The World Wide Web: Is Tony Blair right about the internet?

Britain may be doomed if it does not embrace the new technology - but not in the way the PM thinks

Tony Blair pushing cautiously at a mouse and tapping one-fingered at the keyboard makes an icon of our times; an intelligent, successful and educated middle-aged man who has suddenly noticed the internet bearing down on him like a tidal wave, and all he has to ride it is a surfboard. But is it true that we will all have to adapt to the internet or be swept away by history and ground on to the rocks?

This is certainly what people who have just discovered the power of the web believe. And yes, in broad terms computer networks have turned the world upside down and will continue to do so. But this has been a revolution that devours its own buzz words quicker than any other; and today's buzz words about e-commerce and business on the internet may turn out to be profoundly misleading.

Most of the real and important changes encompassed within the umbrella term "the internet" are invisible, or else very diffuse in their effects. The internet is far more than the world wide web, and many of the most important computer networks in the world are not even part of the internet. Yet they have already changed politics and economics beyond all recognition.

Practically all the important symbols of the modern world are now digital, and the most important of all is money. "Cyberspace is where your money lives" remains one of the most powerful slogans of the modern age. Globalisation, which has constrained everything this government does, would be unthinkable without computer networks and the way that they have linked factories more tightly to shops while dissolving any need for geographical closeness.

To take an obvious example, the power of the big supermarket chains is entirely dependent on their internal computer networks, which make possible very precise stock control and very quick reactions to customer trends. These in turn have a huge effect on the farming industry all around the world, and so on the landscape and even the world's ecology. This is much more profound than Waitrose or Tesco handing out free e-mail addresses and web space. But it is also very much less visible.

It's a commonplace to talk about the decline of the manufacturing industry, and that is certainly very real. But the industries that have replaced manufacturing do have factories of a sort. It's just that their factories are their computer networks.

This newspaper, for instance, could be printed almost anywhere. The articles in it can be written anywhere, and edited anywhere else in the world. What's more, this can all be done collaboratively, and in real time. There seems to be a "factory" in Canary Wharf where it is all made but this is really an illusion. Providing the computers on which all the work is stored are backed up, the whole tower could vanish into a hole in the ground without disrupting production too much.

Similarly, a law firm, a stockbrokers', or even a government, are all now things which could be done on the internet and to a surprising extent already are. There are technical problems concerned with secrecy and reliability; and there is always the problem of finding software which makes collaborative working easy. But these can all be solved, and soon will be.

We will know this has happened when computers become as ubiquitous and as invisible as electric motors are. I couldn't tell you how many electric motors there are in my house, but I can still count the computers easily: I'm writing this in my study with two computers, two mobiles, an ISDN and a conventional phone line spread round on the desk and shelves in front of me, but at the moment, the only reliable connection between all these gadgets is me. Once we have reached the point where I don't even notice which is bringing me what information, the internet will have finally triumphed.

In large companies this is already true. There cannot be a single company in the FT-SE 100 which is not completely dependent on its computer systems to function. But all this is what one might call the "producer" internet which lurks, largely unseen, on the boring and incomprehensible margins of life, like telephone exchanges.

The other side of the net - about which all the fuss is being made - is the consumer internet: all the juicy fun we can have with web pages and e-mail. This too is going to change the world, but much less, I think, than the producer internet has done. Comparing the two is rather like comparing the difference that car- ownership has made to the country with the difference that lorries have made.

There are plenty of large companies that are almost invisible on the consumer internet. Not all of them will lose by it. The ones which sell directly to the public will almost certainly do so. Anyone selling cars, for example, is at a huge disadvantage without a helpful and efficient website. But this is a Red Queen race - in which everyone has, like the Alice in Wonderland character, to run faster to stand still - for a good website will only stop you falling behind the competition; it will not put you far ahead. The real advantage of the consumer web is to the consumer.

For instance, when I recently bought a second-hand car, I did almost all my preliminary research online, because the classified ads in Exchange & Mart or the local press are much easier to search and organise on a computer screen than on paper. I still had to drive the thing and talk to the seller in person. If he had not seemed trustworthy I would never have bought it. But if it had not been on the internet, I would never have found it.

Large companies may not need to deal directly with the public like that. If you want to buy a mobile phone, the manufacturers all have comprehensive websites, but none has prices on them, since these are set by the competing sellers of airtime. But there is no doubt that the consumer internet makes comparison shopping enormously easier. This is going to make markets everywhere more efficient, and that is the real long-term threat of the consumer internet.

More powerful markets mean less powerful governments. We have seen in the past 30 years a general acknowledgement that governments are helpless against the financial markets. But the internet makes governments helpless to control the information economy, too; and more than you think is actually made of information.

Take gambling. Already the gambling industry is heading offshore to places where the tax is lower. It is not only easier to gamble over the web than by phoning the bookie or going to visit his gloomy shop, it is also more profitable, since your winnings can be paid without tax. It would be perfectly feasible to set up an offshore lottery that offered better terms to the consumer than the Camelot one and no rake-off to the Government either.

All these changes will turn up unimaginable problems. To deal with them will require deep and subtle thought. Paradoxically, one of the best instruments for that may be the fountain pen, after all. So, perhaps Tony, if not the rest of us, should stay frightened of his mouse.