Internet and Economy

 <Entry for Deutsche Bank White Paper Challenge- IDEATRICS>

Imagine that the Internet and computers were available in 17th Century, before the industrial revolution. Explain how it would have changed the face of business and economy today.

Computers and internet, better called the Information Technology (IT) have had a profound effect on all walks of our life. Whether it is education, entertainment, governance, policing, transportation, IT is there in all of them. There is a saying- ‘We earn to live and live to earn’. With its colossal capacity of data processing and lightening speed of information exchange, computers have an unparalleled existence in today’s business and economy. Though for many of us, especially in the agrarian land of India, business and trade is still nothing more than exchange of goods, cash, cheques and loans, growth of use of IT in stock markets, exchange, international financial forums deeply impacts the global commodity prices and fiscal policies, and hence affects the lives of even the least concerned.

Things evolve out of need. Although it was the extra-ordinary impetus to the industries, trade, knowledge sharing and quest for higher living comforts, given by the great industrial and scientific revolution of 18^th century, that led to the eventual evolution of Computers and Internet; the importance of Information Technology in economy and trade can still be appropriately emphasized by imagining its presence as soon as in 17^th century.

Industrial revolution of 1800s marks a major turning point in human history with almost everything influenced in some way or other. The growth of textile industry, Iron making and steam engine then started a chain process which is continuing even today, a process of sustained growth. Within two centuries of 1800s, there was a 10 fold increase in the global GDP and 6 fold increase in the population. Apart from this, what really was significant was the mental revolution that accompanied in that period, which changed the thought process of people towards more democratic, independent, constructive, and innovative one. Though IT was actually a consequence of this change and has organically adapted to sustain this trend of growth, had IT been there earlier, it would certainly have been precursor to even more dynamism. It has been less than 50 years since the invention of computers and internet, but still what mankind has achieved with its help today was unimaginable even a generation ago. Had IT been there 300 years ago, the face of society, business, trade and economy as previewed by the visionaries and fictionists would have been true today.

 The biggest boon of IT is the speedy dissemination of information. With advent of computers we have entered into a new era of globalisation, in which the whole world has become a village. People have become well aware of so many macro and micro economic events occurring round the globe that affect them and their family. However the so called mental revolution is still constantly lagging behind the other growths. There are still so many people who do not have an access to computers or internet. Countries like Somalia, Algeria, Afghanistan etc are still living in age of fundamentalism under the mercy of the elitist bourgeois class of rulers. People have certainly benefited a lot from the IT revolution, however still very small ratio of people have actually got benefits from all these developments. The abundance of natural and human capital of more than half of world is still untapped. Had there been access to computers to all right from the very beginning of the revolution era, the fruits of such growth could have percolated to the deepest corners and I am sure the increase in world economy (GDP) would have been enormous and sufficient feed all and still save.

There is an undeniable link between good education, good health and good economy in a country. If industrial revolution brought with it higher living standards, more employment, easier production of goods and services, some menaces like population explosion, increasing disparity between people, increasing health hazards like pollution, radioactivity and most importantly mental stress  also crept in. Today we find solution to these in better technological infrastructure to cope up with the rising demands. However still caught in a vicious cycle, it’s becoming more and more difficult to achieve inclusivity as further innovations are leading to more growth of the already benefitted group and the others stay lagging far behind. However if IT had been present right in the beginning, a more planned and inclusive growth could have been achieved. Today, being unable to provide classroom teaching to all, we have started resorting to e-schools, e-hospitals. The fruits of this instalment are expected to reap in next few decades. If the same innovation had begun 3 centuries earlier, it could be very much possible that today every single person had access to education. And thus the skilled human capital would not only have had employment but would have generated employment for many others. With better health and medical facilities, the vast ocean of talent which now perishes or goes unnoticed would have added to the global productivity in enormous quantities.

The next important area where IT is continuously establishing itself is governance. Considering a developing country like India, most of the upcoming policies are centred around the usage of Computers and internet. This especially has a great significance for the poor. Various programs like unique identity program, e-chaupals, RTI, agricultural education via internet etc. are being implemented, and for all these the pre-requisite is computer literacy. The entire class of ‘Computer illiterates’ is bound to be at loss. However the emergence of computer technology in 17^th century would have made computer an accessory to each and everyone today, with no one being practically aloof from benefits of computers. This would have rendered not only stability and robustness to governance and hence the economy, but also have included one and all. Moreover an increased transparency by use of IT in the governance would have led to decreased corruption and have saved trillions of illicit money that remains hidden from countries’ active economy.

