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Office of the Press Secretary

For Immediate Release April 5, 2000
                        REMARKS BY THE PRESIDENT
                            AND PARTICIPANTS
                        IN FINAL SESSION OF THE

                             The East Room

4:30 P.M. EDT

THE PRESIDENT: All right. Please be seated, everyone, let's go. The final panel today is one of particular importance -- to me, at least -- and that is, how can the new economy's tools empower civil society and government. And I'm going to call on Esther Dyson first, the founder and chairman of Edventure Holdings, because she has to catch a plane.

MS. DYSON: I can stay.

THE PRESIDENT: But you can go first, anyway -- so there. (Laughter.)

MS. DYSON: Okay. I'm going to try and set a good example by being relatively brief. And what that means is that I can also make my points fairly blunt, which is what I'd like to do.

I have two roles here. One, I'm chairman of Edventure Holdings, I'm an industry observer and I invest in small start-ups. I'm also chairman of I Can, which is a new form of agents, if you like, that manages the technical structure of the Internet, it's international. And I may talk about that briefly at the end or if people have questions.

To me, can new economy tools empower civil society in government -- in some sense it's the wrong question. What they can really do is they can empower people as individuals and citizens. A lot of what you hear about in the rhetoric about the new economy is, isn't this great, we're going to empower consumers. And what that usually means is, oh, great, we have tools to get their attention with so they can buy more stuff and they can choose from among more different brands and they can see different pricing options.

But what's really exciting about these tools is that they empower people to make choices for themselves also, again, as citizens and as producers. The interesting thing about the Internet is that it's two-way. It's a feedback loop. The very short form of this is broadcast TV, government media. Those are all good for propaganda -- whether good or bad. And the Internet is good for conspiracy, whether good or bad.

And so, the cruel thing about the Internet is that it actually has a lot more impact outside the United States. The United States, as an economy, is relatively efficient. Economically, it has trade shows, it has catalogs, it has 800 numbers, it has faxes, it has the SEC and corporate financial statements. A lot of countries don't have that.

So, outside the United States, also, a lot of people don't have -- you might like it -- a good opportunity to talk back to their government. And that's what the Internet gives them, for better or worse. And it's tremendously exciting.

Now, this also has a bad side, and that is, it empowers individuals to do bad, and it fosters fragmentation of society. If everybody is watching the same news programs, good or bad, at least they're united, at least they have a common history. So as we look to what the Internet does, it's not all good. But I do think the preponderance of it is good.

What I would like to do now is just give three specific examples of what I'm talking about. The first you're going to hear more about is Govworks. And what Govworks does, it doesn't go an make contracts with government organizations, it goes at markets to citizens, and then it helps the citizens in dealing with the government. It applies the economy as a scale that once belonged only to big business and other big institutions on behalf of individuals.

And then, there is another even more interesting phenomenon. There's a Web site called -- great name. What Payusback does is the following: If you send a Fed Ex or an airborne package, usually you get a guarantee of delivery time. But unless you really have nothing better to do, you're probably not monitoring your package on the Web, even though it's possible to do so. And so you don't get a refund if it's 10 minutes late, maybe not even if it's a day late, because you're probably a PR guy, and you don't care when it gets there. It just should go in a FedEx package and look important.

But says, we'll monitor all your packages for you, because we do it automatically, and we'll get you your refund. Now, the first-order impact is money changes hands. Second, FedEx and the other guys have to change their guarantees. But the third impact is you're going to have more transparency, because someday payusback, or somebody else, is going to start publishing the statistics. Who's better, FedEx or Airborne?

And so you have more and more this phenomenon of private companies taking on what used to be government-like functions. They rate things; they provide recourse; they help inform consumers. They even enforce basically consumer-vendor or even citizen-government transactions.

For example, if I buy something over the Web, and I don't like it, I'm not going to call the FTC. I'm not even going to call the something-something in France. I'm going to call American Express or Visa. And so what you're really talking about in this new world is the rise of alternative agencies that often represent citizens as individuals, but with more power than individuals often have.

A final point I'd like to make, again, is about empowering people not as consumers but as producers. I think when you talk about -- you can talk about philanthropy, but you can also talk about enlightened long-term self-interest. And I'm not sure how much difference there is between the two.

I think one of the most interesting phenomena in the last few months has been Ford's and Delta's programs to buy PCs and provide Internet access for their employees, because that sends a very interesting message. It says, we value you not just as workers in our plants, but we value you as individuals, we value you as intellectual human beings. Yes, we want to invest in you and make you better informed and better educated, we want to help you improve the lives of your children. But it sends a very different message to employees from simply giving them more money. And I think that's the kind of thing I'd like to see encouraged.

So with those opening remarks, I'm done.

THE PRESIDENT: Thank you. I think it would be good now, I'll just go over to Kaleil Tuzman, the co-founder and CEO of to talk. The floor is yours.

MR. TUZMAN: Thank you, Mr. President. I was looking at the question posed to the panel here, once again a few moments ago, and I thought the answer of whether the new economy's tools will be empowering to civil society and government seems self-evident, because of the quite pleasure to be sitting next to Professor Putnam, who used to be the Dean of the School of Government where I was intended to finish my graduate studies and didn't. (Laughter.) So I feel particularly empowered. (Laughter.)

