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Jewish World Review July 10, 2000 / 7 Tamuz, 5760

James Freeman

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Where’s my dividend?

http://www.jewishworldreview.com --
WE’VE ALL HEARD of the peace dividend. The politicians cut defense spending after Ronald Reagan’s victory in the Cold War, and we’ve been enjoying the benefits ever since. Thanks to defense cuts and an awesome economy created by all you hard-working Americans, the government is actually running a surplus today. Still, even with a smaller commitment to national defense, the Federal government is still growing, up 15% after inflation in the Clinton era. And state and local governments are growing even faster – they now consume almost 9% of our gross domestic product.

One of the reasons that we still have big government in this age of peace and prosperity is that we haven’t received what I believe should be an even larger payoff than the peace dividend. Call it the tech dividend. Every other area of American life has been enhanced and made more efficient by information technology. In every other part of our society, people have used computers to do more with less. So where’s the tech dividend in government budgets?

Every Governor and every Federal agency has a story to tell about the wonderful things they’re doing with technology, but the numbers don’t lie. We’re not seeing the one thing we all want from government use of technology – cheaper government. The price tag just keeps rising.

For decades, Silicon Valley has been fulfilling the promise of Moore’s Law. In 1965, Gordon Moore (who would co-found Intel Corporation three years later) said that the computer chip industry could double the number of transistors on a silicon chip every 18 months. In 1995, he amended it to 24 months, and his predictions have held true through decades of innovation. Today, the latest microprocessors are more than 10,000 times as powerful as the one Intel invented in 1971.

For computer users, that’s translated into twice the power for the same price every 18-24 months. So I can now drive down to CompUSA and pick up a Windows 98 machine with all the fixin’s, including a monitor, for less than $700. True, it doesn’t have the fastest chip, but it does have a modem, a CD-ROM drive and plenty of memory. Given the productivity that results, I think this may be the greatest bargain in the history of economics. Obviously, the government can get the same deal, and probably a better one since it buys in bulk. So where’s the payback? Where’s the cost savings? As a taxpayer, where’s my tech dividend? Don’t tell me I’m getting more government for my dollar. Yikes! Like most people, I want less government for fewer of my dollars.

To the power of the PC, now add the power of the Internet in delivering cost savings. Metcalfe’s Law is named after Bob Metcalfe, a pioneer in computer networking who founded 3Com Corp. and created Ethernet. This law says that the value of a network increases by the square of the number of users. Basically, once we’re all connected via this amazing global network, we derive enormous benefits from the wealth of information and services offered by individual citizens and companies in this global village.

Okay, let’s bring it a little further down to earth. There’s now a lot of capital flowing into the new frontier of e-commerce: the “B2G” market -- businesses selling things to government. In the online edition of Government Executive magazine, Anne Laurent reports: “That giant buzzing you've been hearing recently is the sound of Internet dot.coms swarming the government market.” E-commerce powerhouse Freemarkets.com has already signed up several Federal agencies to use its reverse-auction process. With this system, a government agency posts a listing of the goods or services it needs and then companies bid to provide them.

Federal agencies could go a step further, joining together to get larger discounts. Rafe Needleman, writing in the tech magazine Red Herring, reports on a pilot program by the General Services Administration to use technology from mobshop.com. This consumer site reduces the prices on electronics goods as more people agree to buy them.

What all of this means is that government agencies should pay less for goods and services. Reports Laurent: “Boston-based Aberdeen Group, a consulting firm, found that most businesses realize a 300 percent first-year return on investment in Internet procurement.” As taxpayers, we should demand that the Feds pass the savings on to us. It’s time for the tech dividend!


JWR contributor James Freeman is editor of Tech Central Station. Comment by clicking here.

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