Democracy & Technology Blog Digital Prosperity Report Concludes IT Investment Critical

Policy makers should recognize information technology as the centerpiece of economic policy and develop their plans accordingly, concludes the Digital Prosperity study published this week by 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,” writes Foundation president, Dr. Robert D. Atkinson, author of the study.
Atkinson is a widely respected economist who formerly served as project director of the Congressional Office of Technology Assessment, and is the former director of the Progressive Policy Institute’s Technology and New Economy Project of the centrist Democratic Leadership Council.
Based on reviews of other studies, and Atkinson’s own research, the report maintains, “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” in the United States.

Not only is the impact of IT on worker productivity three to five times greater than that of non-IT capital, according to the study, it also encourages greater quality and innovation, allows workers to manage their time and resources, and enables workers to join the labor force who may not otherwise be able to manage a traditional work environment.

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

Atkinson identifies key sectors like health care, education, transportation and others “influenced by public policies” as fertile ground for digital innovation and economic transformation.
So what is the well-informed, technology driven, policy maker to do with the conclusions from the study, other than giving IT an old fashioned tip of the hat and a salute?
Atkinson suggests four specific policy principles:
1) Actively encourage digital innovation and transformation of economic sectors through such “policy levers” as tax, regulatory, and procurement policies;
2) Focus tax policies on spurring additional investment in newer generations of IT;
3) Create partnerships between the federal government and for-profit, non profit, and state and local government sectors to help citizens use and access technology;
4) “Do no harm” in policies affecting the “digital engine of growth” through adopting laws and regulations which slow digital transformation.
While various technology users, as well as technology providers, in a highly competitive economy may differ on just how they would counsel policymakers to adopt these recommendations, the emphasis on attracting investment to IT is the key.
Unfortunately, the study does not address the high costs of regulatory policies and tax uncertainties, developed and administered during this study period by then-Vice President Al Gore and his protégé, FCC Chairman Reed Hundt, which created just such a barrier to investment, and helped burst the high tech bubble of the late 1990s. While Gore did not get the credit he sought for inventing the Internet, he does deserve to be remembered for policies that delayed and distorted IT investment decisions.
In the words of Oscar Wilde, policymakers have shown that they can “resist everything except temptation” when it comes to using political power in an effort to achieve political goals at the expense of economic growth.
Nevertheless, “do no harm” is about the best advise we can hope for as the Congress and regulators continue to push such ill advised schemes to regulate the internet and give competitive advantage to one group over another, such as Google’s so-called “network neutrality” proposals.

Frank Dillow

Senior Program Advisor, is a broadly experienced telecommunications executive.  He worked for various Oregon newspapers and the Oregon Public Utility Commission prior to joining GTE Corp. as part of their corporate headquarters staff.  For 10 years he was external affairs director for GTE-Northwest, before being named Vice President for Federal Government Relations for GTE (and later Verizon Communications) in their Washington, D.C. office.  He is recently retired and resides in Arlington, Va.