In previous reflection -- and I say this without the intent to offend anybody in the room -- the question here made me think, as well, of Aristotle's comment that a man's life is at its beginning and end marked by the search for truth, and everything in the middle is politics. (Laughter.) And I think that the Internet, and the tools of the new economy, like the printing press and like the radio, like the telephone, like the TV, will fundamentally change politics and governance more than probably anything else.

And I think that that launches into really the answer, or one way to answer the question. And that is really to separate out politics and governance -- politics really encompassing kind of civil society, if you will, and governance being the administrative function of government.

And in terms of civil society, the question of empowerment is really difficult to disentangle, because I think that -- you know, in certain ways, there are obvious paths to empowerment that are engendered by the tools of the digital economy, or the new economy. And I break those tools down into two different general areas; I'm sure other people would have other definitions.

One is the technology and access, the use of the widget, if you will, of the Internet. And the other is the equity ownership in this IT revolution. And they both can be tremendously empowering when it comes to democratic representation. I mean, there's nothing that can fulfill really atomic-level representative democracy like the Internet, really, at all of our desktops, of course if we have access. And there's nothing that can empower in a more direct way than equity participation. And so there's enormous promise.

At the same time, I may be striking a bit of a more somber chord here than in other discussions today, but it can also be extraordinarily disempowering -- as if people don't have access and don't have equity ownership, then in fact, as other panelists have noted today, then it can have the reverse effect of expanding socioeconomic divides.

A few weeks ago, there was a Silicon Alley, which is still not as well-known as our counterparts on the West Coast, in New York -- there was a publication that listed many of the top Internet companies in New York. There was one company on that list that was Latino-owned, and there were no companies that were African American-owned, and we at Govworks are one of the only companies that have been funded -- VC funded, that are not ethnically targeted, that are not Internet companies that are targeted at ethnic communities, which are great businesses, but don't expand the reach of equity participation as they need to. So there are disempowering elements as well.

On the side of governance -- and I hope you will forgive the kind of -- what may sound like a plug, but given the President's comment -- the last panel -- around governors getting their DMV registrations on line, that is what we do, and there are a whole host of others out there that have begun to follow our example in the marketplace of helping states and counties and cities get transactional, get interactional on-line quickly. And this, I think, goes to Esther's reference as well to kind of public-private sector partnerships or the outsourcing, the privatization effect of the Internet, if you will, in governance.

There was a recent IBM e-government institute study that claimed that using today's transactional on-line processes, there's a $143 billion of savings inherent in applying that to government processes like permitting and licensing, transactional processes, collections, everything from child support to paying on real estate tax. And it's really quite simple. And that's an extraordinarily important part of what's going on in the new economy and how it can affect all of our lives.

I guess to follow Esther's example and wrap quickly, the last note, I guess, again, will be on the more sober side. And that is in another era de Tocqueville said that the proper functioning of American democracy is primarily inhibited by the prevalence of American illiteracy. And it was really a comment that I think was probably a contribution to things like major civil strife in this country, both on the battlefield and in our urban centers. And if we don't take that lesson to heart again in this era, and what literacy means today is training for children on how to use the Internet effectively, vocational training, as one of the earlier panelists said, universal access and expansion of equity participation and we will fall into the same trap again.

THE PRESIDENT: Thank you. I'd like to now call on William Julius Wilson, who is now a Professor of Social Policy at Harvard, the JFK School. He's been very generous with his time to me and to this administration over the last seven years, and who I think, better than anyone else I know, chronicled the disappearance of work for minority males in inner cities as the economy changed and as jobs moved to the suburbs and the implications that had for economic and social dislocation and racial tensions in our country.

So I would -- I think the title of his last book was "When Work Disappears."

PROFESSOR WILSON: That wasn't my last one, so it gives me a chance to plug the last one -- (laughter) -- which is "The Bridge Over The Racial Divide."

THE PRESIDENT: Yes, I've got that one, too.

PROFESSOR WILSON: Okay, fine. (Laughter.) Thank you very much --

          THE PRESIDENT:  I try to hawk all of them.  (Laughter.)
          PROFESSOR WILSON:  Thank you very much, Mr. President.  It's

really an honor to be here.

You know, we talked a lot about rising inequality today, especially this morning. And I would like to emphasize that rising economic inequality undermines, over the long-term, civil society. It increases racial and class antagonisms, including, as Professor Galbraith pointed out this morning, greater opposition to programs like affirmative action. It increases and facilitates the spread of demagogic messages about different groups. In short, it threatens American ideals of shared citizenship. And if left unchecked, could lead to what The Harvard Economist calls "a two-tiered society" in which "the successful upper and upper middle classes live lives fundamentally different from the working classes and the poor."

However, Mr. President, thanks to the economic boom, there are signs that the rising inequality which began in the early 1970s is in remission. If so, will this new economy eventually produce a pattern of economic progress that prevailed in the two and a half decades prior to 1970 a pattern in which a rising tide, aided by economic and social policies did, indeed, lift all votes. And will the development of such a pattern be enhanced or impeded by current social policies?

