E-commerce: from hype to reality

Secretary-General of the OECD

The dot.coms that were the darlings of the stock markets just a few months ago have gone into hibernation. I say hibernation because I believe that some of them, those that have real value, will return. Others which floated upwards on wishful thinking may never again find their way into serious investment portfolios. Indeed, many of them have already folded. What does this mean, if anything, for the future of electronic commerce?

Some will argue that e-commerce is a balloon which has been forever deflated. Others will see this down period as a temporary pause, part of a cycle in an irreversible process of doing business in new and different ways through the Internet. Both arguments are compelling, but the truth is that it is simply too early to tell. For my part, cautious optimism is the right approach.

We have here an application of Information and Communication Technology (ICT) which is really “transformational” in many ways. Much of the increase in business productivity in recent years, particularly in the United States, can be attributed to ICT, which is seen as a key driver of the so-called new economy. The question is, will new technology (and ways of doing things) spread through the retail and wholesale sectors of the economy, and transform the way that buyers and sellers behave? In my view it will, but perhaps it will take more time than many optimists thought.

The fact is that ICT is not a passing phenomenon that will simply disappear to be displaced by some other technology that is in the pipeline. This cannot be said of all innovations before it. At the Chicago World’s Fair of 1893, one wise person predicted that air travel was the way of the future… not by aircraft (yet to be invented) but by balloons tethered to cables, linking cities like an Alpine telecar! And because pneumatic tubes carried mail of the day in major cities, another prediction foresaw pneumatic tubes carrying cargo across the United States. Such are the dangers of linear projections!

Nor is it hard to overestimate the impact of new technologies. Take nuclear energy. Lewis Strauss, then chairman of the Atomic Energy Commission, said in a speech in 1954: "It is not too much to expect that our children will enjoy in their homes electrical energy too cheap to meter." Nuclear energy has been many things over the years, but free is not one of them.

To some extent we have been swept away by the promise of new and powerful communications technologies. Yet e-commerce has brought clear benefits. A lot of us already do banking electronically, make travel arrangements, order goods (even food) online. This is now routine for many of us, even among my friends who a short time ago would have been regarded as techno-peasants.

On a larger scale, because communications have got cheaper (even unmetered in the case of Internet access in some countries!) e-commerce has brought the world’s markets (and people) closer together, opening up real growth opportunities for developing and developed countries alike. Regardless of what may be happening to dot.coms, this is one contribution of ICT that cannot be reversed.

True, there is work to be done to get all countries “wired up” so to speak, to reduce the so-called digital divide between the technology haves and have-nots. The newly formed Dot.force, which brings together the G8 countries, eight developing countries, the European Commission, and some 13 multilateral organisations, including the OECD, is therefore an important step (see News brief).

But such initiatives apart, there are good reasons to be confident that e-commerce will continue to spread at an ever-accelerating pace. Telecom deregulation and technology improvements will keep driving costs down and accessibility up for a start. Nevertheless, e-commerce is new and its progress depends on solving some problems. There is some distance to go before e-commerce wins the kind of consumer confidence buyers and sellers in the physical world take for granted. Many who freely give their credit card number over the phone refuse to launch it into cyber space. They worry about confidentiality, about legal recourse in the event of defective products, non-delivery of goods, and the like.

These and other issues are reflected in the articles on this website: from taxation and trade to government/citizen relations, from online privacy and consumer protection to education and development, from understanding the technology to overcoming its abuse.

The OECD takes these questions very seriously indeed. It works closely with non-OECD countries, some of whom (like Dubai or Hong Kong, as we see in this magazine) have been showing the way forward in e-commerce development. OECD works closely with businesses and civil society groups from developed and emerging markets, in an attempt to find solutions to these international problems. Not everyone agrees with everyone else on how to go forward. Governments have yet to agree on some aspects of e-commerce taxation, for instance. The OECD’s job is to find consensus so that we can move ahead with some confidence.

E-commerce is a marvellous thing. And while it may be suffering from hype today, I see it as a harbinger of the reality of tomorrow.

©OECD Observer No. 224, January 2001

Economic data

GDP growth: +0.6% Q1 2019 year-on-year
Consumer price inflation: 2.3% May 2019 annual
Trade: +0.4% exp, -1.2% imp, Q1 2019
Unemployment: 5.2% July 2019
Last update: 8 July 2019

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