Till now, what we saw was the indirect though highly important effect of IT would have had on economy and business. However it is imperative to analyse the hardcore sectors like banking, finance, investment capitalists, stock markets, futures markets etc. in preview of early advent of IT and computers.

With banking industry, it has become so easy today to manage money. One can invest his savings judiciously; borrow money for new ventures at most competitive interest rates. Introduction of plastic money, ATMs, phone and internet banking has ushered a new sense of independence in one and all. The already exponential growth of banking industry would have reached a tendency to touch infinite capabilities by now if the computers and internet were there 3 centuries ago. Every home computer would have been a bank; every smart phone would have been a super market. Trading would have become extremely easier. This would have multiplied the income of one and all manifolds. The various schemes and benefits of investment banking, financial derivatives etc. could have become a child’s play.

This new method of delivering information has had an enormous effect on business activities in general and on the financial sector and stock investors in particular. What used to be a matter of a few days has today become a matter of just a few hours in trading stocks. There used to be a whole ritual of formalities, filling up of forms, signing affidavits etc. for even small transactions. But IT changed it all and is still changing. However had there been computers right from the very beginning, online trading would have become a matter of few seconds or even less. And it is a well known fact, that ‘Time is money’. With lightening fast access to changing rates, and trends in the market, and with more user-friendly trading interfaces on everything with a computer chip, traders could have made even more informed financial decisions regarding buying and selling stocks. Financial derivatives which are meaningful to large scale investors only, could have become meaningful to even a small farmer trading seeds and fertilisers for his farm. Also so much of the money leakage in commissions and brokerages could have been saved towards higher profits, and would also have allowed checking various types of misleading frauds. By now internet would have mitigated three of the proposed causes for low stock market participation: transaction costs, information costs, and limited access.

The use of computers is not just limited to information sharing but also includes high efficiency in data processing and calculations which was not possible ever before. Presence of Computers during 18^th century would have given unprecedented boost to science and mathematics. This could help our economists and policy makers make much better choices regarding future. Currently our financial markets, investment banks and industries are based on speculating the future trends. Having right mathematical and probabilistic models and capacity to process huge amount of data for them helps us to take curative steps right in the beginning to avoid any substantial economic crisis. It is not improper to think that a sustained and calculated growth using computers in the past few centuries and careful assessment of future could have saved us from the ill effects of the financial crunches like Great Depression of 1929 and the recent crisis of 2008. After all, these were nothing but issues of unexpected rise in demands and unemployment crisis. Use of IT from the beginning would certainly have opened up many avenues to meet the needs of 7 billion people today. Researches in various fields of science would have turned time into an odyssey. The concept of flying cars, virtual computers, humanoid robots, high speed transportation would have been true. Where today we are facing extreme space crunch on earth, computers 300 years ago would have made space homes and inter-planetary travels possible, therefore opening lots of avenues of new business today.

On one hand when something has benefits, on the other there are some inherent disadvantages too. Security would certainly have become a potential threat. With every iota of information flowing around through wires, it would have become highly vulnerable to cyber thefts and hacking. Though such threats are coming up today also, but introduction of IT 300 years ago would have immensified our needs and dependence on it. There would have been confidentiality issues, identity thefts, and copyright violations like never before. Secondly, it could have robbed us of our creativity. It is already being felt that whenever we are to take up a new work, we rely too much on Google. People waste a lot of time online on social networking websites. There are reports on worldwide decrease in the level of innovation in school going kids. This would have had really adverse effect on present economy. Also it is argued that since the need of computers was not even felt as early as 17^th century, the potential of computers’ processing power would just have gone unused until today without really having much economic impact.

I would conclude by saying that a decade ago such skepticism about the long-run economic implications of our data processing and data communications technologies was the conventional wisdom. But the past five years have converted many skeptics. Today the idea of computers and internet is totally invincible. There is no denying the fact that had there been computers in 17^th century, we would have been living in a fast forward mode, and present would have been far beyond our imagination.