Now, from 1945 until 1970, all income groups in America experienced economic advancement, including the poor. In fact, poor families during this period recorded the highest growth in annual real income during that time, which meant that the poor became less poor not only in relative terms, but in absolute terms as well. However, in the early 1970s, as we all know, this pattern changed. The highest family income groups continued to enjoy steady income gains, adjusted for inflation, while families in the lowest groups experienced declining or stagnating real income.

Now, this growing income disparity, which continued through the mid-1990s, was partially linked to the slowdown in productivity growth. We all know that profits and wages depend on how much we produce. In the period between the early 1970s through the mid-1990s, productivity growth slowed tremendously. Less revenue was produced, which put downward pressure on wages.

However, as pointed out this morning, in late 1995 productivity began to surge, averaging about 3 percent since then. And given the current rate of productivity growth, the recent rise in the gross domestic product, and the sustained low unemployment rates, the most optimistic scenario is that this new economy will eventually produce rates of economic progress similar to those that marked the period from 1945 to 1970.

Now, the signs are encouraging. Real wage growth has been quite impressive since 1997, especially for low-wage workers. Also, the ranks of those in the labor market who have been out of work for more than six months, the long-term jobless, plummeted from almost 2 million in January 1973 to just 700,000 in January 1999. Moreover, the unemployment rate of high school dropouts declined from 12 percent in 1992 to just 6 percent today. And most of this decline has occurred since 1997. And furthermore, the black unemployment rate is the lowest since the Bureau of Labor Statistics began collecting unemployment data by race in 1972.

Now, given these changes, I believe that if our current economic boom continues for several more years, it will significantly lower the overall jobless rates in areas such as the inner-city ghetto -- not only for low-skilled workers still in the labor force, but for those who have been outside the labor market for many years as well. And in addition, it will enhance the job prospects of many welfare recipients who have reached the time limit for the receipt of welfare.

Now, having said all that, should those of us concerned about the rising inequality relax, finally relax? Not yet. It will be important to determine how current policies will mediate the impact of changes in the new economy on ordinary families, especially poor working families.

Now, we should keep in mind that the trends of rising inequality are associated not only with economic changes such as the level of skill bias in the economy and productivity growth. But they can also be related to what the MIT economist, Frank Levy, calls "the nation's equalizing institutions." And by this, he means the quality of public education. Unions: The Welfare State broadly defined legislation to support workers, such as the minimum wage and the earned income tax credit and other political developments that respond to market outcomes, and ensure that ordinary families benefit from economic growth.

So let me just end by saying that these equalizing institutions were much stronger from 1945 to 1970, the period I have highlighted. And they will have to be strengthened to insure that rising inequality remains in remission and that a broadly equal pattern of family economic progress will once again be achieved in the new economy. And I think, Mr. President, that this would be the best way to empower civil society and I applaud you for working in this direction during your administration to strengthen these institutions.

THE PRESIDENT: Let me say, as you know, we're trying to get another substantial increase in the earned income tax credit, including one that would help working families with more than two children. The last time we -- we nearly doubled the earned income tax credit in '93, and it took -- that helped us to move over 2 million people out of poverty.

Most of the people in poverty today, by American definitions, are working people, which would surprise a lot of Americans. It wouldn't surprise anybody from any developing country, where all the people in poverty are working people unless they're disabled. But it's also true in America and I think it's very important.

And, clearly, we ought to raise the minimum wage again. It still hasn't recovered its former levels. And indeed, all we will do if we raise it to my proposal is to basically recover where it was about 20 years ago in real dollar purchasing power terms. I hope we can do that.

I'd like to call on Professor Robert Putnam now, who is also at Harvard, and who gave us the concept of social capital, defined as "rules, networks and trust," and has really, I think, broadened the understanding that we have of civil society and its role in how our economy works and how we all live together. And I also have the galley copy of your latest book, so you can hawk it, too, if you like. (Laughter.) I think you should.

PROFESSOR PUTNAM: I'm happy that you hawk it.

THE PRESIDENT: "Bowling Alone," it's called. Worth it for the title alone. Go ahead.

PROFESSOR PUTNAM: Thank you very much, Mr. President, it's a great pleasure to be here, even though it's a little daunting to be speaking at the end of 15 or 20 great acts. The question for our panel is, can the new economy tools empower civil society and government? And my answer is, I hope so.

I want to, in the few minutes I have, to introduce one concept, this concept of social capital. I want to describe one trend. And I want to pose one historical challenge to all of us.

The basic idea of the concept of social capital is that networks have value. Everybody in this room knows that networks have value for transmitting information. They also have value as a basis, for undergirding cooperation and reciprocity. Reciprocity is a $10-word, but it was best defined by Yogi Berra when he said, if you don't go to somebody's funeral, they won't come to yours. (Laughter.) And that kind of reciprocity is a key to all sorts of cooperation, and is undergirded by networks.

It's undergirded by networks in the economy. Any of the entrepreneurs in the new economy knows that companies, venture capitalists and employees who have better connections are better remunerated, and they are because their connections have value.

What I've been doing in the last several years is studying the value of those social connections for communities. And it's quite clear that social capital is one of the most important assets that a community can have.

