People who can use ICTs to create and promote growth may benefit even more than those who enjoy the new products and jobs that are the fruits of the ICT innovations. Well- distributed prosperity depends on some willing to take risks and others able to respond to change. Conclusion In sum, not only does the New Economy paradigm not provide an alternative to the difficult undertaking of policy reforms for structural adjustment and development, it favors comprehensive progress on the full range of policies—picking and choosing in piecemeal fashion is less and less rewarding. Once the set of policies is understood implementation is the next step.
The benefits of the New Economy depend on managing the political economy of policy reform in the domestic arena above all else. Managing the reform process is deeply challenging. The risks from embracing new policies quickly, with the potential for disruption to the economy and citizenry, must be weighed against the costs of not engaging fully in reform. The New Economy does not diminish the right of choice for policy makers but it does make more transparent the outcome when the choice is made (for political, cultural, or security reasons – it does not really matter) to diverge from growth-oriented policy.
Meanwhile, adopting a “culture of transformation” – which is essentially what joining the New Economy means – may pose a challenge to the national identity of a society, which requires leadership and wisdom. 21 This we know: it can be done, and will be done by at least some in APEC, as elsewhere. The next two sections of this Report present tools for policymakers forging policy reform at home in view of the New Economy. Section III presents evidence on changes to trend productivity (and hence economic growth) made possible with new technology operating within a facilitating environment and with diffusion throughout the economy.
Evidence from the US, Australia, and Europe is compared and contrasted to interpret the different ways that economies can gain from the forces of the New Economy. Second, using modeling techniques, it highlights the aggregate macroeconomic gains reformers can achieve as the outcome of policy reforms. Section IV uses examples from APEC economies to sketch pictures of how business, civil groups and government have been able to more fully engage in the New Economy as a function of policy reform, or been held back by failure to reform.
Looking ahead, the remainder of the Report will draw out the implications of this evidence for the APEC region, considering in particular trade competitiveness and other aspects of the so- called “digital divide” (Section V). Section VI summarizes the challenges and impediments to reform and offers recommendations and conclusions. Annexes contain the mini-case studies from APEC members, detailed analysis of trade competitiveness and references. 21 Economists may well ignore this, but politicians cannot. We are guilty as charged, but it is nevertheless important to provide the politicians with the ammunition of mere economic costs and benefits. - 22-