Last December – as the debates over the stimulus packages were just beginning, I wrote a piece on why the wrong stimulus today could fail us tomorrow. Well, today has become tomorrow, and we are failing.
A stimulus package should be an investment. It should create new industries and markets, it should find help create efficiencies and improve productivity, in short, in should help the economy grow in a sustainable manner. In the last depression the government accomplished this by funding infrastructure necessary for the 20th century economy, things like roads and highways for cars and transportation, power stations and grids for cities and industry, university buildings for education. Today, we already have much of that infrastructure and – while some of it needs to be renewed – we need to be focusing on what infrastructure is needed for the next economy – the digital economy – that will carry us out of this recession.
So what powers the digital economy? It isn’t coal, steel or cars and power (although these things are necessary), it’s data and connectivity.
Data is the plankton of the new economy. It seems plentiful, tiny and insignificant. But a whole ecosystem of companies, large and small are emerging to feed off of it and support our next economy. People often fail to recognize that the largest company already created by the new economy – Google – is a data company. Google is effective, rich and powerful not because it sells ads… but because it generates petaflops of data everyday from billions of search queries. This allows it to know more about our society, and sometimes us individually – the merchandise we like, the services we want, the spam we’ll receive, even if the likelihood we’ll get sick in 4 months – than we know about yourself. Give people access to data and they will use it to become more efficient (freeing up more money to reinvest) and to create new services and opportunities (creating new jobs and profits).
Look no further than the City of Washington DC. It created a publicly available database of city collected and created data and asked local individuals and companies to use it. The result? A $50,000 dollar investment in changing processes and offering prize money has so far yielded $2.3M in value. That’s a 46 times return on investment in one year.
Now imagine that at a national level. Imagine Statistics Canada making all its data available freely (since taxpayers have already paid for its creation). As I outlined in a talk to StatsCan last year, not only would this make them a more important ministry, it could foster billions in savings, investments and new jobs all for a tiny sum. Let’s pick a truly excessive number, say $100M (.2% of the stimulus package) and imagine that’s this would be the cost for Statistics Canada to free all its data and provide in formats usable for webpages, cellphones and applications. Even if such a stimulus were only 20% as effective as Washington’s open data project it would still yield $460M in one year of new (not saved) jobs, and improved economic efficiencies and competitiveness. Over a decade, billions in new wealth would be created.
Compare this to our current course of action. To date much of our stimulus has been spent propping up (not creating) industries that are in death spirals such as logging, newspapers, and the auto-sector. The money spent isn’t about creating new or better jobs, it is simply being spent to keep jobs. Indeed, Andrew Coyne calculates that each auto-job saved cost us just under 2 million dollars. It will take years, if not decades, for such an investment to pay off, if it ever does. Worse still, the Canadian economy will be no more efficient or profitable as a result. While we are at it we might as well be giving Canadians money to buy land-line telephones to stimulate the telecommunications sector.
Oh, and it case you are wondering, the Americans already give out much of their government data for free and they are starting to give away more and more. This is a competitive race we are already losing, and only falling further and further behind.
Canada needs a better stimulus, one that is low on carbon and fat on data. Sadly, I fear our current government lacks the vision and creativity to give us what we need to prepare for the 21st century. So far we are off to an ominous start.
An excellent point, one that hopefully our governments will eventually understand., bit by bit. Thanks!
I fully agree that propping up GM and Chrysler is essentially flushing money down the toilet. I also agree that government should invest in the high tech industry. There has been a pretty vigorous debate on the the sorry state of high tech VC in this country over the past 4 months and the government could play a role in stimulating new investment. This should not be done to the exclusion of other sectors. The next economy is not just the digital economy but in creating diverse local and regional economies that are self sustaining. We should be looking at concepts like those proposed by Riversimple to give us ideas as to how this might evolve and result in actual jobs. Some of this thinking should be applied to high tech, auto, energy etc. to create real jobs that hopefully will be less susceptible to global shocks. Focusing on one sector is, in my opinion, just another recipe for disaster, the more so with high tech since it's even easier to move the jobs. A couple of examples include Sun Life moving actuarial jobs to India or big tech companies like IBM, MS etc. doing the same. And while the efforts like Apps for Democracy are interesting I would challenge the notion that it has resulted in $2.3M in value. It has possibly resulted in that amount of cost avoidance by DC government, but has generated no revenue on the other side. I would also question the value of some of the apps. This is certainly reflected in the video with Vivek Kunda. He suggests two fundamental problems with the first contest — requirements gathering and commercialization. If you can't create a market for the stuff then it doesn't have much real value. I got the same impression at Van ChangeCamp. There's been no real thought put into real requirements gathering or how someone can make money from this stuff. That's what's going to create jobs.
kferaday – thank you for the comment. Completely agree this needs to be sustainable. Do you have a link to the Kunda video that you could send me?
Thank you for the comment. Totally agree. Do you have a link to the kundra video?
It's at the bottom of the link that you provide ($2.3M of value). http://www.appsfordemocracy.org/
Ha! Now that's embarrassing. :)
I'm the worst one for that kind of stuff as my wife will be happy to tell you. Since you're really connected on the government side I'd be interested to hear from you what use cases the government sees for data it's publishing.
Yes, yes and more yes. Thanks for writing this. Well done on so many levels.
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