I'm very impressed as an educator with the administration's efforts to make investments to decrease class size. But the statistical evidence is that the best predictor of the performance of a community's schools, the best predictor of math scores and science scores, for example, is the social capital in that community, even better than the class size. The best predictor of the crime rate -- negative predictor of the crime rate -- in a community is not how many police they have, or how much they're spending on cops, but the amount of social capital in the community. And by that I simply mean the number of people who know one another's first name, the number of people who take part in community organizations, the level of trust and reciprocity in the community.

There are many other factors, many other important factors, that social capital predicts and encourages in our communities. For example, to take another timely example, social capital is the best predictor of which communities will return their census forms. And it's by far the best predictor of which communities are compliant, which people are compliant with the IRS tax code. So social capital has lots of collective benefits. It's not connected -- this is not a matter of warm, cuddly feelings. There are powerful, measurable benefits to communities that have it.

But perhaps the most important example is that social capital has powerful effects on your health, both your mental health and your physical health. Connectedness really matters -- wonderful studies, controlling for your blood chemistry and how old you are and your gender and whether you jog, and whether you smoke and so on, your chances of dying -- actually your chances of dying are high -- (laughter) --

THE PRESIDENT: I'll go to your funeral -- if you'll come to mine. (Laughter.)

PROFESSOR PUTNAM: -- your chances of dying over the next year are cut in half by joining one group. Cut in a quarter by joining two groups. This is not some statistical legerdemain here. The evidence in favor the social -- the health consequences, the physical health consequences of connecting with other people are as strong now, the statistical evidence is as strong now as the evidence on the health effects of smoking was at the time of the first Surgeon General's report.

So if you smoke and belong to no groups, it's a close call. (Laughter.) This is not an argument in favor of smoking, but it is saying that connectedness matters to our lives and to our community's health in very many measurable ways. That's the first point: social connections really matter in measurable ways.

The second point, my point about trends. American communities have seriously lost many forms of social capital over the last 25 years. We're familiar, all of us in this room, with one index of this, which is the decline in voting turnout. That's down about 25 percent. It turns out that that is actually one of the least striking measures of the decline in social connectedness. And in this new book, "Bowling Alone," I try to pull together a lot of evidence. I'm going to just highlight a very few facts for you.

The frequency with which families eat dinner together has declined by one-third over the last 25 years -- not just for people who work at the White House, for all Americans -- (laughter) -- the frequency with which you have dinner with your family -- the frequency with which families take vacations together has declined by one-third over the last 20 years.

The number of times you have friends over the house has declined by 45 percent in the last 25 years. Participation in clubs, in civic organizations -- not just the old-fashioned ones with the funny hats, but even the new-age poetry groups and so on -- adding all of those civic, community organizations up, involvement in those has been cut more than in half in the last 25 years.

Church attendance is down, net, by about a third since the 1960s. Philanthropy in absolute dollars is up, but of course everything's up in absolute dollars. As a fraction of income, philanthropy is down by nearly one-third since the 1960s. So in many respects, communities all over the United States have seen a serious erosion of this very valuable asset, our social networks that connect us with one another.

Finally, my last point, the historical challenge. We as Americans have been here before. There are deep parallels -- and Mr. President, you've made this point lots of times in your presidency, and I think it's a very valuable insight -- there are deep parallels between the turn of the 20th century and the turn of the 21st century. Deep parallels -- not least the features of growing inequality in both of those two periods.

But one of the important features is -- one of the important similarities between the end of the 19th century and the end of the 20th century is that in both cases a variety of technological and economic and social changes rendered obsolete one stock of social capital. In our lifetimes, it's a variety of trends. It's partly technological change, it's partly two-career families, it's partly sprawl and suburbanization -- a variety of factors meant that we no longer feel comfortable going to the PTA or the Elks' Club or the League of Women Voters.

In the previous period, the end of the 19th century, immigration and urbanization and industrialization meant that people no longer lived near people that they had connected with. So when they moved from the farms in Iowa to Chicago, they left their friends behind in the farms. Or when they moved from the shtetl to the Lower East Side, they left their community institutions behind at the shtetl. And America, at the end of the 19th century, just as we do, suffered from all of the same symptoms of a social capital deficit.

And then they fixed it. In a very short period of time, at the end of the 19th century, roughly between 1890 and 1910, most of the major civic institutions in American life today were invented. The Red Cross and the Boy Scouts and the League of Women Voters and the NAACP and the Urban League and the Knights of Columbus -- and Kiwanis and Rotary and most unions and most professional organizations, and on and on. It was an extraordinary period of civic inventiveness.

And their debates about the effects of technology on their communities were amazingly parallel to the debates we are having now. You can take whole paragraphs of the analysis of the probable effects of the telephone on American community life, do a search and replace and take telephone out and put Internet in, and I could publish them today and no one would know the difference. There are deep things we can learn from that period.

Now, if you had been around -- and it would have been tempting to say, you know, life was much nicer back on the farm. Everybody back to the farm, please. Similarly today, if you're focused on these questions of civic decline, it might be tempting to say -- indeed, to my horror, some people have thought I was saying -- life was much nicer back in the '50s, would all women please report to the kitchen. (Laughter.) And turn off the television. And that's not what I'm saying.

I'm saying, we need to reinvent the Boy Scouts or the Red Cross, or the League of Women Voters or the NAACP. I'm not talking about those organizations. Don't misunderstand me. This time around, maybe it won't be organizations. This time around, it may require -- and this is the challenge that I'm issuing to all of us in this room -- it will certainly require powerful, creative impetuses from the world of the new economy.

