companies find it easier to get into the market. a good example of this is how the matching process on the labour market is facilitated by information technology. in the usa around 80 % of personnel managers are said to use the internet and one of the largest employment agencies on the internet advertises more than one million jobs. 1 four hundred of the world ’ s 500 largest companies use web sites in their recruitment process. these internet employment agencies probably reduce the search costs and facilitate the matching process - reducing what is known as friction unemployment. economic report to the president 2000, council of economic advisers. this has a particularly strong impact when it occurs in conjunction with lower trade barriers and an increased exchange of trade. a popular example of the new international business to business is the joint electronic marketplace planned by the world ’ s leading car manufacturers. this is estimated to achieve a turnover of usd 250 billion and to cover 60, 000 sub - contractors. electronic trading in components in the motor vehicle industry is estimated to be able to reduce the cost of producing a car by almost 15 %. 2 the new internet markets will naturally lead to stiffer competition. sub - contractors will experience fewer barriers to entering markets and the price picture will become more transparent. this means that strong suppliers will be able to push out weaker ones more quickly and sub - contractors ’ margins will in general be put under pressure - the producer surplus will decline for the benefit of the consumers and prices will fall. suppliers will be forced to rationalise and to improve in order to maintain their margins. the stiffer competition among those who remain will be the driving force behind continued growth in productivity. how it will boost growth the more efficient production process and markets are both examples of boosts to productivity that will temporarily increase growth. a simple way of describing this is to imagine the new technologies and more efficient markets causing the path of the long - term potential gdp to shift outwards. this is done by growth strongly accelerating ( see slide 1a ). however, when the technological revolution has subsided, the boost in growth will also subside. however, it is not self - evident that there is some form of “ natural ” growth rate to return to. over a long - term perspective the growth rate has both varied and accelerated. i therefore intend to take up the other possible angle of approach sometimes mentioned, that it could raise growth permanently. this could only be achieved by the technological innovations also creating the right conditions for a more rapid development in technology in the future ( see

. structural changes generate developments that are often referred to at present as a new “ economy ”. the marked improvement in productivity maintains profits and keeps prices down. during the transformation, a good circle is created but it is difficult to tell how long it will last. it can be described, if you like, as a period of extensive rationalisation and heightened efficiency. the growth trend is raised for an indefinite period, enabling the economy to expand more rapidly without inflation taking off. it should be borne in mind that the adaptation to the new information technology does not occur automatically. it is not the case that one day we suddenly find the new technology has begun to be implemented in ways that are leaving their mark on economic developments in general. during recent decades economists have increasingly highlighted institutional aspects in a broad sense as an explanation as to why some economies grow more rapidly than others. this approach underlines that the rate of economic growth is related to the system of rights and incentives that is adopted in a country and the determination to maintain this system in a credible way. in economic jargon, it is usually asserted that the incentive structure and its impact on economic growth is formed by the existing institutional structure. the late 19th century provides important lessons about the necessary conditions for this good circle. at the beginning of the 1800s, as i said before, sweden was still a poor country with an unstable form of government, a chaotic monetary system and a general shortage of credit facilities. ninety years later the swedish economy had undergone a dramatic transformation. inflation was low, with an orderly monetary system. the nation was bursting with vitality in every field. an impressive range of products, many of them world leaders, were being developed on the basis of swedish inventions. swedish financial experts were engaged in the exploitation of the inventions at an early stage. employment was provided for more and more people, living standards rose and growth was among the highest in the world. opinions about the causes of the pronounced change in the swedish economy are not completely unanimous. an increasingly stable form of government presumably contributed. a series of constitutional reforms provided a guarantee of stability. the stable prices presumably played a part. when inflation is low or the price level is stable, those who have to plan for the longer run face less uncertainty. after a rather chaotic period in the history of the monetary system, the introduction of the silver standard in the early 1830s and subsequently the gold standard led to price stability. another significant factor was probably the credit system ’ s development. banks were established and