A lot of politicians come through Silicon Valley these days, much as their predecessors came to Detroit before the Great Depression to ooh and ahh over the assembly-line. When they leave do they understand the nature and significance of the technological and economic transformation through which we are living? Do they understand the extent to which policies to nurture and support high-tech information-based computer-and-communications sectors are truly in the public interest?

No, they do not.

This is too bad. We here all believe that this is a genuine moment of transformation--one in which getting the foundations, the rules and resources to support a new kind of economic growth, right will pay enormous dividends. Getting the foundations wrong will recoil badly. How are politicians, their current advisors, and their would-be advisors to understand the choices they have and the opportunities available before it is too late to make the right decisions?

We think that the politicking and policy-making class would have a chance of grasping what is going on if we can communicate to them a framework for understanding our "new economy," a consistent thread on which they can hang anecdotes and experiences, and which will orient them when they try to form opinions on substantive issues.

We will have no problem documenting the ongoing transformation. The OECD, the Progressive Policy Institute (that is the "research" arm of the New Democrats) the Council on Competitiveness--there are a lot of people who are tracking the emergence of the new economy. Originality in documentiation could actually get us into trouble--into arguments with people who ought to be our allies. And we are very interested in what are your favorite anecdotes and examples, because you live in the center of the tornado.

Where originality and serious thought are needed is in telling a clear and coherent story--clear enough to serve as a compelling orienting framework.

As we see it, the new economy is about a new source--with the potential to become the dominant source--of economic growth. Ideas have always underpinned industry, but in the past ideas required massive investments in finicky and dedicated fixed capital: knowing organic chemistry in late nineteenth century Germany was useful only if you also had very large stainless-steel vats to mix chemicals in. Today we are seeing somewhat of a decoupling between physical and intellectual capital--or rather that the physical capital is no longer dedicated to one particular industrial use, but is instead invested in the extremely flexible network.

And this new source of economic growth spills over. We also see major innovations in business models--many of these innovations made possible by technology. The new economy is also a style of business entrepreneurship and risk taking that is exploding many of the organizational tactics of business--a style that is hard to imagine without the new information technologies.

We see these technological developments and their economic consequences as truly transformative. It's not just for people living near San Jose, an it's not just for businesses that make things out of silicon. Where did Walmart's sudden ability to significantly underprice its old-style competitors come from? What has driven the twenty-percent fall in the inventory-to-sales ratio in U.S. manufacturing over the past business cycle? Will web-assisted purchases amount to five percent of cars sold this year? Will they amount to thirty percent of cars sold in five years? Webvan thinks that it can streamline distribution and make the grocery-product-display out of cheap bits in a server's cache rather than Safeway's expensive piles-and-aisles. Is it right? Tut Systems thinks that every American is going to find all kinds of uses for network connections beyond the last mile, inside the house. Is it right?

Now as this new source of economic growth expands throughout the economy, it is going to need foundations: rules of the marketplace that are consistent with its needs, and resources to fuel its development. The right government policies become important--or at least the wrong government policies become significant obstacles.

Two historical examples. First, Swift's and Armour's idea of a little more than a century ago: mass-slaughter beef in Chicago, ship it dressed to Boston, and undercut local small-scale Boston-area slaughterhouses by a third at the butchershop. A very good business plan, unless the Massachusetts legislature required--for "health" and "safety"--that meat sold in Massachusetts be inspected live and on the hoof by a Massachusetts meat inspector before slaughter. Without the right rules--federal preemption of state health and safety regulation affecting interstate commerce--it doesn't work.

And the new source of economic growth cannot flourish without the right resources. Manchester in England was the center of the industrial revolution. But who noticed that the British government wasn't building schools for the children of Manchester's factory workers? By the end of the nineteenth century the lack of a well-schooled workforce in Britain meant that the post-steam-engine technologies of electricity, metallurgy, and chemistry moved to Germany--where investments in schools had been made. And Britain entered its half-the-twentieth-century death struggle with anti-democratic German regimes with its large initial edge in technology and productivity already squandered because politicians hadn't provided the right resources to support rapid industrial growth.

And as we sketch out our clear and coherent framework, we also need to make sure that the phrase "new economy"--or whatever shorthand we ultimately rely on--means what we want it to mean in the modern political debate. All kinds of people are using the phrase "new economy" to mean things that we do not believe in--and that are probably false: that there will never be another recession, or another bear market.

Our framework also needs to highlight that this techno-economic revolution has--so far--proven to be overwhelmingly an American one. The entrepreneurial, risk-loving, independence-rewarding culture of the Americas has proven vastly more effective at sparking innovation and driving through to success than the cultures--loyalty-rewarding, consensus-loving, organization-building--abroad. A decade and a half ago many of us saw as mounting a serious and significant challenge to the United States's role as the leading edge of world technological development.

And our framework needs to highlight that this revolutin will not stay all-American forever, is not staying all-American now. Is it Jeff Sachs or Michael Porter who rates Finland as the most entrepreneurial country in the world? And how will Finnish wireless innovation build on its recent success? What competitive advantages does the European wireless standard offer?

Preserving the benefits of the network and a level playing field for U.S. innovators in a world in which national rules can have subtle effects and other governments have strong attachments to national standards may prove difficult.

If we do a good job at laying out this framework--and if it does get taken up--then it will help shape the policy debate in constructive directions.

But let me turn that topic back over to John.