Cyclopedia Of Economics 3rd edition

2. 
   Local Authorities - Municipal, regional and state authorities. The Federal Republic of Germany is made of 16 LANDER. Each LAND has its own government and even Parliament. Each LAND collects taxes from its citizens and has its own fiscal budget. The same is true for the USA with more than 50 STATES and three levels of taxation: Federal, State and municipal.
   

The Public Sector has a very bad image in the West nowadays. It is fashionable to deride and devalue it. Everyone - including the American Democrat President, Bill Clinton - is against "Big Government". The former British Prime Minister, Margaret Thatcher, started all this with her Privatisation policies. She sold many British state owned firms to the public and broke the power of the trade unions. Her efforts were so successful that they were copied and emulated throughout the world.

Yet, even after one decade of privatizing the public sector, the figures are still alarming. We measure the involvement of the public sector in the national economy as a percentage of the Gross Domestic Product (GDP). In the European Union it accounts for 42% to 59% of the GDP.

That means that the public sector consumes between 42 and 59 Dollars of every 100 Dollars produced by the national economy. In Japan and the USA the corresponding number is 35%.

The public sector used to be 8% of GDP in the USA in 1920. It used to be 24% of GDP in Japan in 1955 - when the GDP was 12% of the current one. This means that the public sector in Japan grew by 400% in real terms in 40 years!

Singapore and Hong Kong are not in much better shape with 19%.

But what is wrong with having a large public sector?

To answer this question, let us review three historical "accidents".

In 1946 Germany was divided into West and East. Both parts had an identical economic starting point. Yet, 44 years later - West Germany was producing 6 times as much as East Germany, per capita.

In 1953 Korea was divided into South and North. Both parts had an identical economic starting point. Yet, 44 years later South Korea produces 40 (!) times more than its Northern neighbour.

Needless to mention the difference between these initially identical twins: one had an enormous public sector with central economic planning (East Germany and North Korea) - the other has a well developed private sector (West Germany and South Korea).

During the 1980s, British Telecom and British Steel - two state owned firms - were handed over to private hands. Their productivity now outstrips the output of state owned utilities by a factor of 6 (per employee).

The West has developed a few methods of coping with this unwelcome situation:

Privatization

There are three forms of passing the ownership of a state enterprise - or the control of it - to private hands:

(1) The sale of the control of the business to private investors. The latter purchase an amount of shares of the privatized firm which is sufficient to ensure their control of its operations (a controlling stake or "nucleus"). The rest of the shares are sold to the same investors at higher prices in the future, as the performance of the firm is considerably improved under the new management. Alternatively, the rest of the shares are sold in various stock exchanges at prices reflecting a premium attributable to the introduction of new management and new capital to the firm. Privatization in the USA is typically carried out in this way.

Some critics of this method say that it is inequitable. The enterprise belongs to the citizens of the country. When its value is determined by a group of bureaucrats in the Ministry of Finance (even if they are assisted by outside experts, the final decision at what price to sell is theirs) - there is room for big mistakes or even for corruption. This way, a select, tiny group of well-connected businessmen (or former managers of the firm, who led it to its sorry state) will buy the privatized firm at a fraction of its true value and thus deprive the people of what is rightfully theirs.

A second approach was devised and implemented (mainly in Great Britain) to try and overcome these objections.

(2) The sale of the control of the enterprise to the wide public by offering (=selling) its shares in the local stock exchange. Another way is to give each and every citizen a warrant which carries the right to purchase shares in privatized firms (Poland, Russia, Czechoslovakia).

This way the public wealth is equally accessible to anyone who wishes to share in it.

The disadvantage: this is not real privatization - the firm passes from one public hand to the other. The true control of the firm will remain in the hands of its old managers, who will continue doing the same as long as they can.

(3) The third approach - adopted by Israel and France - is undoubtedly the worst. It includes the sale of the operations and management of the firm to a select group of investors at a value determined by bureaucrats at the government. But through special arrangements - commonly known as "golden shares" - the state maintains its grip over the prices at which the products of the firm are sold, its labour policies, its political affiliation and so on. This is usually done under the pretext that the firm utilizes "national natural resources" or that its continued operations are a matter of national security or social interest.

De-Regulation

Governments are doing their citizens a much better service when they de-regulate.

