SCN: Technology

[Steve]

x-no-archive: yes

=========================

Who Wins in the New Economy?

Adapted from the book "The Wealth of Choices" by Alan Murray, 
Washington bureau chief of The Wall Street Journal.


(Wall Street Journal)---It is difficult to live in the United States at the 
turn of the millennium and not be optimistic.   

The constant threat of annihilation that was part of the Cold War has 
been eliminated. The once-confident predictions of American 
economic decline have been thoroughly disproved. And two 
centuries of dismal predictions about the dehumanizing effects of 
technology -- from Mary Shelley's "Frankenstein" to "Fahrenheit 
451" -- have been discredited.   

Instead, the century that witnessed history's great struggle with 
communism and fascism has ended with a remarkable celebration 
of human freedom. The walls that separate nations have crumbled. 
Technology has not devalued individual human life; it has elevated 
it, creating new opportunities, new connections, new freedoms. The 
human imagination has not been suppressed; it has been liberated, 
in ways unimaginable even a decade or two ago. To be alive in 
America today is to face an exhilarating wealth of choices.   

But what kind of New Society will this New Economy create? And, in 
particular, what will it do to the widening gap between rich and poor 
people, rich and poor nations, that is one of the most disturbing 
bequests of the final decades of the 20th century?   

The answer to that question is far from clear. For at war in the New 
Economy are two great myths -- the Populist Myth and the 
Monopolist Myth. And which is the more powerful remains to be 
seen.   

The Populist Myth is the most popular at the moment, favored by the 
editors of Wired magazine and countless other technology 
enthusiasts, who argue fervently that this new world empowers the 
little guy. A generation ago, there was a sense that the big 
corporations controlled our lives and ran the world; John Kenneth 
Galbraith's "The New Industrial State" was the defining text, and 
IBM was the corporate standard of the computer world. But then 
came Apple, started in a suburban bedroom, championing the notion 
of a personal computer on every desktop. The myth was captured in 
the famous advertisement that Apple aired during the 1984 Super 
Bowl, in which a lone female runner tossed a sledgehammer 
through the ominous screen visage of Big Brother.   

The Internet has strengthened the Populist Myth by democratizing 
information. Hierarchies, based on the upward flow of information, 
have been flattened. Anyone with a modem can gather nearly as 
much intelligence as the CIA, access nearly as much knowledge as 
resides in the Library of Congress, and play in the global 
marketplace on nearly equal footing with General Motors. Or so the 
myth contends.   

"When a majority of people get connected," says Steve Case, 
America Online's chief executive, "it will put the consumer in charge 
in ways that weren't really possible before. They can get the 
information they want, when they want, the way they want, on topics 
they care about ... It will give them more perfect information in a 
more perfect market."   

But in his courtroom in Washington, Judge Thomas Penfield 
Jackson has reminded all that countering this Populist Myth is a 
powerful Monopolist Myth. Companies like Microsoft or Cisco or 
American Online have acquired huge power and wealth at a pace 
that would make the robber barons of the Gilded Age blush. And 
amid the talk about empowering the little guy, already-giant 
companies are merging at a surprising rate.   

Scholars of the new economy talk of the "economies of scale" that 
rapidly propel today's businesses to such proportions. In software 
and network businesses, the costs of expansion are often small or 
nil, while the benefits from expansion are enormous. Such markets 
are thought to eventually "tip" to one or two big players and 
squeeze out the also-rans. If there is a big advantage to being the 
"first mover" in this world, as so many in today's business world 
contend, then there must also be an advantage to the people and the 
nations who are first to enjoy the benefits. And what does that leave 
for the latecomers?   

In a winner-take-all world, the losers don't have much to look forward 
to.   

James Wolfensohn is one of the optimists. As president of the 
World Bank, he can recite some of the grimmer statistics of the 
existing order. Half the world's people survive on the equivalent of 
less than $2 a day. Nearly a quarter survive on $1 a day. Over the 
last four decades, the gap between per capita income in the world's 
richest and poorest nations has doubled.   

Yet Mr. Wolfensohn believes the new technology has the power to 
alter that. Today's information technologies "change the nature of 
society, as is and will be happening in China and in many of the 
former countries of the Soviet Union, and as I believe can happen in 
Africa."   

