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US in the forefront of the revolution

WITH the dawn of the new millennium, the world’s most powerful banker, Allan Greenspan has recognised that the Internet-led new economy has rewritten the economic rule book.

At a recent meeting of the Economic Club of New York, he made quite dramatic statements that amounted to a ringing endorsement of the online economy. Some of the more interesting snippets included comments such as:

• It has become increasingly difficult to deny that something profoundly different from the typical post-war business cycle has emerged

• The IT&T revolution has permanently lifted productivity to a point where the economy could grow faster without sparking inflation

• What is happening now with the impact of new technology on the economy amounts to a once in a century acceleration of innovation Greenspan was recognising that something significant has happened to the world economy.

The US economy is, of course, the engine room for the global economy.

Decades of heavy investment in new technology and methodology has produced for the US an overwhelming superiority in booming sectors such as computers, Internet services, biotechnology and investment banking.

Reflecting this reality in bottom line terms, next month the US economy will enter it’s 107th consecutive month of economic expansion – surpassing the boom of the 1960s.

Perhaps the most remarkable feature of this extended boom is that inflation has remained subdued in the face of very tight labour markets.

In those parts of the world which have genuinely joined the online economy, inflation has been consistently low for three fundamental reasons:

• Prices of goods in the IT&T sector have been continuously falling

• The reductions in real levels of wages to employees

• Deregulation and the application of new IT systems has reduced prices in many branches of service industries.

Across the Atlantic, many political and business leaders have now recognised that Europe is rapidly losing ground to the US in the growth industries of the future.

There is no doubt the US economy is surging ahead in locking up a commercial bonanza through future control of Internet-related technologies.

In public policy terms, throughout the last decade Europe has failed to provide the necessary stimulus for business initiatives and has spent a great deal of time, money and effort subsidising dying industries.

Given that technological advances tend to produce rapid innovation, the wide popular access of computers and the Internet in the US is expected to accelerate American dominance for years to come.

While around 50 per cent of US homes are hooked up to the world wide web, only 12 per cent of families among the nations of the European Union have such access.

Similarly, Europe lags well behind the US in the take up of electronic commerce. Last year, in the EU, revenues from e-commerce reached US$18 billion. The equivalent figure for the US was US$54 billion.

One might well ask: “Where does that leave us in Australia?”

The answer, in short, is: “Not quite up there with the Americans, but not as far back as the Europeans.”

For all of the spectacular success of the US economy, the new

economic order has failed to deliver the paperless office, more leisure time and anything remotely resembling equality of opportunity.

• Mal Bryce is a consultant to Dow Digital and a former WA Deputy Premier.

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