An Electric Vehicle charging station in Monterey Park, California on May 18, 2021. – President Joe … [+]
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The introduction, scaling, and integration of revolutionary technologies into an economy is a dynamic, inherently disruptive process that both creates and destroys businesses, markets, and jobs. This “creative destruction” is essential for generating the economic growth, productivity, and competitive impact that such technologies can deliver. One thing that can serve as either a brake or accelerator on this process is government policy and regulation.
As multiple technology revolutions unfold at a rapid pace, a country’s dynamism, including the speed and efficiency with which it can reorganize around new technology, will be a major determinant of its competitiveness.
Hitting the Accelerator for the Digital Revolution.
There is no better case of creative destruction in action than the scaling of the digital revolution. In 1993, as the internet emerged, the Clinton administration issued a policy framework, outlining a vision for an “information infrastructure,” and how this network, vast universe of information, and applications, software, and devices to access it could unleash a revolution and forever change how we live, work, and interact. The framework proposed regulatory and policy actions that would rapidly scale the internet in the United States, including opening competition, ensuring universal access, developing interoperability standards, and reforming regulations that impeded development of interactive services and applications.
The U.S. economy responded by reorganizing in a three-decade whirlwind of “creative destruction.” Private fixed investment in information processing equipment and software grew from $176 billion annually in 1990 to more than a trillion annually today. Thousands of new firms were born. In 1992, about 740 software publishing start-ups were formed; by 1997, the number grew to 1,240. After the internet bust came scaling of the app economy, and software start-ups rose again, from about 270 in 2010 to 1,480 in 2018. Today, the top 10 on the Fortune 500 includes companies that did not exist in 1992 when Clinton issued that policy, such as Amazon and Alphabet, as well as Apple. Furthermore, digitalization disrupted entire industries, such as …….