Extending the Information Revolution: A White Paper on Policies for Prosperity and Security

Athena Alliance whitepaper by Kenan Patrick Jarboe et. al.

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Introduction:

America has a grand opportunity to lay the foundations for a prosperous and secure future. Our task is not just reviving the weak economy or increasing security – as important as those are. Real sustainable economic growth and international security will come from expanding the information revolution to all parts of our society. Metcalfe’s Law states that the value of a network increases exponentially in relation to the number of users. The same is true for markets and economic activity. By leaving some behind – both at home and around the world, we impoverish not only those individuals; we also impoverish ourselves.

The information revolution has reached a critical juncture. It is no longer a phenomena of the dot-com bubble. Economic growth in the information age comes not from physical strength or even the creation of information technology (IT) equipment. It is the creation of knowledge and information that drives growth. In the information age, the output of workers is more likely to be an “intangible” – such as software, ideas, services, music, literature, etc. – rather than a physical good.

Information and knowledge are transforming even traditional industries. Information helps both manufacturing and services companies better tailor their products to meet specific customer needs (customization), improve the product and the process (productivity), and create new products (innovation). These information assets are the new wealth of nations. All companies are becoming information-driven and all workers are becoming information workers. Yet, not all companies have made the transition and not all workers are benefiting.

Macroeconomic policy – either fiscal or monetary – plays a key role, especially in creating an environment that is conducive to investment. But if the information revolution is to be wide, deep and sustained, policies and programs must create a framework in which the information revolution can thrive and all can participate.

Actions are needed in a number of areas. This is not simply a question of technology deployment, although we must do more to get IT into the hands of all users. It is a broad package to help all Americans benefit from the shift to an information economy. Such a package must range from expanding the technological infrastructure to education and training to financing.

This paper lays out a series of recommendations in a number of areas from a number of experts. It is based on some shared principles:

the critical importance of inclusion and true participation by all;
technology is, and should be, a tool – the means to an end, not the end itself;
open and competitive economic systems work best;
and a more economically prosperous world is a more secure world.
This set of recommendations is not, by any means, complete. Nor do all of the authors of this white paper necessarily agree with all the suggestions. What we present is, however, evocative of the range of issues that must be addressed to continue to extend the information revolution to all. The following is a summary of the recommendations.

Telecommunications Infrastructure:
Enforce the requirement of an open telephone network. Reject proposals to deregulate and lessen competition. Instead increase enforcement of the pro-competition provisions of the Telecommunications Act of 1996. Free up more of the radio spectrum for “third generation” broadband mobile wireless. Consider subsidies for certain low-income users or rural communities.

Internet Access and Community Demand:
Maintain or expand federal, state, or local programs that provide funds for community technology, including the Technology Opportunities Program (TOPS) of the U.S. Department of Commerce. Help form public-private partnerships to bring advocates of low-income people into contact with people from the technology and business sectors for community development.

IT Utilization by Non-Profits & Community Groups:
Focus on helping community groups and non-profit organizations use technology in their day-to-day operations – not just on the role of these organizations in providing access to the technology. Identify, assess and coordinate existing initiatives involving non-profits in order to eliminate duplication and encourage replication. Support innovation in technology and related means by non-traditional and/or non-commercial players, while fostering an environment of innovation that can target challenges specific to the non-profit sector. Encourage interest in and adoption of technologies and tools to facilitate public and social participation, including attacking the problems of reluctance and unfamiliarity

Education:
Federal, state and local education departments and agencies should set up specific projects to demonstrate the practices they wish the nation’s educators to accept. The use of technology should be a part of the standards that we are asking teachers to teach and test to. Schools should work with informal learning places (museums, science centers, television stations, newspapers, etc.) that have demonstrated an ability to use technology in learning.

Post Secondary Education and Training:
Create programs that help workers learn more about career opportunities in their industries and elsewhere and to support informed choices about their education and training, such as Lifelong Learning Accounts. Utilize technology in the form of self-paced learning tools and access to on-line learning to better help the unskilled. Support sectoral programs that unite industry and educational providers in developing curriculum, internships, training programs and career pathways. Include computer literacy and problems-solving skill in the basis for funding of all literacy projects.

Economic Development:
Increase our research on how to identify and cultivate information assets as a driver of local economic development. Increase capacity building to help local organizations to identify and tap into local information assets. This should include increasing the size and number of local planning grants available from the Economic Development Administration (EDA), to create new programs similar to the TOPS program for communities to identify and develop information assets. Also, increase the funding and analytical support by state governments and regional planning organizations to local governments in this type of planning activities. Develop a best practices data base to help communities share their experiences specifically in the development of information assets.

Entrepreneurship:
Expand the pool of capital available for new and growing firms, especially those seeking funding in the range of $250,000 to $2 million, an area where chronic capital gaps exist. Expand the pool of scientific and technology workers via training, scholarships and the like – especially for women and minority groups. Increase support for programs that provide technical assistance to entrepreneurs and expand technical assistance for rural entrepreneurs. On the state and local level, existing programs like incubators, entrepreneurial networks and seed capital programs should be continued and expanded.