I want to say that the Internet -- there's been some recent news coverage about the effect of the Internet on isolating us from one another. Actually I know much of that research I don't really believe. I think the Internet had essentially nothing to do with the trends that I've talked about.

All of these trends down, and all of these forms of civic connectedness, are visible clearly in the data at a time when most of today's new economy entrepreneurs were still in grade school. So the Internet had nothing to do with causing this. It may make the --

THE PRESIDENT: Five months ago. Most of today's Internet new economists were in grade school five months ago, I think. (Laughter.)

PROFESSOR PUTNAM: I think -- what I really want to say is, I don't think that the new economy and the Internet will solve this problem by itself. Let me, indeed, close with just one question to the audience to -- this is the point I'm trying to make here. How many people in the room use e-mail? Okay. How many people in the room used airplanes more last year than they did 10 years ago? Right.

And what I'm trying to say is, the reason you use airplanes, even though you have much cheaper communication, is that for some things, face-to-face really matters, especially for things that involve trust and reciprocity. So the Internet is not going to replace our face to face communications. We need to use it creatively to reinforce our face to face communications. And that's where I turn to the experts, both here at the panel and -- how can we use creatively these wonderful new technological instruments to solve what is I think one of our most serious, but silent national problems -- connecting us with one another again. Thank you very much, sir.

THE PRESIDENT: Well, first of all, I thank you all, and I want to give you a chance to comment on what each other said. But let me just observe, every time I hear Bob Putnam speak, I think that Washington, D.C. needs more social capital. And I'm not kidding. And I think also that there is a deep yearning for this sort of thing among young people.

We have a big increase in enrollment in the Peace Corps. We have a huge increase in AmeriCorps. We've had more people in AmeriCorps in five years than the Peace Corps had in 20 years. That shows you there's something to what you're saying, and I think it's very real. And I saw it in very stark ways -- I'm thinking of this because we're coming up on the fifth anniversary of the Oklahoma City tragedy, where person after person down there told me they sort of uncritically bought into the anti-government rhetoric, and all of a sudden, there were these people, and their children were in school with their children. And on and on and on, all the obvious things. But there was this instantaneous sense of cohesion. It had nothing to do with government or the fact that they were government employees.

And I do -- the whole question of whether the Internet will be an atomizing or a unifying, cohesive force in our society is, I think, an open question.

Esther, do you want to talk about it? Bill?

PROFESSOR WILSON: I was just going to say that a great deal depends on the extent to which different segments of the population have access to the Internet. And if, for example, we could increase the flow of telecommunications technology and information to the most deprived communities, I think that the Internet could really empower people and decrease the socio-economic divisions in our society.

It's amazing how excited people in the most depressed areas get when they do have access to the Internet and see what they can learn. And certainly it would decrease the knowledge gap, as well as enhance human capital. So if we can increase access, I think it could be a very, very powerful tool in decreasing racial stratification or class stratification in our society.

MS. DYSON: I think it really is an open question. The good and the bad thing about the Internet is it lets you do more of whatever you want to do. And so I agree with Bob Putnam, it's an enabling tool for social changes that are going to happen anyway. Given that this is a panel about government, I think the thing the government can do is look at the Internet as a two-way tool.

Internet voting is nothing. It's like talking about e-commerce as if all that mattered was the transactions. And what really matters is the open pricing, the communication with the customer, the after-sale support. I like to say it's like talking about marriage as if it were only about sex, when it's really about raising children; it's about communicating with your spouse; it's about cooking together; it's about negotiating a life together, making plans. And in terms of government, it's about the government responding to people.

So my hope for what the Net means about government is not that we can vote in the next presidential election on-line, but that people will get into the habit, probably locally -- because most people don't really go to you to get their water turned off or their parking ticket paid, they go somewhere local -- but if they start getting the expectation that the government will talk to them, I think they're going to start talking to the government more. They're going to feel -- if they feel that they can get a traffic light changed, if they feel that they can get information about their local school, and if they're not happy they can communicate with the principal, they're going to start feeling more involved and more empowered. And they're going to buy into the results.

My all-time favorite story, which I'll tell very short, was when I was on Southwest Airlines, and we'd all sat down; the stewardess gets on and she says, "I'm sorry, ladies and gentlemen, we done run out of peanuts. Now, we can set right here and wait until them peanuts come, or I'm going to take a vote and we can leave right away if you all want to leave." So everybody voted to leave right away, and nobody complained about the peanuts. (Laughter.)

MR. TUZMAN: I think that Esther's comment kind of about kind of what I take that to mean at the end or in reference to your comments about involvement at really the local government level is the necessity for buying, the necessity for involvement and recognition of some of the things that do go away. I recognize that the Internet -- there's a remote aspect. People talk a lot about how it brings us farther away from each other.

At the same time, what's very different about the networks that you talk about at the end of the 19th century and the reaction that you could see today to fill that void, that it could be through the Internet itself, because the Internet is different than those technologies in the sense that it has the possibility of group-based interactivity using the pipes of the totality. And that's what we've been trying to do with Govworks is create local communities, if you will, on-line that are civically engaged.

