Magazine article CMA - the Management Accounting Magazine

Information Management

Magazine article CMA - the Management Accounting Magazine

Information Management

Article excerpt

How should government prime the "new economy"?

Much has been written about the "new economy" of information and technology-based goods and services, and its potential to achieve the prosperity that was once fuelled by our manufacturing and resource sectors. The promise may be exaggerated but the message has been well received and it is now widely suggested that government should play a more active role in establishing a "technology infrastructure," that is, an electronic equivalent of the network of roads, sewers and utilities which physically supports how we live and work.

A recent opportunity to contribute to a task force on government's role in technology innovation led me to spend some time thinking about the idea. The free enterprise view argues that government should not be specifically addressing technology at all but rather aim to create the right general conditions for competition and entrepreneurship -- for example, low interest rates, less regulation, a healthy and well-educated workforce, and so on. The interventionist argues that government should step in where the private sector will not -- for example, providing seed money for risky new ventures, subsidizing products and services until a sustainable market develops, directly investing in new and promising but unproven technologies.

My own view tends more to the practical than the philosophical. There are some areas where government involvement is essential. In the financial industry for example, it is well accepted that government regulation is essential to a basic degree of confidence for investors. Similarly, in the "information sector," some government involvement is necessary to ensure that we are not left entirely vulnerable to monopolies or other countries in the areas of data standards, privacy and security. The challenge is to establish the balance that provides the right degree of protection without unduly inhibiting information exchange and electronic commerce.

On the other hand, the history of government in picking winners or implementing policies to encourage technology investment is not encouraging. Even if budget constraints were not an issue, past experience --Scientific Research Tax Credits, Novatel, various supercomputer centres to name a few -- suggests that this should not be the prime role of the public sector. The most well-meaning policies seem to get undermined by conflicting objectives, special interests and general lack of accountability.

The greatest and perhaps least appreciated potential for public sector stimulation of the knowledge economy lies in the operation of government itself. …

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