IT Infusion in Small Manufacturing Firms:
Expand the mission and resources of the Commerce Department’s Manufacturing Extension Partnership Program (MEP) to help small manufacturers integrate information technology effectively into production process improvements. Provide additional funding and flexibility for programs that provide skills upgrading for workers on the job. Make H-1B training funds accessible for on-the-job training in small firms. Provide employer tax credits for skill enhancement in manufacturing and technology-dependent occupations. Improve collaboration among agencies and programs, such as the EDA, the Small Business Administration (SBA), Small Business Development Centers, etc. Help industry associations and community-based organizations raise the level of “common practice” in small firms regarding technology utilization and create linkages among employers, technology vendors, and other training providers.

Financing and Community Renewal:
Assure that the federal agencies responsible for implementing and administering the New Markets Venture Capital and the New Markets Tax Credit move quickly and flexibly so capital can flow to communities that desperately need it. Expand this program to include a loan guarantee program to enhance private investment in large-scale economic development projects; and a tax credit to encourage financial institutions to setup “Individual Development Accounts” for low-income people.

Information Ownership:
Treat information and knowledge as a renewable resource under the concept of sustainable development. In that regard, avoid over-control of this resource so that at a minimum, no company should be able to prevent others from using non-proprietary or classified information. Assure the replenishment of the public domain pool by placing reasonable time limits on intellectual property protections.

International Aid and Development:
Focus our international development agenda on bringing all nations into the information economy – thereby increasing both economic prosperity and international security. Specifically, increase the level of funding and participation in the efforts of the Digital Opportunities Task (DOT) Force, established at previous G-8 summits.

Please note that the authors’ affiliations are given for identification purposes only. The views expressed are those of the individual contributors, not necessarily their organization. Contributors do not necessarily endorse, or have a position on, ideas presented in other sections.

Telecommunications Infrastructure
Karen Kornbluh, Markle Fellow, New America Foundation

The economic boom of the 1990’s was fueled, in part, by large companies integrating data networks – and the newly commercialized Internet – into their business processes. Businesses were able to improve productivity by streamlining administrative, purchasing, inventory control and design processes. Productivity growth shot up during this period from the anemic 1.4 percent annual average growth rate before 1995 to 3 percent for the period 1995 to 2000.

But smaller businesses lack access to the same technology that allowed their larger brethren to streamline and help the economy to grow. Only 10 percent of smaller companies have access to broadband – or high-speed, high-capacity data networks. Following passage of the Telecommunications Act of 1996, $90 billion of fiber-optic cable was laid across the country.

However, 97 percent of that fiber-optic backbone remains dark; unused because so few end-users have access to it. Upgrading or replacing the existing connections that run through communities to individual homes and businesses – the “last mile” of the network – has proven expensive and difficult.

Overcoming this problem is no less important than was ensuring that critical infrastructures such as railroads, electricity, telephones, and highways were built and made accessible to all. We must begin with a clearly articulated national goal of universal broadband access similar to our previous goals of universal electrification and phone service. Reaching that goal will require a number of specific actions.

First, we must make sure that the proper incentives are in place. The Telecommunications Act requires companies who own the existing telephone network to share access to their wires with broadband companies. This law must be enforced rather than undermined. An open network has been the best guarantor of innovation and investment in the telecommunications sector in the past and certainly will be in the future. If sharing access cannot be enforced, means for separating the natural monopoly portion of the network from the more naturally competitive ones should be explored. This might include separating the physical infrastructure from the services provided on top of it in two separate divisions or companies.

Second, Congress and the Administration must free up more of the radio spectrum for “third generation” broadband mobile wireless and experiments with existing unlicensed spectrum. Wireless solutions can be far less expensive than installing new wires and can increase competition, innovation and investment in the broadband market. This will require recovering unused spectrum now held by a variety of incumbents, including television broadcasters and military users.

Finally, even with greater competition, it may be that broadband is too expensive for certain low-income users or rural communities. To make sure they are not left behind, subsidies may be needed.

Internet Access and Community Demand1

A vibrant grass roots movement has taken hold in a number of American cities, as citizen activists are working to bring Internet access to segments of the community that have not been exposed to the information revolution. Some of those carrying out these initiatives collaborate with city governments; others form partnerships with the private sector. All of them experience high demand; activists running community technology centers are uniformly struck by the volume of additional foot traffic that comes about once word spreads about the availability of the Internet in the neighborhood.

