Technology and Our Economy
Increasingly, the high-tech industry is playing a key role in building a productive and successful American economy.
Published: September 20, 1999
Anyone who uses computers and the Internet knows how technology can increase their personal efficiency. A growing array of software productivity tools and e-commerce technologies makes it easier than ever for people to do business, shop, learn and communicate.
Now, several reports out of Washington, D.C. underscore just how significant and extraordinary these productivity gains are-not only for individuals and businesses, but for the entire nation.
In a recent appearance before the Joint Economic Committee of Congress, Federal Reserve Chairman Alan Greenspan observed that "something special has happened to the American economy in recent years. An economy that twenty years ago seemed to have seen its better days, is displaying a remarkable run of economic growth that appears to have its roots in ongoing advances in technology."
Mr. Greenspan went on to note that technology is enabling businesses to better manage everything from employees to inventories. In addition, it is helping eliminate unnecessary production processes, speeding the delivery of goods to market, compelling businesses to keep prices low and, most important, enabling companies to better meet individual customers' needs.
Just a few days prior to Mr. Greenspan's comments, the U.S. Department of Commerce issued a report noting that although the information technology industry accounts for only about 8 percent of America's gross domestic product, it generated more than one-third of the nation's economic growth from 1995 to 1998.
The Commerce Department study, The Emerging Digital Economy II, also noted that falling prices in the information technology sector cut overall inflation by 0.7 percent. Meanwhile, the technology industry showed dramatic increases in productivity: an average of 10.4 percent annually from 1990 to 1997, compared with less than 1 percent outside the technology sector.
The growth and success of this dynamic and flourishing industry has been driven almost exclusively by action taken in the private sector. As Mr. Greenspan advised Congress, government should seek to foster additional growth in the industry by "further reducing regulatory impediments to competition."
If we continue to allow the free market to drive the evolution of the technology industry-as it has so effectively for the last two decades-we will see even more positive change. Mass customization of products will create entirely new business models and greater choice for consumers. New pricing patterns driven by the Internet will change the way companies do business, and give customers more options than ever before.
The technology sector has done a magnificent job creating new opportunities and helping build a productive American economy. Healthy competition, innovation and consumer choice are clearly the most effective tools to ensure that this prosperity continues.