This also has three forms to it:

(1) Divestiture - the breaking up of big state owned or even private firms which are monopolistic in nature, into smaller regional and / or operational units. These units will compete among themselves in the same markets. The usual result: lower prices, better service, more technological innovation. Famous cases: the breaking up of the telecommunications (privately owned) giant AT&T into small regional phone operators ("Baby Bells") in 1984.

Shortly Japan will follow suit with the breaking up of NTT, another (private) telecommunications behemoth.

(2) The easing or cancelling of regulations which inhibit or prohibit domestic competition.

A famous example: lately, the Cable TV operators in the USA were allowed to compete in the telecommunications markets. They were permitted to transfer phone calls over their infrastructure of lines and modems. This will make them formidable competitors to the local phone companies. The end result for the end user: lower prices, better service.

(3) Adopting free trade policies is a way of de-regulating the markets. When custom tariffs are reduced and other, non-tariff, trade barriers are lowered - this fosters foreign competition.

Economic research and theory demonstrate the benefits of free trade: more efficient allocation of resources, lower prices, better products and services, faster economic cycles resulting in technological innovation.

Securitization

In the West, the provider of credits takes some risk that the credits will not be paid back. These risks associated with credits are called "assets", in banking lingo.

When a person buys real estate property in the West he takes a loan ("mortgage") to finance part of his purchase cost. His loan is packaged together with other loans and sold to the public in the form of a bond.

The terms and conditions of the bond (maturity, interest payable, etc.) accurately reflect the terms and conditions of the assets (=credits, loans) underlying the bond.

The same is done with car loans and with many other forms of credits yielding regular streams of income to the creditor. This way, the creditor spreads his risks among many bondholders.

This process is called "securitization" - the transformation of financial assets (=credits) into securities which are sold in the stock exchanges to the wide public.

The public sector - and especially public utilities which have a stable stream of income - can sell their future income to the markets. This is done by issuing bonds to the public and selling them through the stock exchange. Another way is to sell these bonds directly to institutional investors, such as pension funds.

The bonds are paid back from income generated by the sale of electricity, water, etc. to the public - or by income generated by specific projects which is pledged to the bondholders.

The public sector possesses many assets which are either intangible or cannot be presented in ordinary accounting books. These assets can be put to productive use and generate income.

Examples abound:

Railroad companies own the land in which their railways run. They can lease these strips of land to various users: store-owners, cable TV companies, phone operators.

Electricity utilities have the exclusive rights to use the air through which their physical lines go. These rights can be leased to would-be users. For instance: cable TV companies can run their cables and piggyback on the lines of the electricity company.

Arguably the most well-known case is that of airwaves. The USA government is selling the rights to use the airwaves (radio frequencies) for cellular communication in special tenders conducted once every few months. The revenues from the sale of these intangible assets amount to billions of USD.

The public sector is developing innovative patterns of supplying its products and services - and of generating demand for them. A well-known example: everyone in North America can produce electricity in his home and in his spare time. He can use wind energy or even the energy in his muscles to produce electricity. The electricity companies are obliged to purchase the electricity thus generated from the small producers at a fixed price. This way, they secure diversified sources of supply and plow back a part of its income to the community.

The circulation of print magazines has declined precipitously in the last 24 months. This dissolution of subscriber bases has accelerated dramatically as economic recession set in. But a diminishing wealth effect is only partly to blame. The managements of printed periodicals - from dailies to quarterlies - failed miserably to grasp the Internet's potential and  potential threat. They were fooled by the lack of convenient and cheap e-reading devices into believing that old habits die hard. They do - but magazine reading is not habit forming. Readers' loyalties are fickle and shift according to content and price. The Web offers cornucopial and niche-targeted content - free of charge or very cheaply. This is hard to beat and is getting harder by the day as natural selection among dot.bombs spares only quality content providers.

The subprime mortgage crisis in the United States is spreading into Europe, notably the United Kingdom. Real estate values are deemed inflated throughout the continent. One exception may be Macedonia. Purchase prices here have stagnated in the last few years and rental rates have actually declined considerably. There is good reason to think this will change and soon: new financing vehicles are on offer and, as real incomes increase, there is a stark mismatch between geometrically-growing demand and arithmetically-increasing supply. 

Moreover, impressive improvements in the business climate led to the entry into retail, manufacturing, and services of global giants as foreign direct investors. These need or build shopping malls, office space, and parking lots.  