The community technology movement means that there is an existing capacity to help close the gap in many low-income neighborhoods. But these initiatives need assistance from government and the private sector. The likely benefits extend beyond closing Internet access gaps. By tapping into and aggregating latent demand, supporters of community technology initiatives can open up new markets for companies that serve the Internet economy, from infrastructure providers to companies that supply the hardware that accesses the Internet. Research on community technology programs in cities suggests the following for policymakers:

Encourage public funding. The coffers of local governments have played an important role; several places (Austin, TX; Cleveland, OH) use cable franchise fees for community technology programs. But as demand in the community for publicly available Internet access and training expands, more government help is needed to meet it. Federal funding, in the form of grants from the Technology Opportunities Program (TOP) of the U.S. Department of Commerce, has been crucial to getting many projects off the ground. It is appropriate to maintain or expand federal, state, or local programs that provide funds for community technology.
Encourage public-private partnerships. In several cities, coalitions have been formed to bring advocates of low-income people into contact with people from the technology sector for community development. The existence of them should not, however, be seen as ends in themselves. The partners in these coalitions have differing outlooks and goals. Business leaders may see community-computing programs as a quick way to increase the supply of skilled workers. Community activists may see the partnerships as part of a long-term strategy to foster civic engagement among forgotten members of the community. Recognizing these differences early is key to making “bridging” partnerships work.
Encourage catalysts. The bottom-up nature of most of the Internet initiatives has come about because committed individuals in the community have served as catalysts. Just because these people have taken the initiative does not mean that they and their initiatives do not need nurturing. Financial support is the most obvious, and probably most useful, form of encouragement, but publicity is another. The media could do a community service by focusing on how community groups are using the Internet for social purposes.
1.Based on material from John Horrigan, PEW Internet and American Life Project.

IT Utilization by Non-profits and Community Groups
Ryan Turner, OMB Watch

Extending the information revolution is predicated not merely on providing affordable, equitable and utilizable access to technology and knowledge. It also involves the support, development and sustainability of mechanisms that are both appreciated and relevant in the lives of people who use them. Yet too often information, knowledge, expertise and technology are concentrated among developers or early adopters who have the financial means and people resources to access and use them.

Non-profits are responsible for addressing, coordinating and delivering services in response to an increasingly wide range of individual human needs. As such, they provide the means for collective social, civic and advocacy activity. The demands and responsibilities placed upon these organizations are increasing in an ever more uncertain economic and political landscape. Their value as fundamental institutions for advocacy must be acknowledged, with a focus on increasing the capacity of organizations to effectively acquire and apply information, knowledge management, communications and technology resources.

Non-profits are more than just conduits through which information resources are distributed to individuals. They are also more than simply access points for connecting individuals to useful knowledge and information. These organizations’ proximity to and experience with those they serve contributes to their valuable, yet often overlooked, roles as community facilitators. In that role, they serve in an important position of early adopters and arbiters of tools, resources, and practices most likely to succeed in addressing individual and community needs.

More resources (technological and otherwise) should be deployed to places where the need is greatest for innovation to address growing numbers of underserved populations in an effective and efficient manner, yet where demand is suppressed due to lack of awareness and understanding as to their availability or relevance. This means investing in non-profit capacity building specific to the internal operations of individual organizations. It also means broader nonprofit-driven development of knowledge management and coordination approaches to meet human needs. Directing resources in this area also helps to ensure that resources are deployed in a manner that is relevant to both organizations and the broader communities they serve.

This necessitates learning from similar efforts within the public and private sectors, whose track records as traditional early adopters and developers can help minimize the obstacles facing non-profits. Increased nonprofit involvement will also lead to more direct involvement by stakeholders in the issues around the support, growth, and sustainability of information mechanisms. This is an important part of moving end-users from consumers to owners of the knowledge that impacts their lives and opportunities. Such investments help to ensure that society’s innovation edge is kept perpetually sharp, while reducing the barriers to access and participation by all.

Achieving these ends requires the following actions:

Focus on helping community groups and non-profit organizations use technology in their day-to-day operations – not just on the role of these organizations in providing access to the technology.
Identify, assess and coordinate existing initiatives, at all levels and within and across all sectors, that direct funding, people and community-based and/or -focused knowledge assets towards key social and institutional deficiencies, in order to eliminate duplication and encourage replication.
Support innovation in technology and related means through non-traditional and/or non-commercial players, while fostering an environment of innovation which can target challenges specific to the sector.
Actively engage organizations and those served by their activities through both traditional and nontraditional means, including technologically, to address issues of reluctance and unfamiliarity, and to encourage interest and adoption of tools to facilitate public and social participation, especially where need is greatest.

Education
Bonnie Bracy, Christa McAuliffe Educator, National Education Association

As we extend the information revolution, education and the use of technology in education must be more than just an afterthought – as it still is for many people. The explosion of new technologies has changed the way we live – from the way we do business to the way we communicate with each other. Technological advancements are also affecting the way we teach and learn. But there is one group of workers who are not getting effective training who touch the future in educating the children of the nation. The teachers of America have little meaningful professional development. Students and teachers must learn new skills to live and work in this digital age.

In thinking about education, most people do not understand the impact that technology has on students in their daily lives. Technology in some schools is seen as an Internet connection or a “wired” solution. Today’s schools may have a wire that does not connect to anything. The ratio of computers-to-children is aggregated to make us think that students actually have hands-on technology in every school. That is not the case. Many schools and students are missing out on the richness of this learning experience.

Today, interactive, multimedia technology provides us with new ways to draw upon children’s natural impulses. These new media hold an abundance of materials including text, voice, music, graphics, photos, animation and video. But they provide more than abundance. Bringing all these media together means that we can vastly expand the range of learning experiences, opening up the social and natural worlds. Students can explore the relations among ideas and thus experience a more connected form of learning. Perhaps most importantly, these new media are interactive, and conducive to active, engaged learning. Students can choose what to see and do, and they have media to record and extend what they learn. Learning is thus driven by the individual needs and interests of the learner.

