BACK TO: Information
Technology
Cyberdemocracy and Australian IT
(Identity and democracy in the knowledge nation)
Senator Kate Lundy
Opening Address COMDEX 99 Conference
Darling Harbour, Sydney.
Australia
17 November 1999
Ten days ago the CBS world news in the US ran a story that carried this headline:
"Australia Vote Keeps Monarchy: Rejects Referendum To Make Country A Republic
The UK tabloids pegged Australians as cowards.
Ten days ago Australians gave away one of the greatest chances to build a fresh,
dynamic presence in the knowledge economy and the global community.
More than anything else, the republic referendum was about the future, an opportunity
to establish Australia in the eyes of the world as a nation state capable of active and
effective participation in a the global economy. Regardless of the issues the referendum
campaign was fought upon, the result has meant Australia has given the impression we lack
vision, courage and pride as a nation.
If your attitude remains one of ambivalence towards how Australia is perceived by
others around the globe, then I would suggest that you are yet to come to terms with
globalisation.
Living with globalisation means that not only does Government have to be diligent in
managing an economy within the fickle, deregulated international money market, but the
Government must also be equally diligent in managing our cultural identity. To use a
corporate analogy: you can have the best CFO in the world, but if your marketing division
is asleep ‘brand Australia’ goes no-where.
Like many developed countries, the prevailing wisdom has been that the concept of the
nation state is breaking down as the ubiquitous internet creates opportunities for new
interests to align across old borders. However this attitude fails to recognise that the
actual unit in the international community of nations is still the nation state. It is
just that the identity of the nation state will be defined far more by cultural identity
than by economic identity. It is the economic identity that will diminish relative to
other identifying features.
I would like to share the story of just one nation state struggling with its social,
cultural and economic identity in the final moments of the second millennium.
Australia arrives at this point with incredible strengths, and unfortunately some
significant weaknesses. Government has a specific role to continually analyse the
situation and create a policy framework that will make the most of our positive attributes
and shore up our vulnerabilities.
I would like to explore the distinction between cultural and economic identity, and how
the treatment of each will contribute significantly to Australia’s capacity to
progress and grow in the next millennium. I would like to conduct my own brief SWOT
analysis and finally reflect on the implications for democracy in an age where the
internet’s ubiquitous presence and continuing evolution is reshaping society.
The definition of globalisation I find most comforting is that of ‘democratisation
of technology’, courtesy of Thomas Friedman. However, despite the rosy connotation
that accompanies such a definition, this in no way means that somehow globalisation makes
technology democratically accessible.
The ‘democratisation’ that has occurred comes after years of computer
hardware getting smaller and more powerful, software becoming user friendly and
compression of digital information. In a technological sense, becoming digital enabled
globalisation, because being digital meant a common standard for the distribution of data,
be it in, voice, text, applications, graphics or moving image form.
All these technological developments culminated in the commercialisation of a world
wide network capable to exchanging of digital information – the internet.
‘Democratisation’ in this context simply means more people could potentially
access the internet.
As a result a world where communications and relationships were previously defined in
terms of proximity, has now metamorphosed into a world where distance is merely a question
of bandwidth. The capacity to participate in this world, this knowledge economy, is
therefore determined by internet access. For technology, epitomised by the internet, to be
become democratically accessible, universal connectivity must ascend in political
priority.
Accompanying, or perhaps as a result of the shrinkage of the world in communication and
information terms, political and economic relationships are continuing to change and
adjust to the global environment.
The Internet has enabled unprecedented rates of change in the social, political,
economic and cultural spheres. It has redefined the empowered citizen and the nation
state. Globalisation is most often the term used to describe the symptoms of the depth of
change enabled by the internet.
Thomas Friedman, in his book ‘The Lexus and the Olive Tree’ says "
Today’s era of globalisation is built around falling
telecommunications costs – thanks to microchips, satellites, fibre optics and the
Internet. These new technologies are able to weave the world together even tighter."
Whilst Australia’s pre-occupation with the end of the Cold War is far less than
others, the implications are still significant. First and foremost is has meant that once
and for all there should be no illusion that political decision making is somehow distinct
from prevailing market forces. Governments, individually and as participants in
international communities will continue to guide the structure of modern society.
