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Governments must not hinder the 4th industrial revolution

Montreal, March 31, 2016 – The Internet will be the driver of economic growth in the coming years, which is why the regulations that surround it must be kept to a minimum and remain flexible, argues an Economic Note published today by the MEI.

In addition to benefiting consumers and SMEs—by giving them access to the global marketplace and to office automation and logistical support tools that were not so long ago restricted to large corporations—the Internet creates jobs. A 10% increase in a country’s digitization (that is, the adoption of information technologies by consumers, companies, and governments) entails 0.75% of additional growth in terms of GDP per capita and a 1% drop in the number of people unemployed, according to the World Economic Forum.

Concretely, for Canada, this represents nearly $15 billion of GDP growth, or $417 per capita.

This phenomenon has reached such tremendous proportions that innovations related to the Internet are now referred to as a “fourth industrial revolution.”

“It is for these reasons that the benefits of the Internet must be taken into account when governments seek to regulate a new area of economic activity that is developing thanks to the network,” emphasizes Mathieu Bédard, Economist at the MEI and author of the publication. “Seemingly benign regulatory constraints can have significant adverse effects on the Internet ecosystem and on the ability of companies to innovate.”

On the other hand, more flexible regulations can give a head start to the development of a new area of activity, explains the Economic Note. For example, it is because the relevant Canadian regulations are more flexible than those of the United States that Amazon’s delivery drone tests are being carried out here and not there. This sector is developing more quickly in Canada, along with the related positive effects that this implies on investment and jobs.

Furthermore, most of the applications and technologies developed on the Internet arose in an environment of soft regulation, and because of the difficulty governments have had in keeping up with a rapidly evolving market. Uber, Airbnb, and Bitcoin are some notable examples.

“For our companies to be able to take advantage of all of these innovations, rules that hinder their emergence must be avoided. The Internet requires constant investment for its benefits in terms of economic activity and job creation to persist,” adds Mathieu Bédard. “When it comes to the Internet, as with the rest of the economy, the best regulation is that which is enacted sparingly.”

The Economic Note entitled “The Underestimated Economic Benefits of the Internet” was prepared by Mathieu Bédard, Economist at the MEI. This publication is available on our website.

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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.

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Interview requests: Pascale Déry, Senior Advisor, Communications and Development, MEI / Tel.: 514-273-0969 ext. 2233 / Cell.: 514-502-6757 / Email: pdery@iedm.org

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