Federal Reserve Chairman Nominee Bullish On IT - InformationWeek
Software // Enterprise Applications
04:23 PM
Connect Directly

Federal Reserve Chairman Nominee Bullish On IT

Outgoing chairman Alan Greenspan was an outspoken advocate of IT. In a time when mainstream business leaders are skeptical of the value of IT, Ben Bernanke, named as Greenspan's possible successor, sees IT as a valuable investment when done right.

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.

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
How Enterprises Are Attacking the IT Security Enterprise
How Enterprises Are Attacking the IT Security Enterprise
To learn more about what organizations are doing to tackle attacks and threats we surveyed a group of 300 IT and infosec professionals to find out what their biggest IT security challenges are and what they're doing to defend against today's threats. Download the report to see what they're saying.
Register for InformationWeek Newsletters
White Papers
Current Issue
2017 State of the Cloud Report
As the use of public cloud becomes a given, IT leaders must navigate the transition and advocate for management tools or architectures that allow them to realize the benefits they seek. Download this report to explore the issues and how to best leverage the cloud moving forward.
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
Join us for a roundup of the top stories on InformationWeek.com for the week of November 6, 2016. We'll be talking with the InformationWeek.com editors and correspondents who brought you the top stories of the week to get the "story behind the story."
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Flash Poll