Secondly the role of governments as technological drivers in a market economy are no
longer expressed almost singularly through expenditure on defense-related research,
development and deployment. Instead investment should be spread across innovation
industries, including information technology and bio-technology industries.
The realisation that there is a definitive role for government in information
technology policy comes as a shock to many who believed the strident, anti-interventionist
rhetoric that accompanied economic rationalism extended into all areas of administration
and governance.
Whether it is the effect of electronic commerce on taxation framework conditions,
fostering an entrepreneurial culture, seeing bandwidth in a new light or recognition that
education is the key to a prosperous future, public policy will continue to have a
pervasive and essential role. It is a role that must, by definition, protect and enhance
the interests of all citizens, so they have the opportunity and ability to participate
fully in society as it continues to evolve.
The ability to participate in the knowledge economy is very quickly defining the haves
and have-nots of the next millennium. Access to the internet and the skills to use the
hardware and software are in my view, a prerequisite in allowing an individual to fully
participate in society in the future. This is why universal connectivity must be a right,
in the same way as literacy is as far as skills go, and in the same way as utilities like
power and water as far as access goes.
Every day more people are confronted with www.somethingorother
being advertised in traditional media. This serves as a reminder to the seventy-five
percent of Australians that do not have internet access that they are missing out on
something. Even Government has been getting into the picture. Unfortunately
governments tend to transfer services to an on-line environment as a cost cutting
measure. Surely it is obvious that this will only serve to disenfranchise a huge
proportion of the population?
Is it no wonder that citizens are disillusioned with government? Identifying the causes
of the frustrations felt by many Australians requires a look at these big picture issues,
particularly about the role of government. A large part of the backlash against the
republic experienced only ten days ago can be interpreted as a stick up the nose of a
political establishment seen as irrelevant and therefore undeserving of anything it
sought. This begs the question: were the cynical tactics of the No Campaign to shamelessly
foster the contempt felt by many Australians towards their political representatives the
key to their success?
I suspect as much, but there were other disturbing features. In the same way we saw the
country divided in the first term as a result of the profile afforded Pauline Hanson by
her conservative peers, we see a nation once again divided along metropolitan and regional
lines. The common factors in the two campaigns were the call for Australia’s identity
to be re-established using definition of the past. Economic definition, remembering
Hanson’s call for greater protection; cultural definition, who can forget the
appalling racism that echoed around the globe and finally a public attack on the political
process and representatives as being incapable of acting in anyone’s interests but
their own.
The insecurities of so many of our citizens drawn out in these experiences and
reflected at the ballot box at both recent elections and the referendum support the
unequivocal need for Government to address the issue of both cultural and economic
identity in a globalised environment. It is a grave reflection and socially irresponsible
to exploit the fear and concern people have of change for short-term political goals.
We know that rural and regional Australians are feeling marginalised in the information
economy, because at the recent regional summit held in Canberra identified connectivity as
one of the single greatest failings of both the market and the government.
We know that the rhetoric accompanying globalisation includes ‘mobilisation of
labour and the means of production’, creating concern about employment prospects.
It includes ‘diminishing the role of the nation state’, evoking concern that
our national heritage will be lost forever. It includes ‘regionalisation of
economies’ worrying those who barely scrape by in the domestic market. It includes
‘a new-world order’ which frightens the hell out of people who have an interest
in national security. It includes ‘ how the internet is going to change the way we
live our lives’ prompting fear for those who are happy the way things are.
Globalisation includes all these messages and yet the Federal Government continues to
merely exploit the concerns rather than show leadership.
A vision is required that puts into context the changes that are taking place with
globalisation: a vision that acknowledges the causes of frustration and systematically
addresses them. In the first instance this means being open about the strengths and
weaknesses as well as opportunities and threats. Not really such an unusual process when
you put it like that.
The knowledge economy heralds a shift in values, where the management and commercial
exchange of intellectual property derived from people who think up new ideas ultimately
becomes the source of wealth, rather than the commercial exchange for the products of an
industrial process.
Whilst this over-simplifies the landscape, there is no doubt that the changing
proportion of our economy from manufactures to services is by far the most obvious and
powerful indicator of such a shift, with services sector now over 80% of the Australian
economy. The use and refinement of information technologies has at the same time
facilitated this shift by changing the nature of the workforce and allowed the investment
/ return ratios that existed by definition in a manufacturing/ resources based economy to
be completely blown away.
