There are many who believe wholeheartedly that governments don't create jobs — the private sector does. I thought of this concept when I read last week a McKinsey & Co. report that said the Internet has created jobs, global economic development, and wealth creation that is as high as the GDP of several industrialized nations. When I read that, I couldn't help but think that the Internet's development began as a US military project.
Of course, it's easy to forget that the federal government created the Advanced Research Projects Agency (ARPA, later DARPA) in the late 1950s. ARPA created the Information Processing Technology Office (IPTO) whose objective was to develop a long-term strategy for the US military's communications networks and to interconnect its computers at the Pentagon, Cheyenne Mountain, and Strategic Air Command headquarters — and thus began the journey that has brought us the Internet that we all enjoy today.
The tangible benefits associated with the Internet are enormous. The McKinsey report reveals that the Internet is used by 2 billion people on the planet and almost $8 trillion a year is spent on e-commerce activities. Additionally, the Internet accounts for, on average, 3.4 percent of GDP in the 13 countries the report examined.
With regard to the Internet's capacity to create jobs, the researchers analyzed France's Internet-related job creation and concluded: “A detailed analysis of France over the past 15 years shows that the Internet created 1.2 million jobs and destroyed 500,000 jobs, creating a net 700,000 jobs or 2.4 jobs for every one destroyed.”
Undoubtedly, the high-tech industry owes a great debt of gratitude to the federal government and academia. Their efforts to develop the initial network connections and framework around which the Internet operates has given birth to products such as PCs, tablets, laptops, notebooks, and the software running on these devices, as well as telecommunications networks, smartphones, and other technology.
Furthermore, there's more growth to come. While the Internet has reached around 6 percent of GDP in the most advanced countries, like Sweden and the United Kingdom, nine out of the 13 countries examined in the report — Russia, Brazil, Italy, China, Canada, France, India, Germany, and the US — are below 4 percent.
To foster further adoption and strengthen the Internet ecosystem, the report recommends that government policy makers should work together with business executives. “Governments could leverage Internet public spending as a catalyst for innovation. Indeed, countries with the highest public investment in the Internet are also those with the largest nonpublic Internet contribution to GDP,” the McKinsey report said.
Additionally, government and business leaders should work together on issues such as standards for digital identities, intellectual property protection, and net neutrality, the researchers said.
I know it’s popular among many to deride the government for regulations and taxes that many say stifle business development. I agree that there are some regulations and tax codes that place unnecessary burdens on business, but that shouldn't cloud the fact that at times the government does have a positive role to play in fostering economic growth and job creation. The recent auto bailouts are a testament to that.
To say that government should play a limited role or not be involved at all in business development is short-sighted, counterproductive, and creates an unnecessary anti-government sentiment that doesn't create space for a more reasoned approach to designing an advanced economy.