of inter-connection seems ever increasing, thus creating a network that will be hard if not impossible to by-pass for any trader/businessperson within ten 10 years. Present examples of widescale traders would iclude such great companies as AMAZON, and eBay.

So what do we think ?

Now, in light of all the above, I would like to believe that we can reach an educated opinion of our own on the subject. I propose that the idea, the key to the success of the new economy is not the Internet itself, but something that counselors and psychoanalysts have repeated for several years: Communication. The Internet is simply the tool that has succeeded in reminding and demonstrating to us that widespread and free access to information, through communication, is the key to victory for any human endeavor. The Internet is becoming the backbone of the Global economy, because it has generated a whole network, and a whole new way of seeing communications, with immense potentialities culturally, socially, and most importantly here, economically, on a worldwide scale - even for poorer countries (see map). The economy being a human creation, it was bound to see some growth and improvement from this. However it will benefit more from the Internet when it is seen as a powerful growth tool, and not as the ultimate solution to the riddle that is economic growth.

As for the Internet itself and its perception and use by private individuals, the mass market, many humans caught onto the economic part hence the importance of the Internet in the economy. Many others caught on to the social part hence the numerous chats and IM’s (Instant Messengers). Now if more humans could just get the message, and actually use the new tool to do some intercultural exchanges, and solve… but that is another issue isn’t it?

