Forecasting the Digital Age

Dear Gene--

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Nice to hear from you again ... and by e-mail, yet!
Well, first of all, there's no way I'm going to defend the notion that the Net (even if it were broadly used, which it is not yet) means the end to recessions--or for that matter stupidity, ignorance, herd investing, government distortion of markets, or other ills. Nor do I think technology can fix problems that are due to human nature rather than human tools. The Net is a mirror, not a cleaning solution, and it reflects reality. The future will continue to be unstable, but my hope is that the speed of the Net will speed up the adjustments as well as the perturbations. In essence, do you want earthquakes, or do you want continual little shocks? If the Net really starts working, and we really get fast spreading of good information, we should get a slightly shaky but fundamentally solid world.
That is, the Net does change the speed at which markets work. What we're seeing now--the global economic crisis or whatever you want to call it--is a set of earthquakes resulting from a buildup of the pressure of truth catching up with government-controlled and bias-distorted markets. Money was flowing into nonproductive uses on the basis of a variety of distortions, everything from government support to World Bank funding to sovereign guarantees of noneconomic projects. Currency exchange and capital flows were controlled and managed. But you can suspend the laws of economics for only so long.
Of course, as the new information flows out, people overreact--which is really unfortunate. But the solution is not to try to keep economic forces at bay but rather to introduce them sooner. I am not saying that there should be no government funding of anything, but it should be done transparently, through open methods. Otherwise, you get what you have now--investors leaving suddenly when the unsustainable returns prove, well, unsustainable.
As for wage differentials, you're right. It's going to be a world where those who work hard and intelligently get paid more. But as someone who spends a lot of time outside the United States, I'm glad my friends in Russia and Romania may someday get their share. The best thing for governments to do about this gap is to educate their citizens.

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