The Internet of Things could be the kick in the pants the U.S. economy needs.
The Progressive Policy Institute released a report today titled “Can the Internet of Everything bring back the High-Growth Economy?” The PPI is a public policy think tank that conducts research and promotes liberal economic and political policies.
In this report, chief economic strategist Michael Mandel describes how technological innovation, particularly as it relates to the Internet of Everything (IoE), could lead America’s economy out of a “slow-growth rut.”
“An economy growing at barely over 2 percent per year doesn’t generate enough income to pay for everything that Americans need,” Mandel said in a memo. “The longer that the slow-growth assumption gets locked in, the more it becomes a self-fulfilling prophecy. Over the past year, a series of studies from research institutes and industry have laid out a compelling new vision of a high-growth future—one that that could revolutionize manufacturing and energy, create employment for the jobless generation, and bring back rising living standards.”
Mandel looked at projections from the McKinsey Global Institute that predicted that the U.S. would get one-third of the $2.7 to $6.2 trillion in global gains from the IoE and that two-thirds of the gains would show up in the gross domestic product (GDP). Then he looked at long-term projections from the Congressional Budget Office and estimates that this could lead to a 2 percent to 5 percent gain in GDP in 2025, with a GDP of $28 trillion.
These gains could help regain output and jobs that were lost during the Great Recession.
“Equally important, from the macro perspective, the result will be a shift to growth that is not just faster, but higher quality;” Mandel said. “Rather than being fueled by consumption and borrowing, the Internet of Everything will lead to an economy built on production and investment, with much more extensive education and training built right into the fabric of the economy rather than being separated out.”
Computers and mobile devices are transforming our lives and economy, but Mandel said that thus far, they have had the biggest impact on “data-intensive” industries like media, communication, and finance. They have done little to genuinely improve labor productivity or improve the standard of living.
The IoE broadens the economic impact of the “Information Revolution” because it stands to transform “physical” activities such as manufacturing, energy, transportation, health care, and the public sector.
“Many of these industries have not shown much productivity acceleration in the Internet era,” Mandel said. “But a network of sensors in a factory, for example, hooked to powerful data analysis capacity, could greatly improve the productivity and flexibility of production, and perhaps lead to a rebirth of manufacturing in the U.S..”
Data is a huge part of why the IoE is so important. Connected devices collect and transmit a tremendous amount of data. When analyzed, this data can help individuals, companies, and organizations use their resources more intelligently, make informed decisions, ramp up productivity, and respond faster to changing environments. It can also make training workers for skilled positions an easier and more cost-effective process.
However, hooking corporations and their “things” up is not an easy task. Old-school companies may be slow to adopt new technology, which can be time-consuming and expensive. There are also regulatory concerns and a series of other hurdles.
The potential is there, but like many technological advancements, it will take some time to filter into the mainstream. Completely wireless factories are still a few years away.
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