Much of the value of that technology, Mr. Wolfensohn contends, is 
as a tool for basic training. "If countries are to develop, they need to 
build capacity in governance, and they need to strengthen their 
legal, financial and other systems," he says. "It has become clear 
that just throwing money at countries where there isn't a structure 
doesn't make a lot of sense."   

Every Saturday morning, he says, 300 mayors in Latin America 
connect from remote locations to hear basic lessons on running a 
city government, taught via the Monterrey Institute of Technology in 
Mexico and sponsored by the World Bank. A similar program has 
been set up to help bureaucrats in African countries who are fighting 
corruption. The bank recently opened up 13 videoconferencing 
centers around the globe and by the end of next year will have as 
many as 100.   

"We are now doing 400 videoconferences a month, by satellite," Mr. 
Wolfensohn says. "We are putting computers in villages where the 
villagers want them, where they may not have water or power."   

He adds: "I am personally convinced that the use of Internet 
technology and modern communications technology will be a leveler 
in terms of opportunity."   

Mohsen Khalil of the bank says the economic benefits have already 
begun for some developing countries. He tells of the artisans in 
Kenya who, by marketing their goods over the Internet, have 
increased their export earnings to $2 million from $10,000. "This is 
a great opportunity to connect to the global marketplace," he says.   

Nicholas Negroponte, one of the leading thinkers on the digital 
world, goes even further. He says most people greatly 
underestimate the leverage that the Internet provides to those who 
now lag behind. He predicts that within a few years, the developing 
world will represent more than half of the traffic on the global 
Internet.   

"I'm a very optimistic person, so discount as you wish," he said in 
an e-mail interview. "But in the case of Third World leapfrogging, I 
have seen lots of it firsthand, notably in China, Latin America, and 
remote places like the nation of Nui. In fact, isolation adds even 
further incentive and explains some of the extraordinary statistics of 
Net usage in places like Iceland."   

But count Steve Woolgar a skeptic. He is one of the few who has 
actually attempted to study how these rapid technological and 
economic changes affect society. He heads up a multimillion-dollar, 
25-university project called "Virtual Society?" that is funded by the 
British government and held its first conference in London this 
month.   

His main conclusion: "We have to do everything we can to combat 
what I call 'cyberbole' " -- exaggerated claims about the effect the 
new technology has on society. Indeed, much of the research done 
by his group suggests the problems of social division in a society 
"far outweigh what the Internet can bring to them."   

Middle-class and professional people may be using the new 
networks to their advantage, but others aren't. One study, for 
instance, showed that cyberkiosks and cybercafes intended to 
expand access to the Internet were primarily being used by people 
who had access elsewhere anyway. Another paper, titled "They 
Came, They Surfed, They Went Back to the Beach," documents how 
the Internet is more of a fad for many young people than it is a 
source of empowerment.   

Mr. Woolgar gives a slide-show presentation that include quotes 
like the following: "Over the course of a few years, a new 
communications technology annihilated distance and shrank the 
world faster and further than ever before. A world-wide 
communications network whose cables spanned continents and 
oceans, it revolutionized business practices and gave rise to new 
forms of crime."   

The subject: not the Internet, but the telegraph, in 1840. "In the end, 
this will probably be like the telephone," Mr. Woolgar guesses, "this 
huge new revolution that didn't make much difference to existing 
social structures."   

William Dutton, a professor at the Annenberg School of 
Communications at the University of South Carolina, agrees. Since 
the beginning of the computer age nearly a half century ago, he 
says, some social observers have seen the computer as a force for 
centralizing power, while others have seen it as a democratizing 
force. In the '60s the former held sway; today, the latter do. But both 
positions, he says, "are overly deterministic." Society's 
development depends on many other factors.   

If the history of the last two decades has taught anything, it should 
be that forecasting such things is a tricky business. Even a decade 
ago, no one came close to imagining the world we live in today. 
Why should anyone presume we can forecast the world a generation 
from now?   

But both the Populist Myth and the Monopolist Myth reflect important 
parts of this developing new world. In the end, says Mr. Wolfenson, 
it's inevitable that some will benefit more than others.   

But overall, the new technologies ensure better opportunities for a 
larger number. More people will have more access to more 
information than ever before. And that information is power.   

Copyright © 2000 Dow Jones & Company, Inc.  

Book Copyright 2000 by Alan Murray. Published by Crown Business, 
a trademark of Random House, Inc.  




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