Tech investments part of global stimulus efforts

Updated on
The World

SAN FRANCISCO — The world's largest economies have responded to the financial crisis by including substantial investments in technology as part of their stimulus efforts.

Technology is increasingly seen as an engine driving competitiveness and economic growth in a world struggling through the deepest recession since the 1930s.

But concern is on the rise that the reaction against globalism could tempt governments to pursue protectionist policies at odds with knitting national economies more closely together through trade, migration and technology.

In a report titled, “Driving a Digital Recovery,” the Information Technology and Innovation Foundation in Washington looked at more than $100 million in technology spending by the G20, which is made up of 19 of the world's largest national economies plus the European Union. These nations are responsible for a combined $2 trillion in stimulus programs.

“When you invest in information technology you get a larger bang for your stimulus buck,” said report co-author Scott Andes, a research analyst with the foundation.

Andes said technology investments not only create jobs immediately but also enhance long-term growth by improving the critical infrastructure of the knowledge-based economy.

“To be competitive 10 to 15 years from now the G20 are going to need things like universal broadband, computerized medical records and smart (electric) grids,” Andes said. “The leaders in the future are the countries that start making those investments today.”

The United States had the largest stimulus package at $789 billion as well as the largest technology spending program, which the foundation valued at $41 billion.

More than half of that U.S. tech spending has been focused on modernizing data processing systems in the health care industry, while roughly a quarter of the total is earmarked for so-called smart grid improvements to electricity distribution networks. The U.S. allocated another $7.4 billion to stimulate investment in broadband networks.

Japan made the next largest tech spending commitment of $32 billion as part of its $275 billion overall stimulus package. Japan focused its tech stimulus on intelligent transportation systems to reduce traffic congestion as well as better networking for its health care sector.

It is not clear how much of China's $586 billion stimulus program will be dedicated to technology. But the Chinese have indicated that modernizing their electric grid will be a national priority.

France, with a relatively modest $33.1 billion stimulus package, has aimed $5.5 billion of that funding at technology, about 17 percent of its overall recession-fighting program and one of the biggest percentage investments in tech among the group.

In addition to funding smart grid technology, France is moving ahead with plans to provide universal broadband coverage by the end of 2010. Germany has set a similar target for universal broadband according to the foundation, which cited recent studies suggesting that higher broadband penetration helped increase a nation's per capita gross domestic product.

Other G20 governments made varied levels of tech investment with broadband improvements being one of the favorite stimulus tactics, according to the report.

Shortly before the G20 group assembled in Pittsburgh, President Barack Obama in a speech outlined a wide array of technology and education policies to drive U.S. economic growth. He pledged to boost college graduation rates, increase R&D spending and invest in smart grid technology as part of his prescription for a tech-driven economic revival.

Obama spoke on the same day that Federal Communications Chairman Julius Genachowski outlined plans to strengthen network neutrality and maintain open access to the internet, which the president called “laying the ground rules to spur innovation.” Genachowski also talked about FCC plans to develop a national broadband plan to make sure every American has “open and robust” Internet access.

Obama spoke in an industrial area of upstate New York State that exemplified the balance he and other G20 leaders face in touting technology as an economic fix during an era of increasing globalism.

The president acknowledged that the area had lost factory jobs in the past to overseas competitors in what he characterized as “almost a permanent recession for years.”

But Obama said upstate New York, which hosts large facilities for tech firms like IBM and General Electric's energy division, was also reinventing itself around new industries like nanotechnology, semiconductor manufacturing and smart grid technology.

“There is so much potential to change our world and improve our lives while creating countless jobs all across America,” Obama said, urging policies with a competitive bent. “The question is if we are ready to embrace it.”

So far the answer appears to be yes. The United States recently topped a list of 66 nations rated by The Economist Intelligence Unit, research arm of the magazine publishing group, for the competitiveness of their technology sectors. Finland, Sweden, Canada and the Netherlands followed, while China ranked 39th, India 44th and Iran came in last.

The survey expressed concern that “protectionist instincts are on the rise,” citing “buy local” provisions attached to the tech components of some economic stimulus plans. Researchers cited no specific instances but warned that “policymakers need to remain focused on strengthening the fundamental enablers of long-term sector competitiveness” instead of favoring “ailing technology firms.”