Some good things are happening. A quiet revolution is taking hold in many schools of education all over the country. Criticized for offering programs that are long on theory and short on practice, many schools have responded with new approaches to teacher education. Students in these programs develop subject matter expertise, practice teaching in real classrooms, connect with mentor teachers and learn the skills to teach with technology as media.

However, there remain problems with training, access, resources, the hardware and software and the understanding of how technology should be deployed in schools and learning communities. Studies of the process of educational change show that access to new information, procedures or tools alone rarely leads to change.

The National Academy of Engineering, in its report Technically Speaking: Why All Americans Need To Know More About Technology, addresses the question of fluency with technology. All teachers do not have these skills. Children have grown up digitally and may be masters of the technology, but the teachers who touch their future have been handicapped with lack of sufficient knowledge about the use of technology. Teachers who teach with limited reach cripple the future of the children they teach.

Missing in our education policy is a focus that encourages the integration of technology content into the learning landscapes of K-12, in the standards, curricula, instructional material, and student assessments in non-technology subject areas. For technology to work well for students and schools, we must build human infrastructure at the same pace we are installing computers, systems, and hardware.

The US government funds only about 8 percent of the educational budget. They give the guidelines but not always the models, examples and resources to fulfill the expectations and states are hard pressed to accomplish the tasks. First of all, Federal, regional and state agencies that help set educational policy should encourage, fund, and demonstrate the practices they wish the nation’s educators to accept. The funds should be explicitly earmarked for this use – but as explicit demonstration activities, not as general grants. Seymour Papert and the MIT staff talk about hard fun, hard demonstrations and ways to share and show what is possible. Such hard demonstration projects are needed for learning communities to be empowered and understand the technology needed to create empowerment. The education departments and agencies should specifically choose places in which they can create demonstration projects that reflect the many kinds of schools and the diverse people we serve. In that we will all be served.

Second, the use of technology should be a part of the standards that we are asking teachers to teach and test to. As long as technology is held outside of the curriculum base it will not be sufficiently integrated into teaching, and learning teachers’ needs, however many guidelines may be used. There are technology tools that will allow teachers to create and infuse these standards in their own planning. Empowered teachers using technology as a tool and using technology as media extend the reach of the learners.

While standards are important, teachers without technology resources are swimming in a set of data that they cannot manage. Teacher tools such as templates and metadata resources to help manage, plan and create learning landscapes should be developed through the Education Department and the Commerce Department’s National Institute of Standards and Technology (NIST).

Finally, knowledge networks should be developed to bridge the educational communities. Education needs to be more inclusive as the depth of content available has been increased. The job is to turn information into knowledge that is meaningful. Informal education is using technological literacy to improve learning outside of the formal K-12 or university settings. Learning places such as museums, newseums, science and agricultural centers, and television, radio, newspapers, magazines and other media comprise the informal education system which offers, to citizens of all ages and backgrounds, the opportunity to use, learn about, and be involved in a variety of learning experiences. We should build on those experiences by encouraging partnerships with parent and community groups, universities, and others who play a critical role in making schools true centers of learning in their communities.

Post Secondary Education and Training
Samuel Leiken, senior policy consultant to the Council for Adult and Experiential Learning (CAEL)

Three major trends are converging on our education and training systems.

The first is demographic changes that include:
an aging workforce – in 1978 the median age was 34.8 years, in 1998 it was 38.7 years;
a slowing of labor force growth – peaking in the 70s at 2.6% and declining in the 90s to 1.2%;
and, finally, the baby boom retirement which is costing the economy skilled workers at all levels.
According to Anthony Carnevale of the Educational Testing Service, if current trends continue, there will be a net deficit of about 12 million workers with at least some college by 2020.

Second is an increased demand for technologically skilled employees as technology spreads into all endeavors. This diffusion means that IT literacy will become as critical to employability as basic literacy is now. The ephemeral nature of technology skills will engender a growing demand for virtually all workers to regularly refresh their skills.
Last but not least is globalization, which allows business to utilize low-skilled, low-wage workers worldwide. As a result, the old road of unskilled jobs as steppingstones to upward mobility is closed. At the same time, competitiveness will be determined by the ability to produce high added value, which requires better-skilled workers.
The implications of these trends include workforce churning, whereby people will have many employers and multiple careers, and a growing contingent workforce. More and more people will be changing jobs and more and more will be on their own. The pending labor shortage will put low-skilled workers in higher demand, making their training more urgent. In addition, incumbent workers will be more important to the economy and will require continuous upgrading of skills.

At the same time, technology is making profound changes in the format, delivery, and credentialing of education and training itself. Post-secondary education is no longer a monopoly but an “education industry.” Technology has lowered the barriers to entry and offered economies of scale that has led to countless new providers, such as Cisco Systems Networking Academies.

What are the policies needed both to cope with the vast array of changes involved in the information revolution and to use it to create opportunities for those on the wrong side of the information divide?