One of the things that's interesting -- we did this -- Peter Hart Research Institute study earlier in the year, and there were some things that were kind of relatively -- kind of gripping from the responses that people gave. And I thought that one of them was that people were asked whether government would be a bigger part of their lives in the 21st century than it was in people's lives in the 20th century. And I would have thought that the resounding answer would be no, and it was quite the opposite. The vast majority said yes.

And then when asked where they wanted government to be more involved, one of the key ares was, involved in managing technological change, in managing some of the things -- kind of the shrapnel that can fly out of the new economy. So there's clearly demand for them.

PROFESSOR PUTNAM: Can I add one thing? One of the neat things that high-tech firms themselves have done is to learn the value of having their customers connect with one another, so lots of the best tech support actually you don't get from the tech support line, but you get from the chat groups focused on that. And many firms have been smart enough to use that by making it easy for people to connect with one another.

So, rather than B to C, that is business to consumer, the business focuses on C to C. I hope that we'll use that same lesson in the area that we're now talking about -- not just C to G -- not just between citizens and government, but having government encouraging C to C, that is citizen to citizen communication, because that will be -- I don't know what it will do for government in the short run, but in the long run, it will be a lot better if citizens, just as in wide businesses, citizens are connecting with one another in the context of public programs.

MS. DYSON: I really think in terms of computers and schools, one of the biggest impacts is not the kids learning in the class, but the parents communicating with the teachers and the parents communicating with other parents. Suddenly, you don't need the PTA if you have the school network.

THE PRESIDENT: Anybody out here want to say anything, ask any questions?

Q One of the things I thought Bob Putnam was going to say when he made this end of the 19th century until the end of the 20th century comparison was that at the time of the industrial revolution -- and it started off being very -- increasing in terms of inequality, and there is at least some notion that as we moved into the 20th century, as that revolution matured, in fact, income equality became more -- income was pretty more equal. And I think part of the story there had to do with economies of scale, that as we learn to build cars and it was easy to build two cars, it really wasn't that much more expensive to build a third car for somebody else, and so the economy itself in some sense tried to adjust in ways to try to spread these goods and services over a much broader group of people.

And I'm trying to draw an analogy -- I'm more asking the panel -- which is not an analogy at the end of the 20th century -- the new information technology, if there's anything -- economies of scale, it's in getting one more person on e-mail, one more person -- the information is available -- it's not very expensive once you make it available for 10 million people to really make it available for 50 million.

And I really wonder what opportunity really lies there and how that will play out over time, and whether not only that will play out in terms of social capital issues you're addressing, but also with the earlier questions we raised with respect to income inequality -- whether there's not a good chance that we may, in fact, have some very positive aspects as those economies of scale play out in the economy.

PROFESSOR PUTNAM: Well, in fact, it's even better than economies of scale because there are network externalities here, which means the productivity of the Net increases rather than decreases, as people add to it.

Yes, I think there's a positive synergy, if I can put it that way, between battling inequality and battling the social capital deficit. Across time, across space, across the American states, there's a very strong, positive relationship between the degree of economic equality and the degree of social capital. The places in America that have the lowest disparity of income are the places that have the highest levels of civic engagement.

So I think that battling the problem that Bill Wilson is worried about and the problem that I'm worried about is two facets of the same problem. I don't think, however, that this just happens automatically, that if we just sort of twiddle our thumbs long enough, all these problems of equality and civic disconnectedness will solve themselves. I think -- and they didn't the last time. People, the last time we went through this, worked hard to change the social and political conditions to enable policies that led to greater equality and greater civic connectedness. So my only disagreement with the question is the notion that somehow, if we just sort of sit around, it will all happen automatically.

MS. DYSON: There's another interesting phenomenon, though, which is that economies of scale apply in mass production and they apply in large institutions, but what's really interesting now is that the transaction costs are getting lower, so that individuals can benefit from the economies of scale. It used to be if you wanted to be productive, you had to go join a big company and use large amounts of capital. If you wanted to reach a lot of people, you needed to either work for or own a TV station. And now you can kind of get those economies of scale at retail, not just as a consumer by buying a cheaper car, but again, as a producer, by owning a PC.

As a small business, you can do what you can do uniquely well, but then you can contract out your accounting. You can contract out your laundry if you're a restaurant. You can contract out your payroll. And so there's kind of a bifurcating economy of small, creative firms, but then out-source the commodity stuff to large economics of scale firms who apply their creativity to doing certain functions in a mass-produced way more efficiently.

And the impact of that I'm not sure of. But I think it means that we may be able to look forward to smaller workplaces that are, again, more human. And I think that's a trend really to encourage. Because large companies have duties only to their shareholders, in some sense, and smaller companies can be more human. If you have a thousand employees, you need to treat them all the same. If you have 20, you can actually make allowances for them as individuals.

THE PRESIDENT: Well, when you talked about that, I want to give you an example. When you talked about all these organizations that were created in the aftermath of the Industrial Revolution in America, arguably, they were filling need for social capital, for networks that didn't exist when people worked in smaller work units and had more kind of comprehensive relationships with a smaller number of people.

