15 September 2009
Technology’s Upheaval
This article is excerpted from the book Outline of the U.S. Economy, published by the Bureau of International Information Programs. View the entire book (PDF, 3.26 MB).
Technology is changing the fundamentals of economic competition, and often faster than government, political leaders, and the public can keep pace. The computer age grew out of a confluence of discoveries on many fronts, including the first computer microprocessor, created in 1971. This breakthrough combined key functions of computer processing that had been separate operations—the movement of data and instructions in and out, the processing of data, and the electronic storage of results—onto a single silicon chip no bigger than a thumbnail. It was the product of scientists at Intel Corporation, a three-year-old start-up technology company that had attracted the support of wealthy venture capitalists willing to bet large investments on new, unproven entrepreneurs. The raw material for semiconductors gave the name Silicon Valley to the California region south of San Francisco that became the center of U.S. computer innovation.
Before the invention of the silicon computer chip, computers were massive devices serving government agencies and large businesses, and operated by specialists. But in 1976, two secondary school dropouts, Steve Jobs and Steve Wozniak, developed a small computer complete with microprocessor, keyboard, and screen. They called it the Apple I, and it began the age of personal computing and the dispersal of computer power to every sector of the economy.
The personal computer rapidly became an indispensable communications, entertainment, and knowledge tool for homes and offices. IBM, the computer giant that had dominated mainframe computers since the 1950s, produced a personal computer in the 1980s that quickly overtook Apple’s lead. But IBM, in turn, was driven from PC manufacturing by competitors in the United States and Asia who outsourced component fabrication to lowest-cost manufacturers and minimized production costs of an increasingly low-margin item.
The biggest winner in this competition was Microsoft, a Redmond, Washington-based start-up grounded in software, not manufacturing. Its founder, Bill Gates, had seized on the importance of dominating the internal operating software that made the personal computer work. As rival computer manufacturers rushed to copy the IBM model, Microsoft’s software became the standard for these machines, and they steadily and relentlessly gained market share at the expense of other operating system vendors. Gates’s company wound up collecting half of every dollar of sales by the PC industry.
Gates moved into a realm of wealth comparable to that of John D. Rockefeller and Andrew Carnegie, two titans of an earlier age of dynamic economic growth. Like his two predecessors’ companies, Gates’s Microsoft was attacked by competitors and governments for its dominance. And Gates, like Rockefeller and Carnegie, became one of history’s most generous philanthropists, committing billions of dollars to long-term campaigns to fight illnesses in Africa, improve education in America, and support other humanitarian causes.
Rivaling the impact of the personal computer was another epochal breakthrough. The Internet, including the searchable World Wide Web, accelerated a global sharing of information of every form, from lifesaving technologies to terrorists’ plots, from dating services to the most advanced financial transactions.
Like much American innovation, the Internet had roots in U.S. government science policy. The idea of a self-standing highly redundant network to link computers was conceived as a way to defend government and research computers against a feared nuclear attack on the United States. But despite its ties to government, the Internet achieved its global reach thanks to pioneering scientists such as Sir Tim Berners-Lee and Vinton Cerf, who insisted that it must be an open medium that all could share.
