Beyond e-Hype

It may be less glamorous than the information industry, but the "old economy" still pays most of our bills

By: Jim Stanford

  The Globe and Mail recently unveiled a snappy new "e-BIZ" logo, which will be used to highlight major articles dealing with high-tech developments. This logo might be the journalistic equivalent of the "dot-com" which routinely appears at the end of high-tech company names. Perhaps e-logos on newspaper articles will do for readership, what dot-coms have done for share prices.
  On March 9­its first day in action ­ the "e-BIZ" logo appeared alongside five stories. Another 10 e-business articles ran that day, but for some reason didn't merit this high-tech badge of honour. In all, the business section of the March 9 Globe devoted some 450 column inches to computer and e-business stories, or one-third of its total editorial space (not counting stock market listings). Even the table of contents now features a special "e-BIZ" section­strategically located above quaint, old-fashioned headings like "Canada" and "International."
  Reading the papers, then, one would get the impression that computers and e-business must account for at least one-third of Canada's economy. They certainly attract at least one-third of our attention.
 

The computer services sector still makes up less than 1 percent of the total workforce

  But when you start digging into the hard numbers, it's hard to justify the amount of air time devoted to the e-economy. For example, one of the 15 e-stories in the March 9 Globe estimated that Canadians will buy $3 billion worth of goods and services on-line this year. That's at the high end of recent estimates of the value of the on-line economy. But that still accounts for just one-half of one percent of the $600 billion that Canadian consumers will spend in total in 2000­less than the statistical margin of error in the national accounts data. The e-economy could thus drop off the face of the earth, yet not even be detected in our official GDP statistics.
  The same over-selling is true regarding the high-tech labour market. Less than 1 percent of Canadian workers are employed in the production of electrical and electronic products, and many of these manufacturing workplaces resemble high-tech sweatshops. Employment in this sector has actually declined over the past decade.
  Even in the booming computer services industry, employment opportunities have been vastly overblown. Computer programming, service, and related occupations account for just 3.5 percent of the 2 million jobs created in Canada since the last recession, and the whole sector still makes up less than 1 percent of the total workforce.
  In short, we can't all be Web page designers. And there's a distressing similarity between the low-paid, non-union workers toiling in the Chapters Online distribution warehouse, and the equally low-paid, non-union workers stacking boxes in the back of a WalMart store. Some brave new world.
  It's hard for the boring, "old economy" to get any profile at all amidst this e-hype. Think of General Motors of Canada ­ one of our largest "smokestack" employers, which generates $3 billion in revenue every 18 business days. Yet the company has been mentioned in the Globe and Mail only 15 times so far this year ­ equivalent to just a single day's e-coverage.
 

We can't eat information. We don't wear it. Pure information will never account for more than a tiny fraction of total consumer spending.

  Coincidentally, GM Canada's current and retired workforce takes home about $3 billion in wages, benefits, and pensions every year. But who cares about assembly line workers? They may make good money, but look what they spend it on: cars, houses, clothes, RVs, and boring local services like restaurant meals and hair-cuts. When's the last time one of them bought fine art on-line through e-Bay (a company with 130 employees whose market value currently surpasses that of GM itself)?
  Some pretty fundamental questions have to be asked about whether there even is such a thing as an "information economy," let alone whether it will usher in prosperity for all. We can't eat information. We don't wear it. Pure information will never account for more than a tiny fraction of total consumer spending.
  Sure, information is more sophisticated, more readily available, and more important as an input to business decisions. But that doesn't mean we live in an information economy ­ any more than the fact that we all breathe air means we live in an "air economy." The vast majority of our economic resources for the foreseeable future will continue to be dedicated to the production of real goods and services which make a more tangible contribution to our actual quality of living.
  Maybe e-hype is just another passing fad, grabbing the headlines for a few years before the media jumps on another craze. It becomes a problem, however, when our policy-makers start to ascribe it with the same importance as the headline-writers.
  For example, the reductions in capital gains taxation announced in Paul Martin's recent budget will cost the federal government $450 million per year. Martin justified this significant expense by the alleged need to prevent Canada's computer geeks from fleeing south (even though the major beneficiaries of this tax cut will be run-of-the-mill rich people who wouldn't necessarily know a network driver from their limo driver).
  Why didn't Martin spend this $450 million on health care? After all, ten times as many Canadians work in health care as work in the computer business. And good health care surely makes a bigger contribution to the well-being of Canadians than yet another dubious on-line service.
  The so-called "old economy" may be boring, but it still pays most of our bills. And real economic progress implies a whole lot more than finding new ways to go shopping. Policy-makers shouldn't forget this, no matter how much of their newspaper may be devoted to the "new economy."

Jim Stanford is an economist with a boring old union of auto workers.

* Animated graphic from www.geekgarb.com

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