It's not just businesses that can benefit from embracing technology

The pressure will be on the next government to use this extraordinarily powerful tool

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If, like most of the British population, you have been doing much of your Christmas shopping online, consider this proposition: our daily lives are changed far more by technology than by government.

Roughly one-quarter of non-food shopping this month is expected to be online, and it may turn out to be more. Of course it is not just shopping. Most of us check restaurant reviews online, just about all of us book flights online, and we all share personal information online (often without knowing what we are doing). This is all happening very fast and we are still adapting our behaviour to it. Who would have thought five years ago that a shadow minister would have to resign because of an ill-advised tweet? After all, Twitter was founded only in 2006.

This technology is almost entirely American. Unsurprisingly European governments resent that, and so we are seeing push-back. That takes many forms. We have just had our Chancellor proposing a Google tax. No, that is not what George Osborne called his plan to charge a 25 per cent tax on companies that artificially shifted their profits around to low tax locations, but it is clear the type of company in the firing line. Last time I bought a book from Amazon it came from, er, Luxembourg? We have had legal challenges to Uber in various cities in Germany and on Monday a Dutch court banned the company from operating in the Netherlands. The French have pushed for a European browser, ideally French. And of course there is the whole privacy issue. 

Just this week, a report by the Council of Europe, which oversees the European Convention on Human Rights, urged governments to stop mass retention of individuals’ data. The US “has more control over the internet than any other state (or even all other states combined). Together with its close partner, the UK, it has access to most of the internet infrastructure,” the report said. It added: “Unless the US improves compliance with international human rights standards in its activities that affect the internet and global communication systems, the movement towards such a truncated internet will be difficult to stop.”

So technological change raises huge tax and privacy issues that are likely to fester for some time. The tax issue will continue to be dance between the different jurisdictions, with – as far as Europe is concerned – Ireland and Luxembourg rather in the frame. But the privacy issue is even trickier, for we as individuals vote with our fingers – on our keyboards and keypads – and we vote in favour of disclosure. Our mobile phones know exactly where we are, and our Google searches know a huge amount about our purchases and our interests. The more we search and shop online, the more we reveal about ourselves. We are complicit with that bargain of trading information for services. To take a simple example, we don’t mind telling Google where we are driving if it enables us to dodge a traffic jam.

Now step back. We are in the countdown to the next general election. During the course of the next parliament, assuming it lasts its full term, technology will leap forward at least as far as it has in the past five. That is a challenge to government but it is also a huge opportunity. The natural instinct of governments, more in Europe than in the UK but to some extent here too, is to lean against it. That is understandable but it clashes with the natural instinct of individuals, which is to grab it. Britons are particularly swift adopters. For example, a higher proportion of goods are bought online in the UK than in any other large economy, higher even than in the US.

There is the opportunity. Our next government, whoever forms it, will have even less money to play with than the present one. (If you look at the major parties’ spending plans, in so far as we or indeed they know them, the differences are pretty much at the margin.) So the pressure will be on to use this extraordinarily powerful tool, in shorthand the IT revolution, to fit its services better to what we want – or to be more precise, what we demonstrate by our actions what we want.

We regard it as normal that private sector services should improve as a result of the pressure we can now put on them and that companies large and small should respond to those “votes” we make with our fingers. Why shouldn’t those self-same technologies also improve public services as well?

Actually – and this is the hopeful bit – I suspect something is happening. One of the many puzzles of the economy over the past four-and-a-half years has been how well the public sector in general has responded to the pressure put on it. That has been alluded to but in a negative way: “the people who said public services would collapse have been proved wrong”. Surely it should be seen as a positive story and at least part of the reason why has been using technology to cut costs. There seems to be evidence too that satisfaction in the quality of service has improved.

So maybe that proposition above that technology changes our lives more than government needs to be modified  slightly – because technology, applied skilfully, enables government to  improve too.

Stabilising US recovery is a boon for economies worldwide

The trot has speeded to a canter. We are into the “What to look for in 2015” season for the economic analysts, a useful exercise in discipline but at best an uncertain one. Who predicted the plunge in the oil price, which has really transformed everything?

But one thing is very clear, very important, and worth noting here. It is that the US recovery is solid and secure. Until really the last couple of months, the recovery was uneven. The official growth numbers were all right, but well below those of previous expansions.

While unemployment was coming down somewhat quicker than expected, that was as much to do with discouraged workers abandoning the search for a job than new jobs being created. But now the latest employment numbers change the picture. The economy is creating a steady 250,000 jobs a month, sometimes more, and forward surveys suggest this will if anything pick up further next year. Pay is rising too.

The really interesting thing, though, is whether, as demand for labour continues to rise, the discouraged workers will come back into the job market. That would slow the decline in unemployment but it would enable the growth phase of the economy to last longer. In other words the US could continue at around 3 per cent growth rates not just next year but well beyond.

If this is right, there is a narrow impact and a broader one. The narrow one is what it means for interest rates. On the one hand more capacity to grow might suggest slower rate rises, but on the other a strong recovery would be better able to sustain rate rises. The broad one is that if the US economy has a good year, the rest of the developed world is likely to have a somewhat better one too – which of course includes the UK.

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