WSJ article. High-Tech Industries, Led by Internet, Boost U.S. Growth, Rein In Inflation
[1 billion people on the Web by 2005...]
By BRUCE INGERSOLL, 4/16/98
Staff Reporter of THE WALL STREET JOURNAL
interactive.wsj.com
WASHINGTON -- Information technology, led by booming business on
the Internet, is spurring economic growth and reining in inflation, the
Commerce Department says.
The high-technology industries of computers and telecommunications
accounted for more than one-quarter of the U.S. economy's growth in the
past five years, according to the federal government's maiden report on the
"emerging digital economy."
Without information technology --
and the electronic commerce it
fosters -- overall inflation would
have hit 3.1% last year, more than a
full percentage point higher than the
2% it was, the report says. Plunging
prices for high-tech goods -- such
as transistors, microprocessors and communications devices -- are largely
responsible for keeping inflation in check.
Commerce on the Internet -- barely a blip a few years ago -- could surpass
$300 billion by 2002, the report says, as more companies go on-line to cut
purchasing costs, streamline inventories, supervise branch operations, clinch
sales and drum up new customers. General Electric Co., for example,
expects to save $500 million over two years by purchasing $5 billion in
goods via the Internet.
Commerce Secretary William Daley frequently invoked the report
yesterday in seeking industry support for several Clinton administration
proposals, including an Internet free-trade zone, where electronic
commerce could expand without government tariffs and taxes. He urged
Congress to implement two treaties setting international standards to protect
musical recordings and other copyright works. He also leaned on the
industry to deliver on promises of self-regulation to ensure the privacy of
consumers.
"Last year, 100 million people logged onto the Internet, up from 40 million
the year before," Mr. Daley told the Information Technology Policy
Council.
The rush into cyberspace is unprecedented. Radio and television were
available for 38 years and 13 years, respectively, before 50 million people
tuned in, the report says. The Internet hit that benchmark after just four
years of public use. Some experts expect as many as one billion people to
tap into the Web by 2005.
What has really caught the government's attention is the Internet's sudden
expansion from a medium for e-mail, education and entertainment into a
seemingly boundless venue for business.
The report projects a future where millions of consumers will do much of
their shopping, banking and reading on-line. Internet bookings in the travel
industry, for example, could rise to $8 billion within three years from $1
billion in 1997.
Because the Internet is so new, reliable economy-wide data on its impact
are difficult to find, the report acknowledges. But there is plenty of
anecdotal evidence to show the boom in electronic commerce:
On-line traffic has been doubling every 100 days.
Cisco Systems Inc. booked just over $100 million in 1996 sales on
the Internet; by the end of 1997, its Internet sales were running at an
annual rate of $3.2 billion.
The first Internet bookstore, Amazon.com, recorded 1997 sales of
$148 million, up more than 825% from the previous year.
In 1996, Auto-by-Tel, a major Web-based auto mart, generated
sales of $1.8 billion; by this past December, it was processing more
than 100,000 purchase requests a month, with sales projected to hit
$6 billion this year.
The information technology field employs 7.4 million Americans, who earn
an average of nearly $46,000 a year. The Commerce Department estimates
that an additional 1.3 million workers will be needed in the next decade.
Investment in information technology accounts for more than 45% of all
business-equipment investment, the report says. Federal Reserve Board
Chairman Alan Greenspan and other economists believe such investment
helps to boost U.S. productivity, while others are skeptical. "As yet," the
report notes, "there is limited direct evidence in government data that
investments in [information technology] have substantially raised productivity
in many [noninformation technology] industries."
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