We ignore the digital economy at our peril
To see how far out of touch our politicians are with the amazing potential of the digital economy, you only have to go to the recent Throne Speech or to the Advantage Canada strategy of the Harper government.
As described in a recent speech by Industry Minister Jim Prentice, the Advantage Canada framework includes infrastructure. But in his words it is about "world-class roads, bridges and ports." No mention of world-class high-speed broadband even though this is the critical infrastructure of the 21st century and Canada is a laggard.
Likewise, the recent Throne Speech talks of a federal commitment to infrastructure and its importance for economic growth, but again the language is about "safer roads and bridges," not about ensuring that Canadians have universal access to truly high-speed broadband. Yet while the information and communications technologies account for about 5 to 10 per cent of GDP, they have a huge impact on the other 90 to 95 per cent.
As Robert Atkinson, president of the Washington-based Information Technology and Innovation Foundation, has argued, the information technology revolution is "the key driver of growth" in economies today, and the most important source of increased productivity and prosperity.
The digital economy, he argues, is much more than the Internet, important though that is. In his description, "the digital economy represents the pervasive use of IT (hardware, software applications and telecommunications) in all aspects of the economy, including internal operations of organizations (business, government and non-profit); transactions between organizations; and transactions between individuals, acting both as consumers and citizens, and organizations." In other words, it is everywhere.
The rapid decline in prices and parallel gains in performance of information technologies has enabled a radical change not only in the goods and services we produce and use, but how our business, government and other organizations are organized. And this will continue.
Both Atkinson, and Canadian economist Richard Lipsey, author of the powerful book Economic Transformations, argue that these dramatic falls in prices and accompanying gains in performance should continue for another 15 to 25 years, with the range of radical new applications extending well beyond that.
The problem, says Atkinson, is that policymakers don't understand the central role of the digital revolution in shaping economic policy. "Digital transformation," he argues, should be "the centrepiece of economic policy." In Canada's case, it doesn't even seem to be in the same room.
Google is one of the most dramatic examples of how the Internet can be used to create jobs and wealth. A decade ago it was just a project of a couple of graduate students, Sergey Brin and Larry Page, operating out of a low-rent garage with $100,000 from an angel investor.
Today it is a public company with more than 6,000 employees and a market cap of about $140 billion, or more than the combined market cap of the Bank of Nova Scotia, the Canadian Imperial Bank of Commerce and Toronto Dominion Bank. Brin and Page, in their mid-30s, each hold $17 billion worth of shares. Not bad for a decade of work.
There are potentially many more Googles out there waiting to be created, as well as thousands of smaller but still dramatic possibilities in both technology and applications. This year's Nobel Prize in Physics went to Albert Fret of France and Peter Grunberg of Germany for their research that radically shrunk the size of computer memories and enabled many new products, including the iPod, an example of the potential for ongoing advances in technology.
This is where our future jobs could come from. But it seems our own government is not impressed.
David Crane's column appears on Mondays. He can be reached at crane @ interlog.com