Ben Bernanke, whom President Bush on Monday nominated to replace Federal Reserve Chairman Alan Greenspan, has made the case that how information technology gets put to use is every bit as important as whether it gets bought.
Bernanke, in a speech at the University of Arkansas in February, laid out in considerable detail his thinking on information and communication technology's role in improving worker productivity. Looking at how much companies invest in IT software and hardware isn't enough, Bernanke said, since the investment in research and development, training, and organizational redesign are important and may be just as costly.
In fact, the time and expense learning how to use IT might partly explain why there seems to be a lag from when IT spending rises and productivity gains show up in the economy. "For example, to realize the benefits of its [information and communications technology] investments, Wal-Mart had to reorganize work assignments, retrain workers, develop new relationships with suppliers, and modify its management systems," he said.
Under Federal Reserve Chairman Alan Greenspan, who's term ends Jan. 31, information technology's role in the economy was often under the spotlight. Greenspan generally has been a big believer in IT's ability to help companies improve worker productivity. Those productivity gains in turn helped shape the "new economy" thinking that the U.S. economy could grow at faster rates than in the past without triggering the same inflationary pressures (as well as other factors, such as unprecedented global competition holding down prices.) So what Bernanke thinks about IT and its role in productivity is sure to be one key element to his leadership in one of the world's most-powerful economic positions.
Bernanke appears to think there's more value for U.S. companies to wring from IT. "The productivity optimists have a good case," Bernanke said in February. Many of IT's productivity benefits haven't spread widely through the economy, including to smaller companies and those that haven't adopted the latest technology. He acknowledged that the cost of computing power isn't dropping as fast as in the late 1990s, and that there may not be the same pace of killer business app innovation today. "Even if the technological frontier advances more slowly during the next few years, further diffusion of the existing technologies and applications can continue to raise aggregate productivity," he said.
Bernanke had been an economist teaching at Princeton University until 2002, when President Bush named him to the Federal Reserve's Board of Governors. Since June, he's been on Bush's Council of Economic Advisers.
Bernanke has also spoken directly to the topic of offshore outsourcing, in a March 2004 speech at Duke University. And, at least in March 2004, he didn't think dire predictions of large-scale U.S. job losses would materialize.
"Outsourcing abroad has proved profitable primarily for jobs that can be routinized and sharply defined," he said. "For the foreseeable future, most high-value work will require creative interaction among employees, interaction that is facilitated by physical proximity, personal contact, and shared cultural experiences. Moreover, in many fields, closeness to customers and knowledge of local conditions are also of great importance." He said this was particularly true of "high-value jobs."
He took the position that trade " in goods and services " increases a country's economic prospects, but acknowledged that the beneficiaries of new jobs often aren't the ones losing their jobs due to trade. So he encouraged policymakers to do more to help in that churn.