When you did your book and you talked about Italy, for example, and how Northern Italy had massive amounts of social capital, partly around the economic units that were patterned on the medieval gills, I got to thinking about this -- I'll just give you an example of something that's going on in the Internet economy.

You know, eBay, the Web site where you can buy or sell on eBay and you can trade, they keep up with their customer base, and they -- I just was out there last weekend and I always ask, every time I see somebody that has anything to do with them -- they're now up to approximately 30,000 people who are making a living on eBay. That's what they do for a living. They buy and sell, swap and trade on eBay. And they know that a significant percentage of these people who are now making a living were actually very poor, were actually moved from being on public assistance, on welfare, to making a living on eBay. So they have, in effect, recreated a small village.

On the other hand, they're working alone on a computer at home. Does this phenomena add to or subtract from the stock of our social capital?

Q Yes. (Laughter.)

THE PRESIDENT: You ought to run for office if that's your answer.

PROFESSOR PUTNAM: It certainly -- particularly, I think, in eBay where there is the possibility to developing reputations, it actually is a community, and I think a crucial part of eBay is the ability to develop reputations. And the anonymity in some forms of net life is actually fatal to social capital, because if you can kind of run away from what you did yesterday, that is lethal to social capital.

On the other hand, I admit that I'm a little skeptical about, I belong, myself, to lots of these virtual communities. I correspond every day with people in Europe and Japan and so on, but they're not going to bring me chicken soup if I get sick. What I'm trying to say is there are some functions that are provided by real, not virtual community, that really require us to connect with other people in real world, not just in virtual world. And I think part of the story -- I'm reacting this way because I think some people think that if only we had all virtual communities, we could just live in that virtual space. But I think we need to think harder about how to -- for example, Govworks is a good example of that -- how to use these technologies to reinforce real face-to-face communities.

And if you go to Govworks, you see there are really opportunities there where you can meet other people who live in the same community that you do. That's the -- and those people, if you meet them, will bring you chicken soup. So I'm not only thinking it should be virtual.

THE PRESIDENT: Let me just give you one other example. I've seen this in several contexts in all of the controversies in which I've been involved here over the last seven years. You can create a virtual national movement over the Internet in 48 hours.


THE PRESIDENT: Somebody supports my position on the assault weapons ban. Somebody opposes my position to close the gun show loophole. I can give you 30 examples. And all of a sudden, you will have 200,000 people that are in touch with each other all for the same thing. And I think in a lot of ways that's empowering and a very, very good thing. And a lot -- but the thing that bothers me about it is, even though it has infinite possibilities and it's really reinforcing, in some sense you want communities to be places of different views have to meet and mediate those views.


THE PRESIDENT: Where you have to confront not only those that agree with you and you want to swell your numbers so you will have a defined political impact, but you have to sit down at the table with people who totally disagree with you and try to figure out what in the Sam Hill you're going to do to live together and work together and move forward. That concerns me as well, because it's like the specialty magazines or the 69 channels on your cable, or other stuff. I think all this on balance is a big plus. It's more fun for me. I like it, you know, and everybody else does.

But the question is, where do we find the commons? And how can we use the technology to find the commons, and to honestly discuss in a respectful way with people with whom you disagree those matters that have to be dealt with, because no matter what our opinion is, you know, our action or inaction will define who we are as a people.

You know, for example, I think about a developing country that -- what I hope from what Ms. Chatterjee was saying is that in the beginning of her opening remarks is that somehow technology can be used to bring decision makers face-to-face with the poor en masse, and force them to interact with them in a way that in effect creates a community that wouldn't be there, because we all know in every society the people who are really poor and downtrodden tend to be invisible to people until they're intruded upon.

I don't have an answer to this. I just know it's a serious problem. It's a problem -- you know, when I leave the White -- I don't have an option, as President, not to deal with people who disagree with me. And I think it's a good thing, because I'm constantly having to re-examine my opinions on the issues, or wondering whether on the edges I might have been wrong, or whether we can do better, you know?

But when I leave here, you know, I can do just fine and be happy and sassy going through the rest of my life just being around people that agree with me all the time. And I don't know that that's the best thing for a community. There needs to be a common space where we come together across the lines that divide us.

MR. TUZMAN: I think that -- this is not so much an answer to that question, but just a rumination -- that there's no question about the fact that -- I mean, we find on our site, for example, we try to get people together. And what happens is, I don't know -- siloization or whatever, people getting into separate channels and discussion based on other people that think the same thing. And it's a constant problem, and it manifests itself in the other media that you describe.

But I know it can go the other direction as well. I grew up in Latin America, and I'm now very active in informal networks of Latino entrepreneurs in the United States. And now we're reaching out to folks in the region a lot as well. And one of the most amazing things about the kind of new economy's effect in that region is that you're seeing for the first time in my memory, in my father's memory, in my grandfather's memory, people feeling like it's -- people interacting in real time across the region with each other as a regional kind of group.

And I don't know if I'm describing it well, but you're really seeing -- Latin America's been going the other direction for decades, probably centuries, of getting Peru going farther away from Colombia, and Argentina going farther away from Brazil. And there's a whole new generation of Internet entrepreneurs that are actually coming -- you know, there's less brain drain. It's the opposite; they're coming back into the region. People feel like they're more part of a community. Informal groups developing that meet on-line, and then meet also off-line, which has got to happen, of entrepreneurs throughout the regions. I know in my gut that it can go the other direction, too.