The first order of business is to redefine the social contract – one that was built in the New Deal and is based on the workplace. The information revolution means that now individuals will be more responsible for their own career development. We need programs that help workers learn more about career opportunities in their industries and elsewhere and to make informed choices about their education and training. Lifelong Learning Accounts, a variation of IRAs, could allow employers and employees to contribute to portable, career development accounts to pay for these choices. Such a strategy could be coupled with innovative programs for self-managed, portable accounts for the contingent workforce in health care and retirement as well.

It is often noted that the digital revolution is a double-edged sword for the less educated. On the one hand, it creates new and better jobs. But on the other it raises the bar on the asset they least possess, high-demand skills. We need to sharpen the side of the sword that utilizes technology to serve those on the “downside of privilege.” The explosion of self-paced learning tools and access to on-line learning that is available now to the better-educated must be broadened to the unskilled. If government and foundations help with capital, it will be possible to develop better, faster, cheaper tools for this purpose. It has been noted elsewhere in this paper that by tapping into and aggregating latent demand communities around the country (libraries, community-based organizations, agencies, etc.) could be mobilized to recruit students – for example, there is enormous unmet demand for vocationally-oriented, intensive English as Second Language (ESL) nation-wide.

The skills shortage in the IT sector is an opportunity for the industry, government and education to develop partnerships to extend the information revolution to low-income communities. Government can support sectoral programs that unite industry and educational providers in developing curriculum, internships, training programs and career pathways. This strategy has worked in manufacturing and should be tried in the tech sector.

Finally, the Workforce Investment Act of 1998 defines literacy as “an individual’s ability to read, write, speak in English, compute and solve problems at levels of proficiency necessary to function on the job, in the family of the individual and in society.” In the 21st Century, this definition of literacy, with an emphasis on computer literacy, should be the basis for funding of all literacy projects, public, private and non-profit.

Economic Development

A key element to extending the information revolution is identification, development and utilization of information assets. Information and knowledge is the new fuel of the economy. Information is both a major input in the production process and a product in and of itself. Companies rely on information assets in all parts of their business, including the tacit knowledge of its workforce, the social capital of the companies and their locations and intellectual property such as patents and copyrights. Thus, in this information economy, economic development means harnessing the information and knowledge assets of a community to help local businesses succeed in the new environment.

Part of that information-based and knowledge-based economic development is the utilization of IT to enhance existing local businesses. As Mark Troppe’s piece describes, IT can be a powerful tool for increasing business productivity. Tools like the Internet can be important sales and marketing channels. More importantly, IT can help small businesses develop and utilize their internal information assets – and tap into external information assets.
But the process of local economic development is and should be much more. Every community has or can develop some knowledge and skills that are useful in the information age. In the information economy, every worker is an information worker. The tacit knowledge of the area’s workforce and social capital are some of the most important assets found in any location.

Local knowledge and information assets can be drivers of that economic development activity by:

capturing and using that knowledge as an information product, in and of itself;
using local knowledge to identify new entrepreneurial opportunities; and
developing the local knowledge and social capital base to facilitate innovation.
Three sets of actions will help communities better utilize their local information assets:

We need more research on how to identify and cultivate information assets. Our understanding of how to identify, develop and utilize local information assets is still incomplete and needs to be greatly expanded.
We need increased capacity building to help local organizations identify and tap into local information assets. Actions to increase capacity building include:
an increase in the size and number of EDA planning grants so that local organizations will have the resources to carry out the needed analyses;
creation of a new EDA program similar to the TOPS program for communities to identify and develop information assets; and,
an increase in the funding and analytical support by state governments and regional planning organizations to local governments in this type of planning activities.
EDA should develop a best practices data base to help communities share their experiences specifically in the development of information assets.

Entrepreneurship
Erik Pages, National Commission on Entrepreneurship

Full participation in the information revolution means full participation in the benefits of such a revolution—not only as consumers of new IT breakthroughs, but as owners and shareholders of the firms that pioneer and utilize these new technologies. This full participation requires an expanded commitment to supporting entrepreneurship.

This support for entrepreneurship can take many forms, but it must be based on several core concepts:

Encouraging and supporting those who already own and operate new ventures and existing small businesses;
Encouraging and training aspiring entrepreneurs, i.e., those who are currently dreaming of “taking the leap;”
Educating youth on entrepreneurship as a viable and rewarding career option.
Creating a vibrant climate in which entrepreneurial companies can start and thrive offers many benefits. Fast-growing entrepreneurial firms create the majority of net new jobs in the U.S. economy. But, beyond the bottom line, other benefits result. These new firms help increase participation in the economy, especially by groups previously left out. New immigrants and minority populations are among the most entrepreneurial parts of American society. Finally, entrepreneurs help build civil society by giving back via philanthropy and assuming civic leadership positions.

