Technology enables economic success, responsibilities: economist
Employees' ability to use technology wisely appears to increase their earnings potential. The recent more than doubling of the U.S. productivity rate, enabled in part by use of technology, may allow sustained U.S. growth greater than previously thought possible, even with very low unemployment.
Employees' ability to use technology wisely appears to increase their earnings potential. The recent more than doubling of the U.S. productivity rate, enabled in part by use of technology, may allow sustained U.S. growth greater than previously thought possible, even with very low unemployment. However, global technology use may also augment severity of human errors related to managing world economic health.
These are some of technology's key influences on the U.S. and global economy, according to Dr. Laura D'Andrea Tyson, dean of Haas School of Business at the University of California (Berkeley, Calif.). She delivered her analysis at Siemens Corp.'s (New York, N.Y.) Industry Press Forum here on May 24.
The global economy is stronger now than in the 1980s, with a 4.5% GDP and 3.5% inflation. There are differences across regions, she noted, but the present recovery is broad-based. Earlier liquidity problems and 1998's currency crisis and recovery in Asia, Russia, and Latin America showed the interdependence of world markets. Thailand, a very small economy, started the crisis. Today, there's a global expansion in place that's likely to withstand a U.S. "soft-landing," an economic slowdown designed to slow growth to a sustainable rate, without recession. Still, with the U.S. accounting for 25% of global GDP and 75% of the expansion among G7 countries, the world is watching.
Computers fuel productivity
The most recent series of interest-rate hikes were held off, Dr. Tyson says, because productivity since 1995 increased from a 25-year historical average of 1% to 2.5% now. That gain has offset effects of a tight labor market to creating economic growth. Up until 1995, the IT revolution hadn't had visible benefits on U.S. productivity, which baffled many observers. Since then, she explains, a critical mass of information infrastructure (equaling, in adjusted terms, the assets amassed by railroads at their peak) has more than doubled what economists felt was a sustainable rate of gain in U.S. productivity. Other countries' economies seem likely to follow. So far, the U.S. has the largest portion of the world's 275 million Internet users. Two billion or more users are expected globally in five years, with most growth outside the U.S.
In addition, technology use by individuals has appeared to create an elite skill class in many professions, where earning potential increases dramatically with technological expertise. Those with specialized knowledge, professors, for example, have found Internet-enabled ways to sell information for profit, perhaps to the consternation of their employers. In another build-up of wealth, more frequent use of stock options has also decreased earnings' pressure on inflation.
From a global economic view, the new speed of technology-enabled transactions can add to human errors of economic policy, sometimes contributing to a currency crisis that swamps smaller economies. Despite technologies, some fixes require "good old-fashioned policymaking," adds Dr. Tyson.