Is The Internet Bad For The Economy?

Since the earliest days of Amazon.com I have been buying shelf loads of books from this innovate Internet business every year.  Then I stopped going to record shops and bought my CDs from them too.  Later on I bought running shoes, electronic gadgets, printer ink, and anything else that was convenient.  I buy a lot more books because of Amazon.com’s heavily discounted prices, no state sales tax and free shipping on orders over $25.  Now that the economy has taken a fall, I’ve got to wonder if my buying habits helped in knocking it out?

None of my favorite bookstores have gone under, but they’re struggling.  All my old record stores are dead.  So is the place where I bought my running shoes.  And all the small computer shops I used to visit have disappeared.  My state is hurting from low revenue, mostly gotten from sales tax rather than an income tax.

I buy a lot of audio books.  Audio books used to be $25-150 on cassettes and CDs, but I get them for $9.54 each at Audible.com as a digital download.  I never would have bought many titles if I had to pay the old prices, but if retailers now sold them for $15-25 a book, and Audible.com didn’t exist, I would buy 3-4 titles a month.

I used to buy 2-4 CDs a week.  Now I buy none because I pay $120 a year for unlimited listening on Rhapsody.com.  I used to buy a lot of software, but most of the programs I use today are free.  My wife and I used to collect DVDs, but now we have Netflix.  We used to pay for photo prints to give to people, but now we email copies.

I’ve got to ask:  Is the Internet hurting our capitalistic system?  I love the Internet.  I would never want to give it up.  But survival in this world depends on economic activity.  And comfort and security depends on everyone having a job and the economy doing well.  A 2% rise in unemployment, which we’ve recently experienced, has brought fear and misery.  What will 10% do to our sense of well being?  Do you remember the early 1980s?  People are talking about this financial crisis being the worse since the Great Depression.  1932 had a peak of 25% unemployed.  I have no way of imagining that level of bad times, and I don’t think anyone under 95 can really remember what it was like either.  We really don’t want to go there, and need to consider doing almost anything not to.

We all need to be conscious of our economic impact.  Spending frugally, staying out of debt, making careful purchasing decisions, and all those lessons financial advisors taught us might not be the right thing to do right now.  Would spending a few dollars more for each book and paying the sales tax be a better choice for my local economy than ordering from Amazon?

This afternoon my wife and I wanted to watch a movie together, but there was nothing on at the theater we wanted to see.  So we thought we’d go by Target and buy Kung Fu Panda.  It was $19.99 plus almost $2 in tax.  I could get it from Amazon for $15.99, a savings of almost $6.  But we decided to wait a couple of days for when it comes in via Netflix.  The rental cost would be less than the tax, thus saving over $20.

We didn’t buy Kung Fu Panda.  We just didn’t feel like spending $22 for something so trivial in these economic times.  If Kung Fu Panda would have been on sale for $12.99 we would have come home with a new DVD.  I wanted to help the economy, and considered a 4 DVD set of Dexter Season One for $17.99 plus tax or a 6 DVD set of Northern Exposure Season 6 for $14.99, both of which seemed like excellent buys, but I’ve been spoiled by Netflix.  Why buy something to own when I only expect to watch those shows one time?

See, the Internet has turned me into a bad consumer.  It’s saved me a lot of money, plus it’s more efficient because I don’t have to maintain a physical copy of something that would clutter up my house.  But I’ve deprived a local business of income, took jobs away from the local economy, and reduced the tax revenue of Tennessee.  My gain is a loss for my community.

Either we have to design an economic system with the efficiency of the Internet in mind, or we need to go back to our old ways.  I’m reminded of an old science fiction story.  I can’t remember the title, but it was about a future where the poor had to consume on schedule, while the rich were free to consume as needed.  An example, the poor had to change their shirts several times a day to keep production up in shirt factories. 

Do we really want an economy where people need to buy DVDs rather than rent so more people will have jobs?  Or buy a new gas-guzzling SUV every three years.  I’m sure you get my drift.

Well, the answer might be yes.  If we want to keep the old economy going.  And we might until they invent a new economy.  This is all very hard.  What if you could buy a car that would last 300,000 miles, and used little or no gas, being mainly powered by solar panels on your garage’s roof.  What does that do to GM or Exxon?  If environmental technology, ET, becomes just as efficient as information technology, IT, what does that do to the economy?

What if I took the money I saved by using the Internet and spent it on renovating my house with local labor, buying from local suppliers, but with the goal of making my home more energy efficient?  Will that help the new economy, or just delay the death of the old economy?  I already bought a new SEER 16 HVAC that’s saving me hundreds of dollars a month on energy.  That’s $9300 that went into the local economy, but now my monthly nut to the utility company is smaller.  I could start spending money on insulation, better windows, better appliances, and all of that will add to the economy.

Eventually, I’ll have a very energy efficient house, and I’ll start putting much less into the economic system.  It’s like switching from buying DVDs to renting them.  At some point being efficient leads to less economic activity.

Yes, I think the Internet is bad for my old local economy, and bad for our old national economy.  What’s needed is a new economy.  It’s called a steady-state economy, one that’s not based on growth.  Is the financial crisis that has come down on us going to be the metamorphosis that we must endure before becoming butterflies in a new economic world?  Will Barack Obama return to old tricks to solve our new problems?  Or can he be Copernicus seeing the Ptolemaic economic solar system with new vision?

We can always go back to a wood-chopping, horse and buggy world.  We could turn off the Internet.  This financial crisis may force many to give up cell phones, Internet and cable TV.  Without the Internet, most people will have little need of a personal computer.  Going backwards is possible and may happen.  We may have to prop up the old economy, but is that what we want?

It’s very important that we all pay attention.  In the next few years, a lot of decisions are going to be made.  Where are you going to throw your support?  Every dollar spent is a vote.

JWH – 11/15/8