Outlook: New economy rap

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The Independent Online
THE NEW economy has been pretty much everywhere, apart, that is, from in conventional, generally backward looking, economic statistics. Yesterday's Family Expenditure Survey, an annual snapshot of spending patterns by the Office for National Statistics, therefore gave a rare glimpse of the extent to which the phenomenon has impinged on everyday life in Britain.

Pretty far already, seems to be the answer. That spending on leisure has for the first time exceeded that on food is in itself an important enough watershed, indicating as it does that the whole balance of the economy is shifting. But there's also plenty of food for thought on the new technologies too.

The survey started to record home computer ownership in 1985, when 13 per cent of households had a PC. By 1997 this had doubled to 26 per cent. In the latest two years their spread has accelerated to 33 per cent. Use of the Internet has obviously penetrated less widely, but, five years after the launch of the first commercial browser, 10 per cent of us have a connection at home. Use of mobile phones has spread rapidly too, from 16 per cent of households in 1997, when first included in the survey, to 26 per cent now.

The hard facts and figures confirm anecdotal evidence about how pervasive the new information and communication technologies are becoming. But they raise two questions. One concerns their distribution. Better-off households have vastly superior access to the Internet and mobile phones. Correspondingly, London and the South East, where the bulk of the really well-heeled live, are far more wired than the rest of the country. This should set the government thinking hard about how severe a form of social exclusion and inequality this is.

The answer to that depends on your reaction to the second question, which is how much these new technologies matter for the economy. Sceptics about the new economy point to the absence of any upsurge in productivity growth, at least outside the US, which would be the clinching evidence that something fundamental had changed. But it seems over-sceptical to rule out any possibility of change unless there is conclusive rather than persuasive evidence.

The rapid spread of internet use amongst British households is a persuasive sign. It signals a likely explosive boom in e-commerce, which in turn holds out the promise of strong economic growth at a time of falling prices - an unprecedented combination in recent history.

No matter how weary everybody has become about e-hype, that will at a minimum lead to big efficiencies and productivity gains in retailing and many other service industries. Home Internet connections are also likely to reshape working patterns, with some companies already taking advantage of potential head office savings by introducing more flexible patterns of work. The trends of the future are already visible in the detail of yesterday's figures.

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