	Is the Internet really the engine for economic growth?
Links Overview Dot COM Boom Internet Economy ? AOl, Amazon, Dell Growth Points for the 21st century References	Ali M Mamina *TCG member & blogista, Senior Earlham College Student*
	In the past 15 to 20 years, a sublime phenomenon has been taking over our world. Some call it the web, some the net, and some, like me, simply call it the INTERNET. Until the beginning of the 2000’s, the phenomenon was said to be the solution to all problems, the revolution of the twentieth century. With the possibilities that the new information technology package offered, the world was said to be on the fast track towards ending such evils as hunger, poverty, unemployment, and towards a better and more prosperous future. The opportunities for growth seemed limitless. Now it is time for a recapitulation: Is the increasingly Internet-dependent World headed towards a bright and dandy ‘cyber-future’, or into a concrete wall? Is this Internet thing really all that? The Daze of Novelty Bill Clinton, former President of the United (1992-2000) " We are working to promote competition and to remove regulations in the high-technology communications business, speeding the development of an information superhighway that will connect our businesses, classrooms, libraries, hospitals and clinics as we approach the 21st century." It is a fact that the new dimension of Information technology brought by the Internet era has generated a great deal of revenue and successes, in the world of high finance. The Internet was the precursor of a new way to view our world: A world of system connections. The hopes were so high on such a groundbreaking occurrence, that the deregulation of the “high-technology business” made its way to the top list of President Bill Clinton’s new economy plans, at the end of the last century. John Gantz, Senior Vice President, Chief Research Officer, IDC “Information technology is both an industry and a modernizing force. In most countries, IT spending grows at two to five times the rate of overall economic growth. To the extent that the spending is on locally produced products and services, the industry provides employment, tax revenues and a generally expanded industrial base. As a modernizing influence, the use of IT leverages investments in other capital, called "capital deepening" -- such as human capital, production equipment, etc. This in turn can increase a country's overall productivity and output per capita. . Building an IT ecosystem within a country relies on efforts both by IT suppliers and governments. Governments help to provide stable infrastructure within which an IT industry can grow, as well as education and skills development for the IT-using populace. The IT vendors bring new products to the local market, establish delivery channels, and service and support networks, usually employing nationals. Evidence supporting the notion that IT is an engine for growth can be seen in the IT Economic Impact Study -- which tracks IT spending and growth, IT-generated tax revenues, and IT employment in 28 countries. More academic studies -- such as one produced by Dedrick, Gurbaxani, and Kraemer of the University of California, Irvine, last year -- point to overwhelming evidence that IT deployment drives economic output and GDP (gross domestic product) growth for local economies. Often noted as the symbol and greatest example of success of the ‘Internet economic revolution’ – as it is sometimes referred to – is the NASDAQ stock market. Here is a stock market, symbol of the old economy, which decided to be based and rely entirely on the technology of the future that they believed the Internet to be. Quoted at NASDAQ are a very large number of enterprises that have the opportunity to participate in a market of a virtually unlimited number of participants. With the Internet as a basis, the IT world has allowed for the development of networking technology capable of dispatching and receiving orders and information from the four corners of the World, thus creating never before attained market reaching possibilities for NASDAQ. Along with success of NASDAQ, was the dot.COM boom of the end 1990’s, with the rush for Online business. Overall the Internet was seen as the highway to financial heaven on earth. Mitigating views Where are we today? Well, the NASDAQ is still up and running amid several critics, and a certain number of shakedowns. The once blooming dream of the Dot.com businesses are now fading away, and a hint of bitter reality comes knocking at the door. Marxist sympathizer Marc Roberts was railed when, at the beginning of the millennium, he stated that : “It is only a matter of time before the US internet bubble is burst, investments collapse and consumption of the masses falls back because of a loss of confidence in the 'new economy'”. They base their argument on the fact that Capitalism does not often learn from its own history. They recall such events as the El Dorado phenomenon of California, or the automobile, and quote the Business week in 1929 stating “every new era in history has been based upon the exaggerated enthusiasm set in motion by some single new industry.” Interestingly enough, in a column that is entitled the New Economy, run in the New York Times , Susan Stellin – who has spent most of the last three years reporting on the new economy, and several aspects of the Information Technology revolution – seems to expose a similar yet milder mitigated view of the new economy. In several articles, she acknowledges the tremendous potentials of the Internet, while also shining a light on the excesses brought by exaggeration. Have we been fooled? In the recent months, due to the apparent ailing state of the dot.com business – predicted by the Marxists, and the decrease in the pace of growth in the NASDAQ, and the apparent inability of the new economy to adapt to a changing human environment, the people who believed in the revolution feel a sense of betrayal. Titles such as “Dead as a Dot.COM” in the news only contribute to further the panic. The so-called new economy might not have been ‘all that’. Author of The Death of "e" and the Birth of the Real New Economy , Peter Fingar suggests that the new economy was only going on half solid bases. In a support of his corporate program on Business Process Management, Fingar explains that the current problem with the new economy, is the failure of people to realize “that the Internet is about business transformation, not a Web site --that what's Really New in the Real Economy.” Author Kevin Kelly of New Rules for the New economy takes the argument in a similar yet slightly different direction, when stating that there was a need for people to see the Internet as the new and most advanced step in the human endeavor to build networks among themselves. In his words, in order for the new economy to yield results, people need to realize that “the net is the total collective interaction of a trillion objects and living beings, linked together through air and glass.” One thing is sure, with the exception of the Marxists, and with the addition of a few qualifiers, these thinkers are mostly optimistic about the potential of the Internet as an engine of the economy. The difference seems to lie in whether not it should be the sole engine, with an increasing number of thinkers stating they would rather not. Many of their arguments seem well grounded in truth. In terms of networking for instance, it is very interesting to see that some of the most successful web based companies are those that have attempted to serve as inter-connection and networking enhancers, such as search engines Google, and Yahoo. Both these have reached such a level of worldwide popularity and establishment, that words have been coined after them. The level of inter-connection seems ever increasing, thus creating a network that will be hard if not impossible to by-pass for any trader/businessperson within ten 10 years. Present examples of widescale traders would iclude such great companies as AMAZON, and eBay. So what do we think ? Now, in light of all the above, I would like to believe that we can reach an educated opinion of our own on the subject. I propose that the idea, the key to the success of the new economy is not the Internet itself, but something that counselors and psychoanalysts have repeated for several years: Communication. The Internet is simply the tool that has succeeded in reminding and demonstrating to us that widespread and free access to information, through communication, is the key to victory for any human endeavor. The Internet is becoming the backbone of the Global economy, because it has generated a whole network, and a whole new way of seeing communications, with immense potentialities culturally, socially, and most importantly here, economically, on a worldwide scale - even for poorer countries (see map). The economy being a human creation, it was bound to see some growth and improvement from this. However it will benefit more from the Internet when it is seen as a powerful growth tool, and not as the ultimate solution to the riddle that is economic growth. As for the Internet itself and its perception and use by private individuals, the mass market, many humans caught onto the economic part hence the importance of the Internet in the economy. Many others caught on to the social part hence the numerous chats and IM’s (Instant Messengers). Now if more humans could just get the message, and actually use the new tool to do some intercultural exchanges, and solve… but that is another issue isn’t it? References Q&A: Information Technology: An Engine for Global Economic Growth Internet Revolution - a marxist perspective New Economy (Susan Stellin, New York Times; 05/07/2001, Vol. 150 Issue 51746, pC4, 0p, 1 cartoon) The Internet's Economy: the World's Next Growth Engine. (Michael J. Mandel, Irene M. Kunii, *Business Week; 10/04/99 Issue 3649, p72, 6p, 1 chart, 3c, 10bw) In Search of New Growth Engines. (Bruce Einhorn, Pete Engardio, Manjeet Kripalani* Business Week; 11/29/99 Issue 3657, p68, 4p, 4c) Susan Stellin, Journalist and her numerous articles Peter Fingar, Author Kevin Kelly, Author The Washington Post The World is increasingly more connected.
October 23rd, 2003	Ali M. Mamina

Is the Internet really the engine for economic growth?

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