As they look for growth in tough economies, governments have become much more interested in industrial policy. Sceptics frown: they worry that governments inevitably will support the wrong sectors or intervene clumsily. They would prefer that governments take measures that work across the whole economy -- or, better yet, just let the market rip.
Policy towards the Internet provides an interesting window on this debate. Some countries are doing much better than others at encouraging the depth and breadth of Internet activity in their countries, which has benefits for consumers, businesses, governments themselves -- and the economy. The digital divide among nations is widening. And government policy seems to be making an important difference.
These are some of the key findings on the 2012 e-Intensity Index compiled by The Boston Consulting Group and released in a new report, Adapt and Adopt: Governments' Role in Internet Policy. The Index ranks countries according to the quality of their infrastructure, how much is spent online and how much we use the Internet.
The same five countries--South Korea, Denmark, Sweden, Iceland, and the UK -- top the rankings in 2012 as they did in 2011. At the same time, countries from across the economic spectrum -- Brazil, China, Russia, and the Baltic states (Lithuania, Latvia, and Estonia), among them -- are catching up. Many OECD countries, including some from the EU-15, are stagnant or slipping. Important G-20 economies such as Indonesia, India, and South Africa perform weakly even though their scores are improving. African countries are generally holding even or falling slightly in the rankings.
The leading countries share a pas -- their governments have actively pursued policies to promote Internet growth, including encouraging take-up, improving competition, subsidising content, and spreading innovation. Sweden pioneered universal access. South Korea saw the industrial opportunity early. Britain put all schools and libraries online. These initiatives were typically taken within an overall approach, such as Hong Kong's Digital 21 strategy.
Of course, business, consumers and researchers have led the development of the Internet. But it would be wrong to think that governments have no role to play, as many of the countries now rising up the e-Intensity rankings, such as the Baltic states, have demonstrated.
So, what constitutes smart policy? In our report, we argue this is more complicated than just looking for the Top 10 Internet policies. The Internet is evolving so quickly that governments have to renew their policies frequently, and indeed, they are bound to get some things wrong.
For this reason, the way governments organise themselves is as important as the policies they choose. In particular, governments need to take on an explicitly adaptive style for Internet policy. Rather than methodically looking for perfect, definitive answers, governments need to go for quick, roughly iterated policy. They need to make decisions fast -- and not be afraid of changing course when things don't advance as expected.
Governments should think about how their policy function can be organised to support this style of policy making. One thought is to locate outside Whitehall, near centres of Internet expertise. Another is to build flexible teams involving an equal mix of outsiders and civil servants, bringing together responsibilities and staff from across the different departments that have a bearing on the Internet.
The world is now an Internet policy lab, and governments shouldn't be shy about imitating what others have done. For many issues, such as copyright or privacy, creating systems that can evolve over time should be the priority. But governments can't always devolve responsibility. In some areas they need to take risks, by making a few big bets on the areas where their countries could be world-leading. In the UK or Australia, for example, this would include supporting our content industries through the tax breaks favoured by both this and the last government.
Governments in developing countries should look for opportunities to leapfrog their developed counterparts. Many emerging economies are already climbing quickly up the digital curve. Unshackled by legacy infrastructure or embedded commercial interests, they can take advantage of the next waves of innovation, including mobile access, cloud computing, and the rise of social networks.
An adaptive style of policymaking requires a different type of organization and outlook, one that looks outward and abroad, tolerates failure, and moves and learns quickly. An adaptive style won't triumph over policy substance. But in the fast-moving Internet age, it is its essential partner.