US Senator denounces the ‘IT Revolution’

US Senator Fritz Hollings (D--South Carolina) had a nice rant today on the Senate floor about the grossly exaggerated importance of information technology to the US economy. Citing an article in this week's Economist, which he submitted for the record, Hollings loudly denounced the false hopes American businesses and politicians have placed in IT and e-commerce. The cost of this misplaced faith has been widespread Pollyannaish optimism in the face of quietly deteriorating economic conditions. "The American industrial base is being hollowed out," Hollings warned, adding, with some cynicism, that "Wal-Mart now employs more people than General Motors." The technology sector has long been touted as a saviour to US workers trapped in Wal-Mart and other low-paying service positions, which Americans refer to sarcastically as "McJobs". Hollings quoted aloud from the magazine article. The Economist, in turn, quoted a study by Goldman Sachs which finds that technological investment and growth is grossly overestimated by such simple errors as failure to adjust for current dollar values, and by including the value of investments in anything with an electric cord attached, including such routine items as telephones and radios, which were in every company's budget many decades before the Technology Revolution began. Furthermore, Internet-based sales are vastly inflated by adding the total value of goods and services traded on line, the production of which has nothing whatever to do with the Internet. "The value added of Internet sales -- i.e., its contribution to GDP -- would be much less, probably little more than 1 per cent of GDP," the authors reckon. Beyond that, gross sales of computers are often taken as evidence of IT growth, but in reality a hefty portion of those purchases are made merely to replace outdated equipment, with no real expansion going on. And even taking such sales in their best light, "computers still account for only two percent of America's total net capital stock," the study finds. The purpose of Hollings' speech was to discourage passage of a Senate bill offering tariff exemptions and other incentives to stimulate economic development in sub-Saharan Africa and the Caribbean. The Senator fears that the USA simply can't afford to give the competition a break, especially now, as we can see that the IT sector is but a faint reflection what it's cracked up to be. The bill has broad, bi-partisan support, however, and is likely to pass regardless of whether the Technology Revolution performs the expected miracles or not. ®