As a result wealth is being created in ways and orders of magnitude that are reshaping
economic hierarchies both within nation state economies and the global economy. The
internet has enabled the emergence of another market, a market that thrives in active
contempt of the traditional corporate culture. Australia’s capacity to think outside
this risk-averse corporate culture has been preceded by recognition that it exists here in
droves. It’s true: an agricultural and resources based economy carries the risk in
the weather and exploration. Therefore the concept of increasing risk in the value-added
aspects of the business did not make good business practice. What was a cultural strength
in a commodity and resources economy has become a cultural weakness in a service and
information economy.
The challenge is therefore to change our corporate culture so we are best able to place
Australia in a position of strength in the global information economy, with the aim of
deriving the benefits from growth for Australians.
The enabling technology industries have established themselves as the drivers of
growth, with the sector being characterised by high value added and high wages. Here in
Australia, the information industry is growing at a rate three times that of the economy.
US Federal Reserve chairman, Alan Greenspan, has stated that the IT&T sector, which
provides the infrastructure fort the information economy accounts for one third of all
recent US growth, and is growing at two times the rate of the overall economy.
Forrester Research has estimated the total value of goods and services traded between
companies over the Internet will reach $2 trillion in 2003. To put this in perspective, a
5% commission on this represents a $100 billion opportunity. (AU$) Business to consumer
e-commerce is also growing at phenomenal rates.
From another perspective, internet stocks continue to lead the market, with
capitalisation figures outstripping revenues way beyond the normal relativities of other
stocks. Despite a series of adjustments, internet stocks have held up despite prophets of
doom predicting a devastating bursting of the ‘bubble’.
Globalisation introduces many challenges to Government, industry and the community.
What is the best path to follow in policy terms and what strategies can offer the best
chance for success and survival of our national economy, and indeed our sense of
Australian identity? Jerry Everard confronts these issues in his book Virtual States which
I had the pleasure of launching just a few weeks ago. He has this to say:
‘ Globalisation is above all a social process, and it operates
unevenly across society and between societies. This differential quality provides dynamism
behind globalisation. It also promotes social inequalities.’
In other words whilst ever there is market driven technological dynamism, there is by
definition a role for public policy in countering the social inequities that are an
inevitable by-product.
From a public policy perspective, we need to establish, as far as is possible, what
constitutes success. Is it an identifiable economic return to a nation that can be
quantified within trade balance of payments terms? We know that we have a chronic IT&T
trade deficit problem, with recent figures showing a phenomenal worsening of
Australia’s position. So would success be turning this trend around? Or maybe, given
the emphasis on intellectual property, it is the number of patents held by Australians? Is
it the unemployment figures? Whatever the definition of success, the policy framework to
achieve it must address social justice.
Defining success in policy terms will always be difficult. The complex relationships
between a vast array of portfolios including education, industry, communications and the
arts I have found mitigates against defining a clear vision. As a result, assessing the
degree of its realisation becomes very difficult.
However, we do know that sustained economic growth offers greater opportunities for
employment, and that education offers greater opportunities for those seeking employment.
Given that employment in a high wage society offers the best chance to maintain improve
one’s standard of living, then investment in these areas by Government makes
political sense.
To highlight this point, in 1996, public spending on Australian education, research and
training increased to almost 3 per cent of GDP from 2.35 per cent. This has since fallen
dramatically to 2.53 per cent in 1999-2000. If the 1996 spending levels had been
maintained, $2.87 billion more would have been spent on education in the last budget. The
impact of public re-investment of this magnitude in Australia's skills development,
research, innovation and, ultimately, industry growth and ultimately, jobs would have been
significant.
We also know that there is a quantifiable relationship between research, development
and commercialisation and economic growth. The higher the R&D expenditure as a
proportion of GDP, the stronger the growth. And nothing could be more obvious than through
the example of internet and technology services based sector.
It is this point more than any other that accentuates why so many Australians were
dismayed when the Government pushed internet censorship legislation through the
parliament. In addition to the potentially disabling effects on bandwidth and networks,
the point made earlier about global positioning is pertinent. As a result of this
legislation, a major US industry magazine labelled Australia the ‘global village
idiot’. This is precisely what we don’t need at we take our place in the
knowledge economy.
