The current economic expansion is the longest on record. Yet in one critical sense, the expansion is just beginning. The Internet revolution is in the early stages, and its full impact won't be felt for many more years. It takes a long time for a major technological innovation to work its way through the economy. Canals took forty years to build, the railroads fifty years, and the commercial exploitation of electricity in manufacturing approximately four decades.

Still, the Internet economy is expanding far more rapidly than even starry-eyed optimists imagined a mere five years ago. The University of Texas recently released its third annual report on the Internet (www.internetindicators.com). The figures are striking. Revenues of U.S.-based Internet companies rose by 62% to half a trillion dollars last year. The Internet economy now employs more workers than the insurance industry, and, measured by revenues, the Internet sector will be bigger than the auto and truck industry some time this year. The pace of change is accelerating.

To be sure, many economists still downplay the Internet as a transforming technological force. They argue that its economic and social impact will pale next to railroads, electricity, and the internal combustion engine. I'm skeptical of their dismissive perspective. But whether the Internet ranks high or low among technological innovations is beside the point. Economic growth depends more than ever on knowledge, creativity, and innovation. The Internet speeds up both the generation and dissemination of all three. The Internet is a force for higher living standards.

 


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