Bits of Destruction

While DBCDE has ended its DE blog, and started its more formal consultation, there are signs that they still underestimate the magnitude of the question "what is the digital economy?"

Their discussion paper starts with an objective that;

The Australian Government is seeking to increase the effective use of networked information and communication technologies (ICTs), especially the internet, by consumers and all businesses to drive higher productivity growth and community participation in the digital economy.

In my own discussions I've tried to suggest that the issues of the DE are far greater than this. It is not just about driving greater use of online transactions but recognising the wider impacts that these have on economic and social structures. The British MP Tom Watson included a link to this venture capitalist blog post under the heading Bits of Destruction. The post started;

The news is full of stories this year end about the impending bankruptcies of retailers, newspapers, auto manufacturers, banks, and a host of other businesses that have been the mainstay of corporate america for the past 100 years or more.

Clearly the economic downturn is the direct cause of most of these failures but I believe it is the straw that broke the camel's back in most cases. The internet, now closing in on 15 years old in its mainstream incarnation as the world wide web, is in many cases the underlying cause of these business failures.

He goes on to list the obvious areas impacted, retail banking, retail shopping, news and entertainment media. But even he misses the big one - that the whole fanciful structures of securitised debt, and then securitised risk (credit default swaps) instruments are as much products of the internet as they are of the "quants" that were hired to Wall Street. You can't create, market and manage these products without electronic settlement systems. But it is the facility of these systems that means the instruments could become so abstract and so divorced from the underlying asset (in the bulk of the cases houses).

Hopefully I will be able to include more of this in a more formal submission.