This legislation will serves as a continual reminder that a focussed, determined effort
by all stakeholders is required to build a knowledge nation. And despite this embarrassing
Act, it’s not like we are starting from a low base.
It is generally accepted that Australia is well placed to be successful in the
knowledge economy. We have high penetration of PCs per head in both business and home and
one of the highest internet connectivity rates in the world. We have a well-educated
population and a history of adopting new technologies quickly.
However our capacity to keep up with technological progression cannot be attributed to
any remarkable effort by government or our corporate sector, rather it has been driven by
consumers. This in turn highlights emerging challenges as the drivers of technological
innovation change.
The now-familiar innovation cycle, characterised by Moore’s law, where
improvements in software bits and processing power created momentum for consumer demand
for technological improvement is now being overtaken by a new law.
Gilder’s Law identifies a new set of factors that will take over as the drivers on
technological innovation and change. The new factors are bandwidth and content. The
innovative tension between content demanding greater bandwidth and bandwidth enabling
better content will create the momentum for technological innovation.
However with one of the factors, bandwidth, being determined by communications
infrastructure, the capacity for entrepreneurial dynamism motivated by consumer demand to
innovate in broad-band technologies is severely limited. Australian consumers will no
longer be able to drive our technological progression. Add the current regulatory
framework and theoretical competitive environment, recent decision relating to spectrum
allocation and the prospects look dismal.
If half of the innovation cycle is incapacitated, where will that leave
Australia’s capacity to innovate, to participate in the next big thing? Unless an
understanding of the innovation cycle leads to public policy that enables the dynamism to
continue, through a priority on high bandwidth connectivity, then Australia may well be
dealing itself out of the biggest drivers of economic growth for the foreseeable future.
I am reminded of a fellow I met in Narooma leading up to the last election. He was an
engineer and used CAD to design components for an engineering firm in Melbourne. He
purchased the bandwidth he required to electronically transfer his intellectual property
to Melbourne from Telstra, who was the only infrastructure and service provider available.
His requirements were way beyond that of the legislated USO. He told me it took at least
five months to get the connection operating satisfactorily, which nearly shut him down.
Eventually he got it working but still anticipates his growing bandwidth needs at least
eighteen months in advance, just so he doesn’t get burnt again.
This guy’s story taught me as much about bandwidth as it did about regional
economic development. His experience demonstrates that connectivity is more than an equity
and participation issue for Australian citizens. I am talking about public infrastructure
that bears directly on the private sector’s ability to innovate. Gilder’s Law
demonstrates that there are incredibly important economic reasons for placing high
bandwidth universal connectivity at the forefront of public policy.
Will we even know what opportunities are being lost if we don’t invest as a nation
in high bandwidth connectivity? Chances are we won’t and the world will leave
Australia in a state of unassuming mediocrity.
It is beholden on us therefore to keep an outward focus and an open mind when it comes
to different ways of doing things. With all of our strengths we also have areas where we
can do so much better. It is useful to look at other environments that have led the way in
adapting to the knowledge economy.
Australians have made a habit of visiting famous locations of IT success stories almost
as much as our talent has made a habit of living and working there. Having ‘been
there - done that’ myself recently (at least Silicon Valley), there are some obvious
elements that can guide Australia in adapting our corporate culture and public policy to
offer the best chance for growth.
Contrary to the perception that Silicon Valley grew out of nowhere very quickly, it has
had the longest history of a geographically clustered entrepreneurial powerhouse. There is
one feature central to its development – and that is Stanford University, which was
established back in the 1800’s. Stanford’s business focus is attributed to
Professor Frederick Terman, who was central to shifting commercial studies into
entrepreneurial business activity. He was the guy who gave Hewlett and Packard $500 to get
them started.
What is less well known is the role that the public sector has played in the
Valley’s growth. A feature all but ignored in recent forays to the region by
Australians. For example, a partnership between the City of San Jose and an association of
software firms provides test equipment, lab space and business services for the
region’s software developers. The procurement methodology of the US Government also
ensures that local businesses will benefit directly. If there is no local capability, then
it is developed, perhaps through a joint venture and the university.
