The Internet will make minnows mighty

Let's start with a little news item this week: the International Monetary Fund has launched a web site on the Internet which gives access to a vast range of financial and economic data from countries around the world. The IMF itself is not providing the data; rather it is providing a guidance system enabling people to find it in a comparable form.

In itself this might not appear a particularly earth-shattering advance. Every second, new information is being put on to the Internet, and this is simply much more useful data than most. But it is important in the sense that it means anyone with a PC and a modem can get financial information of a quality and at a speed that previously would have only been available to a large financial institution. It is one of the best examples of the progress being made to a world of infinite information.

The growth of information has been so widely trumpeted that it is tempting to dismiss the cute phrases the experts trot out. A few days ago Al Gore, the US vice-president, spoke at length about the Global Information Infrastructure, which he said "will forever change the way citizens around the world work, live, learn, communicate". He restated his and President Clinton's aim to have every school in the US connected to the information superhighway by the end of the century.

But for anyone who wants to try to understand how the world economy might develop, it is worth setting aside the hype and trying to think through how the increase in information is likely to affect the economy. Some numbers from the International Telecommunication Union in Geneva are set out in the graphs. If you define information widely enough it is quite startling to see how in the US, at least, there is a rapid shift taking place in the growth of spending on information. As you can see from the left-hand chart, it is perfectly plausible from the trend that spending on information in the US could now be as big as spending on food.

Information, however, covers things like movies on cable TV or pay-as- you-view sport. So American consumers are not paying all this money to download economic data from Al Gore's superhighway. A lot of what is called information is actually entertainment.

Still, strip out entertainment and information is still a big business. Electronic commerce, as opposed to information, is not. The middle graph looks great until you look at the figures down the left-hand side: at the moment electronic marketplace transactions world-wide are only $600m (pounds 390m) less than Britons spend on quality newspapers. It is growing fast of course, but from a tiny base.

Now look at the third graph, showing the plunge in costs per hour of transatlantic communications and the soaring capacity of circuits. The point is that we are getting close to the stage where international telecommunications will cost no more than local ones.

Put these figures together and look at some of the implications for the world economy. People are prepared to pay an enormous amount for information, but the money is not going in the main on the hardware or the costs of transporting it, but on the software.

The greater the amount of information, the greater the need for two types of service: boosters and filters. The boosters are the people who can attract notice for the product or idea, the people who can push it across into our minds. They could be in public relations or in advertising, but they might equally well be in the entertainment industry. That is why actors, sports stars and TV personalities feature so often in adverts; it is why Richard Branson is probably Britain's best-known businessman.

The second group are the people who filter out the information into the useful and the rubbish. Newspapers are a good example of filters ; book reviews are important and the long-established system for reviewing them is why books remain the main global clearing house for ideas. The Internet has yet to develop adequate filters.

I suspect that this boom in boosters and filters will work to the advantage of the US, thanks partly to its dominant position in the world entertainment industry, partly to its experience at promotion and development of brand names, and partly to the English language. To some extent it probably works to the UK's advantage, too.

Electronic commerce? The tantalising prospect of people buying their clothes over the Internet or ordering pizzas over cable TV may remain just that for a while yet. Technically many things are possible; but whether people want to part with money through electronic media is still unproven. It may not happen, or only happen very slowly indeed.

Communications, though, will boom. A world where telecommunications are infinitely capable and virtually free really does shift comparative advantage. Countries on the fringe of large economic areas need no longer be at a disadvantage. Anyone who works on a screen need no longer come into the office; maybe no longer live in the same country as their employer; maybe need no employer, for the electronic availability of information and the collapse of transmission charges will mean the individual can obtain the same data as the giant corporation.

Expect, therefore, small companies to benefit at the expense of large, and talented individuals to benefit at the expense of companies. Maybe small countries will benefit too. Governments, on the other hand, seem likely to lose power - or rather be forced to conform more to global standards.

At the moment the world's financial markets are often perceived as the principal external constituency which governments have to please. The greater the availability of economic and financial information about comparative performance, the wider this constituency becomes. The idea that governments have, like companies, to compete internationally, fulfilling certain common performance objectives, is still new to politicians. Expect that perception to grow and expect that to be one of the most marked effects of infinite information.