Greenspan Puts A Load On IT's ShouldersGreenspan Puts A Load On IT's Shoulders

Investors and business leaders are still unsettled about the economy, and until that changes, spending on IT will remain thin, Federal Reserve chairman Alan Greenspan says. And entrenched reluctance to invest in new productivity tools could have far-reaching effects as baby boomers retire.

"We have yet to see convincing signs of a rebound in business outlays," Greenspan said Tuesday during his semiannual monetary policy report to Congress. Spending on hardware and software in the fourth quarter of 2002 rose an estimated 5% in real terms, but only at a "subpar 3%" for the year.

While investors seem to have recovered from the shock of the many examples of corporate malfeasance last year, war-related worries are stifling real IT spending by executives themselves.

Greenspan said that "relatively strong" consumer spending is, for the time being, outweighing executive timidity. Business leaders, for their part, are waiting for a substantial boost in profits--much bigger than the recent slight improvements delivered by productivity gains. Output per hour among nonfarm businesses rose 3% during 2002, impressive for a generally lackluster economy.

Innovative technology again and again has been lauded by Greenspan as a prime factor in making workers more efficient, and Tuesday's talk was no exception. That must continue, though, if the economy is to regain substantial growth, he said. Baby boomers are nearing retirement, depleting the workforce. New productivity-boosting technology, more immigrant workers, or a combination of the two, he said, will be required to expand the economy the way it grew during the past decade.