The decision to change the driving force of growth in Israel to high technology-related
industries was a political one. Vast sums of public money were spent on incentives to
attract IT corporations. A scheme to introduce venture capital was also put in place. The
scheme, Yozma licensed US VC funds to participate, and provided for public money to top up
the funds. However it is widely acknowledged that public expenditure in defence technology
industries that enabled Israel to move so quickly to establish their presence in the
global IT&T sector.
In all the case studies available it is plain that the policy settings of federal state
and regional government are key determinants of growth and opportunity. Believe it or not
there are now over 25 federal government programs alone pitched at the IT&T sector.
These programs range from the new BITS program through to the well-known, albeit reduced,
tax breaks on R&D investment.
In all of these programs, and some operate with a degree of success, the policy
foundations for education and industry are weak. For a government that claims it is
devoted to the macro policy settings, this is a complete contradiction.
Universities and industries form alliances, allowing an entrepreneurial culture to
emerge as a natural by-product of their relationship. Investment in higher education
becomes a direct investment in industry development. Recognising spending on education as
an investment in industry growth is just the start.
Having the brainpower to drive ideas and the skills to add firepower to innovation. The
adaptability of our education system to the demand of the knowledge economy is critical.
It must however, be matched by an equal commitment to the creation of employment
opportunities too, otherwise Australians will continue to fund the best of the best in the
IT talent that is scattered around the world.
While I hasten to add that part of our strength as an IT nation is our roving
brainpower – because some do come home, we cannot sustain the current losses –
estimated by Morgan and Banks to be about 1000 people per month in the IT&T sector
alone.
Tackling Australia's dire IT skills shortage is essential. The hang-up seems to be: why
invest in education if the best and brightest are lured overseas by high wages, stock
options and start-ups? An emphasis on real industry growth must accompany investment in
education if we hope to entice our own to stay, or at least return.
Part of our problem may be the study-work transition. The relative lack of
collaborative relationships between industry and education institutions whilst improving
all the time, continues to distinguish our education environment from other, more
entrepreneurial cultures. It is an irony that a tradition of distance between education
and industry could also be partly responsible for our capacity to come up with very clever
innovations. It is almost like our thinkers are sheltered from the inevitable
homogenisation occurs when one’s research is sharply focussed on development and
commercialisation for the market. No wonder there is international interest.
Our entrepreneurs are the human resource needed to derive economic benefit from ideas.
They are link between innovation and commercialisation. The ability for entrepreneurs to
secure investment for this process is a critical, tangible aspect of building a knowledge
nation. That is why access to very early, or start-up investment capital is worthy of a
particular emphasis.
A consistent theme that emerges in any geographically clustered entrepreneurial
environment, is the all-pervasive power of the informal networks that exist. It is the
culture of sharing ideas that so distinguishes Silicon Valley in particular from other
corporate cultures. The concept of corporate loyalty has diminished to the point where
personal commitment is extended to the technology and the profession.
This attribute allowed individual investors like business angels to make the most of
their range of experiences, as many have been entrepreneurs or worked in start-ups. This
is experience that has served them well in analysing future investment opportunities, not
to mention knowing who’s who in the zoo for the purposes of pulling together a strong
team to manage the start-up.
There are some good economic reasons for creating a competitive environment for
investment, but it is also important to ensure that sources of capital are as diverse as
possible. Attention has been paid to VC to date, with the Israeli inspired Innovation
Investment Fund seeing public investment along side private investment. However the lack
of recognition of the role Business Angels play continues to be a real threat to
establishing a robust capital food chain in Australia. Securing sources of capital in
stages creates momentum as each stage of investment establishes important credentials for
the next. It is rare that the VC will enter at this really early stage. This initial
investment in start-ups is invariably in the hands of independent business Angels.
One of the more enlightening moments whilst spending time in San Francisco was the
apparent recognition by some business angel investors of Australia’s desire to retain
intellectual property. It seems that in a departure from the established practices of US
investors, these business angels are not devoted to shifting the whole enterprise to the
west coast as part of their strategy to realise their returns. This only emphasises the
state of flux that we are in and that Australian leaders should not merely plead for US
investor interest, but assert what is in our national interest, which is keeping what we
can on-shore.
The knowledge economy will continue to generate new and different corporate
relationships, where location is as much about marketing as it is about tax treatment.
