Governments must plan for economic growth.

• Position: News & Numbers

The current economic slowdown will come to an end, and states must be prepared by positioning their economies for growth over the next decade. Today's global, knowledge-based economy is rooted in information technology (IT) and driven by entrepreneurial growth and innovation--the "new economy" that states must be grounded in, according to The 2008 State New Economy Index: Benchmarking Economic Transformation in the States, a report released in November 2008 by The Information Technology and Innovation Foundation and The Kauffman Foundation.

The report uses 29 indicators to assess the degree to which the states' economies are knowledge-based, globalized, entrepreneurial, IT-driven, and innovation-based. Using these indicators, the report outlines a public policy framework to help states master the five main challenges facing them over the next ten years and to take advantage of opportunities.

The first of these challenges is the speed with which institutions such as government and health care, which are still in the early stages, can make the transition to a digital economy. "The key for states, therefore, is two-fold: Will they see their own economies and societies transformed by IT, and will they be able to also gain business opportunities in IT industries related to doing so?" the report asks.

The second challenge is taking advantage of the next wave of innovation: robotics, clean energy biotechnology, and nanotechnology. The gains in productivity brought about by today's IT-driven economy will slow down in a decade or so, potentially leading to 10 to 20 years of slow growth, so states should think about what steps they can take to develop the kind of technology that will be needed then--likely something based on nanoscale advances in pharmaceuticals, materials, manufacturing, or energy in addition to robots and low-carbon advances, according to the report.

Another important issue is advancing the transition to a low-carbon economy The report points out that taking the bus, recycling, turning down thermostats, and switching to compact fluorescent light bulbs will not be enough to bring about a green economy Developing...