A US government attempt to gauge the whirwind of change brought by new technology places electronic commerce at the center of future economic growth, but says it resides there precariously and demands "a new paradigm for government and private sector responsibilities."
"The Emerging Digital Economy," a 300-page opus released this morning by the Commerce Department, acknowledges the difficulty of measuring systematically how the dazzling advances and investments in information technology have made the economy stronger, but by pointing to specific developments paints a bright picture of new efficiencies realized and new markets created.
It sees business-to-business electronic commerce resulting in lower purchasing costs, citing General Electric's online procurement system; and quicker inventory turnover, pointing to IBM's Advanced Planning System; and faster product development cycles (the entire US automaking industry); and improved customer service (Cisco). It sees consumer benefits, with the emergence of new ways to buy airline tickets, automobiles, and books - ways that are easier, faster, and often cheaper than traditional means. And it sees high-paying IT jobs replacing lower-paying positions.
But like any "major societal transformation," this one makes no sure promises, the report says: The Industrial Revolution didn't, and neither shall the digital revolution.
The digital economy could founder, the authors suggest, if government and business don't together carefully manage the lightning-fast changes taking place. As the Clinton White House has been saying since last summer, "Creating the optimal conditions for the new digital economy to flourish requires a new, much less restrictive approach to the setting of the rules."
That means government must encourage competition, avoid taxing the Net to death, and when it does need to enforce regulation, do so - somehow - "non-bureaucratically." Similarly, businesses must be ready to compete, and must answer consumer concerns about privacy and Internet crime. And both sectors - and workers themselves - must be primed to deal with an economy in which jobs both arise and are vaporized at the blink of an eye. "If we do not have a sufficient number of well-educated and trained poeple to fill these [new] jobs, then the good news can turn to bad," the report says.
Business consultant Lynn Margherio directed the team that produced "The Emerging Digital Economy," which grew out of last year's Framework for Global Electronic Commerce.
"What we were trying to do is pull together in one place some examples, some illustrations, of electronic commerce in practice," Margherio said in an interview. "The point isn't to lay out policy or to answer every question - it's to begin a discussion about some of the challenges that lie ahead." (To that end, a more accessible, slimmed-down 60-page version of the report is available as a pdf file, and within days should also be posted on the Web, Margherio noted.)
One challenge the report steered almost entirely clear of was encryption, where the administration's talk of unfettered ecommerce has run head-on into some of the most restrictive crypto policies on the globe. Says the report: "Many ... await a resolution of current export limitations on encryption software before they plan to increase their Internet business."
Secretary William Daley went further at the report's introduction this morning in Washington. He bluntly labeled the administration's attempt to balance the stated needs of law enforcement and business "a failure" - in large part because the parties to the debate have been so unpliable.
"Our own paralysis has made it difficult to persuade other nations to pursue policies similar to ours," Daley said. "Without the cooperation of other nations, the global market is rendering our policy obsolete. And I fear that will soon make our products obsolete as well.... We've talked a lot about this for several years. We can talk some more. But without a commitment on all sides to settle for less than 100 percent, we are no closer to resolution than we were when we began."
Daley also rebuked business on the matter of privacy, saying it had been slow to put in place protections on what he called a "make or break" issue.
