Few economic fantasies are as beguiling
as the notion that the Internet consumes far less of our social
infrastructure -- roads, energy, police, court time and so forth
-- than brick-and-mortar stores and shops. "[An] e-commerce
transaction," the Cato Institute recently argued, "does not
require police protection, fire service, garbage collection
and so on." Such claims support Congress' decision to exempt
e-tailers from state sales taxes and fuel environmentalists'
eagerness to tout the Web as the key to a greener future.
None of these contentions, however, survives even cursory examination.
Contrary to the Cato Institute's libertarian mythology, e-commerce
relies heavily on public services. Most states, for instance,
have had to set up Internet fraud and anti-hacker task forces.
Police and fire agencies protect both packages and the consumers
who receive them. And even trivial Internet sales generate piles
of cardboard waste.
Nor are online sales necessarily earth-friendly. Last December,
the Center for Energy and Climate Solutions, a global-warming
advocacy group, breathlessly reported that by replacing "atoms
with bits" the Internet was reducing American energy and material
consumption. E-commerce, the group assured us, lets consumers
buy all the products they want without driving their cars or
stimulating new retail development.
The truth is, there's scant evidence that online sales really
do displace trips to real-world stores. Many Internet deals
occur only after consumers check out products in local shops.
In fact, energy analyst Mark Mills has shown that during the
digital 1990s, U.S. consumption of transportation fuel actually
rocketed by 12 percent, and air traffic grew by a remarkable
34 percent. "The Internet," Web pioneer Vinton Cerf once observed,
"has the funny effect of increasing the amount of travel."
Competition, moreover, is forcing most online companies to
use overnight air transport, by far the most wasteful use of
oil and gas products. To spur sales, for example, Amazon.com
announced that it was prepared to deliver 250,000 copies of
the latest Harry Potter novel the day after the book's release.
A whopping 100 FedEx flights and 9,000 delivery employees were
required to make good on that promise.
And what about the energy costs required just for taking orders
over the Web? E-commerce advocates often assume that the Internet,
easily the most elaborate electrified system ever built, was
somehow constructed and powered up for free. But electrons comprise
the very lifeblood of the Web, and making sure they are in plentiful
supply and go where they are supposed to is an enormously expensive
Traffic delays throughout the country attest to the massive
installation of hundreds of thousands of miles of new cabling,
server relays and hubs that supports Internet growth. Since
1997 alone, we have plugged more than $1 trillion worth of electric
machinery into this ever-expanding network.
Analysts such as Mills estimate that far from conserving energy,
the Internet accounts for some 8 to 15 percent of total U.S.
electricity consumption -- up from nothing at the start of the
decade. Over the past five years, U.S. electricity demand increased
by more than the total generating capacity of Central and South
America combined. Half of this new requirement was met by coal
-- one of the dirtiest energy sources -- and nuclear power supplied
another 20 percent. The U.S. economy currently spends four times
more for electric power than for oil, a complete reversal from
just three decades ago.
Internet delivery requirements are spurring massive new development
and infrastructure growth. For example, ShopLink.com, an East
Coast online grocery store, requires a fleet of 25 trucks, each
of which makes 40 deliveries per day, just to meet e-grocery
demand within a 50-mile radius. Multiply that by thousands of
similar businesses, then add national and worldwide shipping
requirements, and the result is an explosive need for new airports,
factories, warehouses, vehicles and fuel.
Internet "fulfillment" development is everywhere apparent in
areas like Ontario, Calif., suburban New Jersey and Portland,
Ore., which sport cheap land and labor on the fringes of densely
populated areas. Dubbed "aero-tropolises" by one scholar, they
contribute to urban sprawl and stimulate precisely the demand
for new schools, housing, development, and social infrastructure
This is the real harm inflicted by the myth of virtual commerce:
The Internet transforms but does not avoid the social costs
of our economy. We currently fund commercial infrastructure
by levying sales taxes that, however imperfectly, allocate public
expenses to the consumers they benefit. E-commerce may change
how we should think about these issues, but it cannot magically
avoid them. They deserve a far more serious hearing than Internet
advocates have allowed so far.