In addition, improved information flows make it easier to move production outside of the company’s premises, to “outsource” activities that are not part of the core activities and to decentralise. The most important effects of IT probably occur in terms of company structure, working life and the everyday life of the individual. The price is crucial One way of evaluating the strength of IT is to compare it with earlier technological changes. The telegraph is an interesting example, both with regard to parallels and differences. The introduction of the telegraph led, just like IT, to a strong increase in the flow of information in the economies of the time. A message that had previously taken perhaps a month to arrive, could now be transmitted in a matter of minutes. Today, with the aid of the Internet, this type of message can be transmitted in a few seconds. This further time gain is relatively marginal, but the significance of the Internet is not. 1  BIS Review 93/2000  The difference lies in the cost. Telegraphy was expensive, which is why its spread was limited. The people of the nineteenth century had to visit a telegraph office or employ a telegraph boy and pay a considerable amount of money if they wanted to send a telegram. In today’s money value it cost them approximately SEK 2,000 to send a long distance message of 20 words, while the corresponding cost today is around 10 öre for 20 pages.
In such a scenario, the net result in the short term will not necessary be falling inflation - it could just as well be rising inflation. This is one of the risks in this context. Another risk that has not been discussed much yet refers to a longer-term perspective. Changes create both winners and losers. Lower purchase prices for a business owner or for us consumers may involve a lost profit margin for other companies. An increase in productivity may involve redundancies and that companies which are unable to keep up with developments are wiped out. The structural transformation thus contains not only possibilities, but also social maladjustment that must be dealt with by the labour market, the capital markets, the education system, etc. What does this mean for monetary policy? I intend to discuss four areas that have figured in debates on monetary policy and the ‘new and old’ economy: the effects on interest rates, the effects on purchasing power, the economic relations and the Riksbank’s intellectual framework. It would not have been possible for interest rates to lie at the current levels if price stability had not lowered the risk premium that lenders require for the uncertainty factor. In addition, the reduction in public borrowing and declining indebtedness has led to real interest rates being pulled down. But would this still apply if we had a higher growth in productivity in the future? One effect of higher growth and increasing investment could be rising real interest rates.