How to get there? While entrepreneurship is a largely a regional or local phenomenon, Federal actions can help encourage this activity. Three priority areas deserve attention:

Capital Access: Expand the pool of capital available for new and growing firms, especially those seeking funding in the range of $250,000 to $2 million, an area where chronic capital gaps exist. Quick implementation of New Markets Venture Capital, as discussed in Stockton Williams’ paper, would be a useful step.
Human Capital: Many fast-growing firms are based on new scientific and technological advances, and building these firms is impossible without relevant expertise. Yet, women and minority groups continue to be under-represented in America’s scientific and technology community. Efforts to expand this pool via training, scholarships and the like should be continued.
Technical Support: Programs that provide technical assistance to entrepreneurs, such as the Small Business Administration’s PRIME initiative, are woefully underfunded. In addition, new efforts, such as expanding technical assistance for rural entrepreneurs (as envisioned in the 2001 Senate version of the farm bill), should be enacted.
These Federal-level efforts must be supplemented by a commitment at the regional and local level to support economic development initiatives that encourage home-grown entrepreneurs. Existing programs like incubators, entrepreneurial networks and seed capital programs should be continued and expanded.

IT Infusion in Small Manufacturing Firms
Mark Troppe, National Center on Education and the Economy

Continued economic growth depends on extending the information revolution through the diffusion and application of knowledge across the American economy. This is particularly true for the small manufacturing sector, where the opportunities for productivity growth are tremendous. We must increase our efforts to help existing small manufacturers better utilize information technology for at least two reasons. This will enhance communication and supply chain efficiencies in support of the national security/homeland security effort, ensuring that we can deliver the required hardware (e.g., sensors, irradiation detection devices, etc.) as needed. In addition, it will contribute to renewed economic growth on a broad scale.

The evidence is clear and compelling that effective use of Information Technology (IT) is an essential element of competing in a fast-paced, knowledge-based economy. IT “cross-cuts” all operational functions within an organization and acts as the fabric that knits together business processes. Therefore, IT is critical in implementing high-performance concepts such as lean manufacturing, mass customization, learning organizations, and real time analytical marketing. High performance manufacturers are able to blend their business and information technology strategies to complement each other in ways that greatly improve overall business effectiveness. Studies show that firms that use the best practices and technology on the factory floor can have a 40 percent advantage over the average firms.

However, small companies have been slower to adopt new technologies than large companies. A recent National Association of Manufacturers (NAM) survey indicates that large firms (>500 employees) are much more engaged in utilizing information technologies and the Internet than smaller firms. The study also shows that, with respect to current usage, small companies are much farther behind larger firms in using the Internet for the purchase of, for example, maintenance, repair and operations products and for supply chain management. Thus, small companies lag in productivity gains and related benefits from what could be expected with greater IT investments. Greater incorporation of available technologies has implications for business strategies, organizational culture and skill requirements on the job (particularly in light of expected demographic changes as noted in Sam Leiken’s paper) as well.

We must focus our efforts on policies that help small companies close this gap and take full advantage of the productivity enhancing potential of the information revolution. Growing existing companies (see Erik Pages’ paper), especially small manufacturers, is an essential component of any strategy for renewed economic growth. The following steps would further that agenda:

Expand the mission and resources of the Commerce Department’s Manufacturing Extension Partnership (MEP) Program to help small manufacturers integrate information technology effectively into production process improvements and the entire enterprise. This will support a new phase of the information revolution by helping companies better utilize information and information technology in the transformation process.
Provide additional funding and flexibility for the Workforce Investment Act’s provisions that allow skills upgrading for workers on the job, so that states and localities can encourage and supplement firms’ private training investments in technology occupations and applications.
Ensure that H-1B training funds (authorized by the American Competitiveness and Workforce Improvement Act) are accessible for increasing the skills of employees in small firms who need to learn how to use the new technologies on the job.
Provide employer tax credits for skill enhancement in manufacturing and technology-dependent occupations, such as by expanding the investment tax credit to cover (in addition to capital investments) training in the use of advanced technologies.
Provide incentives for public agencies with complementary missions (e.g., Economic Development Administration, Small Business Administration, Small Business Development Centers) to collaborate in this effort.
Promote the role of intermediary organizations (e.g., industry associations, community-based organizations) that can help to raise the level of “common practice” in small firms regarding technology utilization and create effective working relationships among employers, technology vendors and other training providers.

Financing and Community Renewal
Stockton Williams, Enterprise Foundation

Bipartisan legislation enacted in 2000 to spur economic development in communities left behind during the economic boom of the 1990s will be especially important now that the nation is in recession. Low-income families and neighborhoods are always especially hard hit during economic downturns, and this one is no exception. Some of the heaviest job losses, for example, have come in the manufacturing and service sectors, where many low-income people found jobs when the economy was strong. Fortunately, the “Community Renewal Tax Relief Act of 2000” gave local communities and the private sector a host of new and expanded tools to generate jobs and investment in underserved and distressed areas that should help many mitigate the recession’s worst effects (The legislation’s major provisions include expansion of the federal Empowerment Zone program for stimulating business development in low-income areas and a similar set of incentives in a new “Renewal Community” initiative. It increases state capacity to allocate tax credit for affordable rental housing development and includes greater state and local authority to issue tax – exempt bonds for affordable housing and economic development. It also provides a new “New Markets Tax Credit” to induce private equity investment in financing entities serving low-income communities, and loan guarantees and matching grants for venture capital investments in small businesses in those areas through a new “New Markets Venture Capital” company program.)

