The process of globalization, increasingly driven by new information technologies, is dramatically changing what economic development means for state and local government. Today, the economic health of any region hinges on competitiveness, not just with neighboring regions, but with communities that may be located halfway around the globe.

"Four years ago, when I became director general of the World Trade Organization, it was almost universally accepted that regionalism would be the new shape of world trade," Renato Ruggiero told senior elected officials from the 29 nations of the Organization for Economic Cooperation and Development (OECD). "Today the reverse is true. In a digital world -- where Singapore is as close

to Toronto as Chicago -- the idea of regional preference and integration begins to lose its logic. Regional arrangements still have an important role to play, but increasingly as catalysts for the global system, not as alternatives."

Already a quarter of the global output is exported, Ruggiero said, up from just 7 percent in 1950. Developing countries' share is even higher -- almost 40 percent.

If this trend continues, soon well over 50 percent of all economic production in most areas is likely to be for export. Moreover, these exports will include not just goods, but also an increasing number of services that will be ordered and often delivered digitally over the Internet. So the whole emphasis of economic development at the state and local levels will shift. What is important will be not what can be brought or pulled into a region to make it economically attractive and robust, but rather what one can push out from it to other economic centers around the world.

"[Regions] are obligated to turn outward, not inward," Ruggiero said.

Economic development in the future will be increasingly tied to electronic commerce, or what Lou Gerstner Jr., chairman and chief executive of IBM, prefers to call e-business.

"Last year we started using the term e-business to describe all the ways individuals and institutions will derive value from the Net," he said. "We coined this term because what's going on here transcends just e-commerce. E-business includes transactions among employees inside an enterprise; among trading partners in a supply chain; and it includes the way governments deliver services to citizens, educators teach students, and physicians treat patients.

"The real revolution isn't about the end-user experience, and it's not even about the technology.

The real revolution is about banks, universities, government agencies and commercial enterprises making fundamental change in the way they currently do things."


Gerstner argues that the existing models simply do not apply. "Not only is e-commerce screaming ahead, moving much faster that any bureaucracy, committee or legislating process ever could," he said, "it's a grave error to think the Internet will develop under the kind of regulation we could apply to, say, the phone system back in the days when coal and steel were determinants of a nation's greatness, and many markets were underdeveloped."

Governments around the world now regard e-commerce as the engine of economic growth in the decades ahead. "It is a new age in which the accumulation and distribution of information will form the basis of a new society," said Sanzo Hosaka, Japan's secretary for International Trade and Industry, at the recent OECD Ministerial Conference. "Electronic commerce will be at the core of all this. Electronic commerce has an enormous potential to revolutionize the very roots of our societies and economies."

U.S. Secretary of Commerce William Daley said, "I am the last American commerce secretary of

this century -- assuming I do my job right. I don't know of another commerce secretary this century who saw, as I am seeing, a technology totally change the way commerce is done. Here is a technology that could give every business, regardless

Blake Harris  |  Editor