The Internet is changing the world’s economy, but does not always benefit those who need it most, writes Victor Keegan in London
WE are constantly told how globalisation has shifted the balance of economic power towards multinational corporations at the expense of practically everyone else. Yet in the most exciting area of the world economy – the explosive growth of the Internet – the opposite is happening.
Multinationals are being taken to the cleaners and, so far, can’t do much about it. There is a “socialist” strain in the Net which deserves much more study by labour strategists.
The Internet is a worldwide network of computers which can be searched from any home computer linked to a telephone. It enables users to do a dizzy variety of things ranging from browsing online through thousands of databases including newspapers, to downloading video clips or audio records.
It’s amazingly cheap for what it offers – costing a small monthly fee plus telephone charges – and will get even cheaper as the new generation of network computers slashes the capital charge of getting online.
The Net is already its own state with its own rules and its own economy. It will soon have its own money too. But instead of being an electronic island remote from the rest of the world, it is starting to change the way the world economy operates.
While everywhere else is still operating a post-Thatcherite philosophy in which everything has to be paid for at a commercial rate, the Net’s content has become an electronic free lunch. Even Microsoft, one of the richest companies in the world, has been forced to give away its Internet browsing software free – not least because its chief rival, Netscape, has already parted with most of its 40-million browsers for nothing.
The highly impressive “search engines”, enabling people to search the world’s databases in seconds, are also free – as are most of the proliferating journals. Last week a senior Microsoft executive lamented that the company couldn’t charge for its online journal, Slate, because of a million other things punters can get gratis, at the click of a button.
Corporations can still charge for offline products like motor cars or sofas sold online. But even here the Net’s potential power is asserting itself. In the United States, consumers wanting the same product are contacting each other through the Net to negotiate bulk discounts, cutting out the middle man if they can.
This gives another push to technological deflation, which is giving customers improved products at a lower real cost. And this is not picked up by national inflation statistics.
The arrival of recruitment adverts on the Net is also starting to have macro-economic effects. Someone in New York can now search through all available ads to find, say, a job in California that he wouldn’t otherwise have heard of – thereby making US labour markets even more flexible than they are.
The question that used to be asked about the information highway was: “Ah, but where are the killer applications to utilise the huge capacity made possible by optical fibres, one strand of which can carry an entire nation’s phone calls?”
Not any more. The Internet has become the information superhighway and the products it has already generated are threatening to overwhelm its capacity.
And we haven’t seen anything yet. The Internet can connect any computer or television screen to anywhere in the world which has a database, a live camera or a similar computer.
Most of the films we watch, the telephone calls we make and banking transactions will probably happen through the Net soon.
These wonders fall short of creating a digital Utopia because they are not universally accessible. The people who would most benefit proportionately from cheap access – the poor, the deprived and the Third World – can’t afford to pay up to $1 500 or more to get online.
This will change only after the resolution of the new Cyberspace trade war that is about to break out. Dozens of companies are battling to build cheap “boxes” to provide links with the Net and easily useable software to use the facilities. Netscape and Microsoft are fighting each other for the biggest prize of all – the browser software that governs navigation of the Net.
Governments are relegated to the sidelines in this war … except in two important respects. As legislators they can alter the direction of battle, as the British and US authorities did when they deregulated the telecoms markets, and as facilitators they can influence the speed at which the technology spreads.
The Conservatives’ decision to put computers in every school during the early 1980s helped to raise computer literacy in Britain.
A comparable plan to help every home to have cheap Internet Access would be the information equivalent of setting up a National Health Service. Any offers?