Congress should assure that the federal agencies responsible for implementing and administering the provisions of that landmark legislation do so quickly and flexibly so capital can flow to communities that desperately need it. The government is off to a good start. The Small Business Administration has selected the first group of entities eligible for assistance under the New Markets Venture Capital company program. HUD has designated new Empowerment Zones and started the process for selecting Renewal Communities. And the Treasury Department has issued regulations for launching the New Markets Tax Credit. The benefits of these initiatives should soon be evident.

Congress and the administration also should apply the bipartisan spirit and principles that produced the Community Renewal Act to filling financing and savings gaps that still exist for low-income people and places. In particular, Congress should revisit two promising proposals it almost included in the Community Renewal Act: a loan guarantee program to enhance private investment in large-scale economic development projects; and a tax credit to encourage financial institutions to setup “Individual Development Accounts” for low-income people.
The loan guarantee proposal in its original form was called the “America’s Private Investment Company (APIC)” initiative. APIC was part of the Community Renewal bill the House passed 394-27 in the summer of 2000. Unfortunately, the initiative was dropped in negotiations with the Senate on the final legislation.

APIC would provide for-profit private investment funds with low-interest, government-backed debt to finance high-impact economic development projects in distressed areas, such as shopping centers, manufacturing facilities, industrial parks, back-office space and business incubators. The low-cost federal guarantee would enable firms to raise private capital for higher-risk activities in difficult markets. By attracting “first-in” private dollars, APIC would unleash tremendous investment activity in capital-starved communities. The program would protect taxpayers by requiring that all private capital be lost before any claims on the federal guarantee. Since the federal commitment is of “credit subsidy” and not actual appropriated funds, the APIC proposal would leverage huge investment at a minimal cost. A mere $37 million in APIC credit subsidy – a virtual rounding error in the scheme of the federal budget – would generate three-quarters of a billion dollars in private investment in low-income communities.

The IDA tax credit concept has been popular with both political parties for several years. While various versions have circulated, the basic premise is the same in most proposals. Financial institutions – from banks to nonprofit community development financial institutions – would receive tax credits for establishing, administering and providing matching contributions to an IDA for a low-income person. The IDA would enable the person to save to buy a home, start a business or send children to college. In addition, by enabling low-income people to build personal savings and accumulate assets, IDAs would help them gain greater access to the financial mainstream. Such increased access is a stabilizing force for families as well as communities. IDA tax credit legislation was part of some Senate drafts of the Community Renewal Act, but was dropped from the final bill late in the process.

The current federal budget picture precludes most new initiatives not related to military readiness and homeland security. But America’s ultimate strength depends on effective capital markets for communities and equal capital access for everyone in our society. Initiatives to raise private capital for economic development investment in distressed communities and help low-income people build wealth deserve the same strong bipartisan political support now that they have had in the past.

Information Ownership

As pointed out in the discussion on economic development, information assets are the new life blood of the economy. Information and knowledge are the raw materials that make the machine go. And just like any other important resource, control over that resource is of critical importance.

Legal control over information assets is defined by intellectual property rights – patents, copyright, trademarks, etc. Over the past few years, those rights have been greatly expanded. Some argue that this expansion has gone too far. As James Surowiecki points out in the January 21 issue of The New Yorker, if today’s copyright laws had been in effect a hundred years ago, the Federal government might have to pay the estate of Thomas Nash every time it uses the image of Uncle Sam. And Santa Claus, as well. Both were created by Mr. Nash.

More importantly, if today’s copyright laws had been in effect a hundred years ago Mr. Nash’s estate could conceivably prevent the U.S. government from using Uncle Sam on a government poster if it disagrees with the policy being presented. Or it could stop a rival Christmas card company from using the image of Santa Claus on its products.

The issue, as Professor Larry Lessig keeps pointing out, is not simply payment, but control. A company that owns a particular information asset can prevent any rival company from using it. The situation is similar to a farmer who might like to dam the stream running through his property to prevent his downstream rivals from irrigating their fields. If certain suppliers of information can control the flow of this key resource, they can choke off various forms of competition. This has been a consistent theme in economic history: cattlemen versus ranchers in the West, railroads versus Rockefeller oil pipelines. The list could go on forever.

The issue is one of anti-trust/competition policy as much as one of property rights. Over two hundred and twenty-five years ago, Adam Smith warned of the dangers of state-granted monopolies. Back then, Smith cautioned policy makers about monopoly rights to a major intangible asset of the day – trading rights of the East India Company. That warning is true for today’s intangible information assets.

Information is the ultimate renewable resource. As such, it should be treated in the same manner. Environmentalists and businesses have come together to develop the concept of “sustainable development.” We should adapt some of the same basic principles to information resources.