Electronic commerce, the implementation tool of a globalised economy presents a
significant opportunity for Australian industry to reach new markets. But it goes both
ways and there are strengths and weaknesses in Australia’s position.
Australia faces on the one hand a release from the shackles of geographic isolation, at
least with regard to the distribution of digital products and services. In itself, this is
a remarkable opportunity and one that justifies an increased industry policy emphasis on
growing our digital industries.
Digital content, which may be everything from applications to multimedia to online
services, has the enviable status of being an Australian strength as well as providing the
critical service of ensuring a permeating presence of "brand Australia" on the
Internet and in the global market place. It therefore makes good policy sense to
facilitate an optimal environment to encourage diverse, quality, digital content.
Fortunately for us, the talent and reputation we have has already made Australians
leaders in this field. While in the US recently I met the president of a production
company that makes commercials for Fortune 500 companies. He had just returned from
filming in Australia. He told me his company was able to wear the costs of travel to
access the talent because the internet was facilitating the production process to a degree
that it almost offset the difference.
On the other hand, the implementation of the goods and services tax has the potential
to directly undermine the capacity of local producers of digital products and services to
compete in the domestic market if there are international competitors. Why? Because any
digital product or service produced and distributed locally on-line will attract a GST.
Imports will not. Domestically produced exports don’t either. Does this mean local
producers will be forced to set themselves up on a server overseas to give themselves
status as an importer, just so they can compete in their own market without a ten percent
cost penalty? Or does it mean that this sector can forget about using the local market as
a base for export growth? Makes it kind of tough for such a critical industry.
Despite having asked the Minister Senator Alston how the Government intends to address
this extraordinary digital products and services market anomaly in the implementation of
the goods and services tax next July, I am yet to receive an answer.
The collection of goods and services taxes within electronic commerce environments
presents a significant compliance problem for the Government anyway, for tangible or
intangible products and services. It is a tax invented for isolated national economies,
where revenue collection is structurally linked to domestic consumption. With the internet
as the medium and electronic commerce as the mechanism for economic globalisation, the
goods and services tax is clearly a tax for times past. At this stage it appears that a
series of bilateral and multilateral taxation treaties is the best Australia can hope for
in reducing the revenue loss from their new GST revenue base in a globalised digital
economy.
Preparing the policy foundations for active participation in a global economy requires
foresight and a continual high-level presence in international fora. More than ever the
rules for participation in the global economy will be determined in these environments.
Australia has shown itself to be a global leader and can be again.
As Australia opens it’s doors even wider to new sources of capital – new ways
to fund innovation and build identity and presence in the global information economy will
emerge. Our path to becoming a knowledge nation will be served well served Australian
ideas. An entrepreneurial environment is but one stepping stone along this path, albeit a
crucial one. It also serves to remind us that our future does depend on people and their
capability to participate in innovative ways to build a society that will serve the
community well into the future.
This means education will always underpin opportunity and growth. Governments too must
take their own education seriously and be willing to look around and learn from other
nations in the search for effective policy solutions. Ensuring our infrastructure serves
the needs of the community and innovative industries means a new emphasis on high
bandwidth and connectivity is required.
We must address the social challenge of the information haves and have-nots. To be able
to use the internet as a mechanism to close the gap, rather than widen it, we must be in a
position of strength in the information economy. The aspiration of universal connectivity
is therefore an essential foundation to a knowledge nation.
Recognising and articulating the challenges that arise from the need to redefine
cultural identity, as distinct from economic identity in a globalised society also demand
serious attention from policy makers. Only then can democracy in the information age be
built on a foundation of understanding. Leadership must emerge from this understanding so
that the path forward is clear and open. I remain optimistic that an opportunity exists to
rebuild trust between citizens and their political representatives because I reject using
fear and trepidation about change for political manipulation.
More than anything else, the referendum held only ten days ago showed me how damaging
the tactics used in the No campaign had become. I want to live in an Australian Republic
and I look forward to taking an active role as a member of the Labor Party in
Australia’s future – a future where a democracy is a celebration of our cultural
identity.
I would like to conclude with another quote from Virtual States:
"National government will still set connection standards, and
still operate with a duty of care to their citizens, so there will remain a strong role
for states to play, no matter how globalised the economy becomes."
Jerry Everard, Virtual States 1999
