THE WHITE HOUSE
Office of the Vice President
VICE PRESIDENT GORE RELEASES REPORT ON THE DIGITAL ECONOMY OF THE 21ST
WASHINGTON,DC -- Vice President Gore and U.S. Secretary of Commerce William M. Daley today released Digital Economy 2000, the Commerce Department's third annual report on the information-technology revolution and its impact on the economy. Electronic commerce and the information technology (IT) industries that make e-commerce possible are growing and changing at breathtaking speed, fundamentally altering the way Americans produce, consume, communicate, and play.
"We are indeed in a new economy--an economy driven by information, research, knowledge, and technology. The report released today underscores an economy that values the productive capacity of people above all else," Vice President Gore said. " I want to ensure that we can sustain the innovation that is now driving the economy and bring the promise of a better life to all Americans."
"This report, Commerce's third, shows us that the benefits of IT are quickly spreading across the board, and eventually will touch every business, from the smallest mom and pop shop, to the biggest Fortune 100," Daley said. "The first two reports were called 'The Emerging Digital Economy.' Today, after just 26 months, we dropped the "Emerging," because it's here, in fact, it has become the driving force of the American Economy."
IT industries are the number one driver of our economy. Over the last five years IT industries accounted for a third of U.S. growth despite the fact that their share of the economy is just 8 percent.
Technological changes have dramatically lowered the costs of computers and communications, and spurred business investment in IT hardware and software. Computer prices declined by 12 percent a year from 1987 to 1994, but plummeted 26 percent per year from 1995 to 1999.
Real IT investment doubled from 1995 to 1999, from $243 billion to $510 billion. IT investment represented two thirds of the growth in total investment during those years.
IT industries have also been a major source of new R&D investment. In 1998, IT industries invested $45 billion in R&D, or nearly one-third of all company-funded R&D. IT industries accounted for 37 percent of the growth in total R&D between 1995 and 1998.
IT is making the U.S. substantially more productive. With 2.8 percent productivity growth from 1995 to 1999 -- double the 1.4 percent rate from 1973 to 1995--the U.S. has a new economy. Improved productivity has lowered inflation and raised real wages.
IT is lowering inflation. Falling IT prices have directly pulled down average inflation by 0.5 percentage points a year. In addition, by raising their productivity, IT is lowering inflation of other industries.
The IT sector is rapidly creating jobs at dramatically high wages. IT jobs average $58,000 a year, 85 percent higher than the average for the private sector. Between 1994 and 1998, employment in IT industries expanded by 30 percent, from 4.0 million to 5.2 million jobs. IT occupations that pay the best and require the most education have been growing most rapidly.
Internet access around the globe soared 78 percent in the last year to 304 million people. That represents a hundred-fold increase as compared to 3 million people online in 1994. Today there are over a billion web pages, and 3 million new pages are added every single day.
Businesses are increasingly using the Internet to improve efficiency. Firms are moving their supply networks and sales channels online, and participating in new online marketplaces. Firms are also expanding their use of networked systems to improve internal business processes--to coordinate product design, manage inventory, improve customer service, and reduce administrative and managerial costs. Nonetheless, the evolution of digital business is still in an early stage.
Economists have substantially raised their forecast for long-term growth. Their 10-year forecasts now call for 3.1 percent growth, up from 2-1/2 percent little more than a year ago. The report's analysis supports this view of a new economy.
The report for the first time concludes that the Digital Economy is here to stay.
To download the report and for more information on the Department of Commerce, visit www.doc.gov.