One principle is to avoid the over-control of this resource. It should be available for the benefit of all. At a minimum, no company should be able to prevent others from using information. It is appropriate that others pay for the development of that information. But information should be available on a user-neutral basis. Any make or model of car or truck can use a road, even a toll road, if its owners pay the fee. Similarly, anyone should be able to gain access to certain information, even if they must pay a fee. And just as cars are barred from private roads for security purposes, disclosure of information that is considered proprietary or classified can be protected. But roads should be not closed to traffic without a strong reason; information should not be locked up in the intangible version of gated communities.

Second, the requirement of continued replenishment of the public domain pool is an important part of sustainability. “Public domain” is the legal term for that body of information that is free for use by all. When a copyright expires, the information is then considered to be in the public domain.

Continued innovation and economic progress is contingent upon general access to the building blocks for new information and knowledge. Those building blocks are found in the public domain. There should be reasonable time limits placed on intellectual property protections in order to continue a flow into the public domain.
Striking the proper balance between the private utilization of information and the renewal of the public pool of knowledge and information will require careful calibration. The current intellectual property law seems to be tilting out of balance. Unless that balance is restored, we may end up with a system that in the name of promoting economic growth actually undermines our prosperity.

International Aid and Development

America’s security and economic prosperity is enhanced and strengthened by economic prosperity and security around the world. Terrorist organizations find aid and comfort in inequality and poverty. One of the ways to strike at terrorism is to strike at its breeding ground. This principle was embodied in President Bush’s State of the Union address when he said “we have a great opportunity during this time of war to lead the world toward values that will bring lasting peace. All fathers and mothers, in all societies, want their children to be educated and live free from poverty and violence.”

At last year’s G-8 summit in Genoa in July, the United States joined with other nations in a program to reduce poverty through two programs: debt-relief and an expansion of information technology. The Digital Opportunity Task Force (DOT Force) is working with countries to develop national “eStrategies” and promote conductivity.
However, poverty is not a technology-deployment issue. Nor is it an issue of charity. It is an issue of wealth and asset creation. Technology can help, but it is at best a tool and at worst a barrier. Debt-forgiveness is an important step, but only if it leads to future asset creation.

As noted in the earlier section on economic development, information assets are important keys to local economic development. The same is just as true in international economic development. While there are crying infrastructure needs in less developed nations, infrastructure is not the end all and be all of economic development, either at home or abroad. The G-8’s DOT Force declaration of last July recognizes the importance of enhanced human capacity development through education and training and of fostering enterprise and entrepreneurship. Yet, since September 11, attention to the activities of the DOT Force seem to be a low priority for the United States.

We need to re-invigorate the DOT Force – both as a tool for international poverty reduction and as an anti-terrorism strategy. Greater attention must especially be given to those areas of utilization discussed in the other sections of this report: community access, the role of non-governmental organizations (NGOs), education, training, utilization of information assets for economic development, entrepreneurship, small business and financing. U.S. foreign aid efforts should incorporate these areas as funding priorities and expand their focus to include the range of activities outlined in this paper. Government officials, from the President on down, should also give greater emphasis on participation in and support for the activities of the DOT Force working groups.

Conclusion

This is a time of transformation and change. Such times require special efforts to ensure that everyone shares in the opportunities ahead.

The information revolution is entering a new phase. Up until now, activity has focused on the dot-coms and their supporting telecommunications and computer industries. But, information is becoming the main input into the production process. In this new phase, the creation and utilization of information and knowledge is the key element of economic prosperity. But prosperity and security in this networked age are only possible if everyone participates.

This paper lays out some of the policies and programs that will spur the revolution forward. Without the efforts of all of us – government, the private sector and civic and social organizations – the information revolution will stop short, leaving many behind. With concerted actions, we can make sure the information revolution is spread to all citizens and all sectors.

For further reading:

Karen Kornbluh, “Disconnect,” The Washington Monthly, October 1, 2001, and “The Broadband Economy,” New York Times, December 10, 2001.

John Horrigan, Cities Online: Urban Development and the Internet, The PEW Internet and American Life Project, Washington, DC, 2001, http://www.pewinternet.org.

Technically Speaking: Why All Americans Need To Know More About Technology, Committee on Technological Literacy, National Academy of Engineering and National Research Council, Washington, DC, 2002, http://www.nap.edu/books/0309082625/html.

Kenan Patrick Jarboe, Inclusion in the Information Age: Re-framing the Debate, Athena Alliance, Washington, DC, October 2001, http://www.athenaalliance.org.

Kenan Patrick Jarboe, Knowledge Management as an Economic Development Strategy, Reviews of Economic Development Literature and Practice: No. 7, Economic Development Administration, Washington, DC, April 2001, http://www.athenaalliance.org.

Lawrence Lessig, The Future of Ideas, Random House, New York, 2001.

“Building Entrepreneurial Networks,” National Commission on Entrepreneurship Policy Report, December 2001, http://www.ncoe.org.

“Five Myths about Entrepreneurs,” NCOE Policy Report, March 2001, http://www.ncoe.org.

“Building Companies, Building Communities: Entrepreneurs and the New Economy,” National Commission on Entrepreneurship White Paper, July 2000, http://www.ncoe.org.

Working in the 21st Century, US Department of Labor, Washington, DC 20001.

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