MS. DYSON: I think it goes back to what Bob Putnam said. At the end of the last century -- I don't know who it was, but somebody said, we can't just let this take its natural course. We need to do something else. And you can never build a system so good that it can't be wrecked by people who don't pay attention to it. And you can never build a system so good that it doesn't need leadership and people with the courage to listen to other points of view, and the courage to actually change their mind if someone persuades them. That's called learning. Learning means, oh, I was wrong; there's new information. And courage is a word you don't hear a lot now. In my world, you hear about risk-taking and entrepreneurship, but very rarely courage.

Q -- CEO of Business and Professional Women, USA. -- and I do think that television, for example, was such a disappointment in terms of the promise that it did have to do a lot of positive things. And I think by and large, it's been mostly negative, partly because it is so passive. And it has dumbed down our culture, instead of lifting up the level of dialogue.

But I think in all this potential of the Internet there is hope, because it is more interactive, of doing something more positive. And the example I would cite is that among our business owners, we have a lot of women entrepreneurs who have left the corporate world, because of the glass ceiling and other factors, and are going out and creating their new business ventures. And the Internet has proven to be a real opportunity, because suddenly in this new terrain of the Internet electronic marketplace, they are not burdened by the packaging that they have in the regular marketplace. So the stereotypes of their packaging are in a more neutral terrain, where they can compete. And that is a very positive factor.

So if there's an ingredient there that applies also to our civic life, you know, to the extent that people feel excluded by gender or by ethnicity, or feel that their government may be ignoring them or not respecting their point of view in the normal places in which they have tried to penetrate that divide. Perhaps the Internet offers them a terrain where they can feel that they're going to have an equal voice and they will be less alienated. I hope that that's a possibility, particularly with this younger generation, because we see them tuning out of politics and tuning out of feeling that government can be responsive to them.

So I think the biggest challenge there is right back to what we said before: education and making sure that we bring this democratizing influence down to all people, and don't leave them feeling that they're out at the margins.

THE PRESIDENT: One more. Anybody? Yes, go ahead.

Q We've talked about empowering aspects of the Internet, but the Internet has the greatest power to regulate our lives as any technology on earth. Our Web site, even though it's in English, we leave it open. You don't have to register, because we know 20 percent of the people reading it are Chinese and we want to leave it open.

But now in this country, we're talking about digital certificates. And when you do something on the Internet, there is a track of every place that you've gone. So people might want to do something like that to protect our children so that they don't go to pornographic sites, but the ability that not only this country, but other countries might have to regulate our lives, this could be the worst thing that ever happened in terms of disempowering. So nobody has spoken about that and I wonder if you have any reaction.

THE PRESIDENT: Who wants to talk?

MR. TUZMAN: I would have to disagree in certain respects. I think that if a digital certificate kind of protocol is kind of used correctly, it will have the opposite effect.

Q If used correctly --

MR. TUZMAN: Absolutely. But I mean, first of all, you won't have to use it -- it's like a Social Security number -- actually, yes, there is a tracking mechanism to it, but it also makes sure your transactions are secure, you are who you say you are. You can do things with confidence, and if it's used appropriately, I think it will enhance people's feelings about security and privacy on the Net.

Q It's like nuclear technology --

MR. TUZMAN: Perhaps.

MS. DYSON: Just briefly -- Bob Putnam's comment about anonymity. It is destructive of the social fabric, but at the same time, it's tremendously important, and it's important for the United States, which, let me say -- I spent a lot of time elsewhere -- has the best policies regarding the Internet of anywhere. And I appreciate you calling this conference and not focusing only on the economy. But we also have a role to play in being enlightened vis-a-vis other countries, where if you're not anonymous, you may be executed for what you said.

And our policies of pretty much leaving the social and political infrastructure of the Internet free and open are tremendously important, more so in the rest of the world even than here.

THE PRESIDENT: I agree with that.

PROFESSOR WILSON: Mr. President, could I just point out one thing. I'm concerned that there is one issue that might be overlooked when we talk about the positive effects of the Internet, particularly empowering individuals, and that is that people who do not have access to the Internet are at a distinct disadvantage.

Now, I said earlier that I thought that the Internet could contribute to enhancing the social and economic status of groups who have access. But groups who do not access fall further behind, and so the Internet could really enhance racial stratification, ethnic stratification. So given the power of the Internet, the possibility that it could widen the divide, deepen the divisions, I think that it should be one of our highest priorities in this country to make sure that all groups in society have relatively equal access to this powerful instrument.

THE PRESIDENT: I agree with that.

Let me say to all of you, one of the things in our budget this year, in addition to our efforts to connect all the classrooms and libraries, is funds to set up 1,000 community centers in poor, rural communities, Native American reservations, and relatively isolated urban neighborhoods, so that this will be -- it will, by definition, build social capital. If you have community centers where people can come and access the Net, with people there who are trained to help people use it, who otherwise would never use it, I think it can make a big difference.

Well, we stayed an hour late, but it was certainly interesting. I think you did a great job, and I thank you all for your patience, and thank you for being here today. It was great. (Applause.)

END 5:33 P.M. EDT