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Huge Meeting of World Economists Discusses Globalization, IT - 2003-01-06

Seven thousand economists from around the world examined the impact of globalization and information technology, during a weekend gathering in Washington.

Economists from the Massachusetts Institute of Technology, Columbia, and Harvard universities say there is a direct relationship between technological advance and gains in productivity, also known as output per hour worked.

Martin Feldstein, a likely successor to Alan Greenspan at the U.S. central bank, said the United States has done better than Europe in productivity and job creation in the past decade because of greater receptivity to innovation and a more flexible labor market. "Innovation is often frightening to people who have to learn new systems, particularly older workers for whom new computer technology may never be user friendly enough. Innovation can also be personally unpleasant for managers if it means firing workers and forcing others to take early retirement," he explained. "This business process innovation nonetheless occurred in U.S. firms because the general environment encouraged and supported change, while the individuals who drove change had strong incentives for doing so," Mr. Feldstein said.

In the late 1990's the United States registered five consecutive years of 40 percent growth in investment in computer technology. Panelists said that investment accounted for almost all of the U.S. productivity gains in recent years.

Mr. Feldstein said unlike earlier periods of technological advance, recent changes are affecting middle-level managers more than blue-collar workers. "These productivity gains made possible by the new computer technologies have been concentrated in white-collar jobs. While earlier generations of technological change permitted automation and robots on the production process, the IT [information technology] revolution has brought productivity gains to management, sales, purchasing, accounting, design and other non-production activities. And that now is where most of the [new] jobs are, even in manufacturing industry," he said.

But the situation is quite different in developing countries where labor is more plentiful and cheaper. Joseph Stiglitz of Columbia University said productivity gains in developing countries are linked to education and a capacity to accept new technology.

"There have been marked changes in technology leading to changes in the pace of productivity. And even if the new economy [characterized by IT and the Internet] has been hyped and has not meant the end of the business cycle as some people thought a couple years ago, it is quite clear that there have been changes in technology and changes in productivity. The point is that different countries are in different position to take advantage of these changes," Mr. Stiglitz said.

He said that while Africa and Latin America lag behind in accommodating new technology, China and South Korea are clear winners.

The panelists concluded that the years 1995 to 2000 represented a unique period of particularly rapid technological advance. This, they said, probably was a once only occurrence facilitated by the arrival of the Internet, the global communications system made possible by the marriage of computer and telecommunications technology.