Peter Roth, the General Manager of Soravia Macedonia, which bought the Business Center in Skopje last year, predicted, in a statement quoted in "Vecer", a Macedonian daily: " I expect the development of real estate, bigger competition, but also higher prices. I think that in the future investments will flow not only to Skopje, but also to Ohrid, Gevgelija and other cities, near the border with Greece." "In the near future small shops in buildings will disappear, problems with parking spots would be overcome, and expensive rents would grow further," - concluded the exuberant article. 

This may all depend on the introduction of real estate leasing. Currently, it is a negligible portion of the activities of companies such as NLB Leasing and Hypo Hypo Alpe Adria Leasing. The latter's brochure doesn't even mention it.

"Under the terms of current legislation, we are able to offer leasing." - says Maja Lape Trajkova, director of NLB Leasing, which was established in 2000 and is owned by NLB Group, essentially a Slovenian bank. Gjorgje Vojnovik and Oliver Zintl, the Macedonian and Austrian managers of Hypo Alpe Adria Leasing agree. Their firm is owned and fully capitalized by an Austria (Klagenfurt) based multinational which operates in 14 countries. 

NLB Leasing offers financial and operational leases of up to 15 years to firms and individuals, on all types of properties, second-hand and new: residential, commercial, and industrial. Hypo Alpe Adria Leasing is more selective and limits its financing to new construction. Equity ranges from 10 (Hypo Alpe Adria Leasing) to 30 (NLB Leasing) percent, depending on the creditworthiness of the lessee. Financing is procured from various sources, but mostly from the mother companies, NLB and Hypo Alpe Adria Leasing, respectively. 

NLB Leasing's "typical leasing contract is with fixed rates and not with adjustable ones, (but) a change (in the) previously agreed terms is possible, of course. When it comes to being flexible and to adjusting to the client's financing needs, the whole package is considered: period, equity, rates, IR, etc."- says Trajkova. Hypo Adria Adria Leasing prefers the safer route of sticking to fixed rates exclusively. 

So, why hasn't real estate leasing taken off, as it has in many other developing countries? Macedonia's banks offer mortgage financing but under onerous terms: multiple collaterals and guarantors, high fees, and an immediate transfer of the title (and of the risk associated with it) to the client. On paper, leasing is a more attractive proposition. 

The problem is a quirk in the tax laws: lessees pay VAT up front on the entire amount of the contract, interest included. There is no VAT payable on interest payments made to banks, the leasing companies main competitors. "The law still protects the three major banks with a 75% share of the market," complains Vojnovik. Zintl concurs: "he private customer is at a tax disadvantage". 

Even worse, expounds Trajkova: as far as the VAT law goes, financial leasing is a taxable exchange of goods. While firms can deduct the VAT or reclaim it (in one year's time or longer, if the firm has just commenced doing business in Macedonia), individuals incur it as a net out of pocket expense.  

Additionally, all lessees have to pay a "real estate turnover tax" twice: once when they have signed the contract and once when they receive title to the property, having paid the lease in full. The turnover (or transfer) tax ranges between 3 and 5 percent, depending on the municipality. This and similar problems render certain types of leases (such as lease contracts incorporating leaseback or buyback options) untenable. 

Trajkova compares this costly double taxation to the situation in Slovenia, where individuals pay only a property tax once. She met with officials at the Ministry of Finance, but they had no information as to when this hindrance will be removed. She claims to have formed a joint lobby, within the Chamber of Commerce, together with Hypo Alpe Adria Leasing and others. Hypo Alpe Adria Leasing beg to differ: they decry the lack of coordinated initiative by other leasing companies and in their own meetings "with this business-friendly government", as Vojnovik puts it, they were reassured that the problem will be solved in the first quarter of 2008. 

Trajkova notes a growing awareness of leasing even among individual buyers of residential property, owing to a string of scandals involving swindlers who took advantage of Macedonia's chaotic and incomplete cadastre (the central registrar of land and real estate property). "People trust us and are willing to pay more," - she explains.  

Vojnovik and Zintl also describe an overwhelming interest: the foreign ownership of leasing companies, the fact that title (and the risk it brings) remains with them until the end of the lease, their clean record, and their plans to enter the real estate scene as contractors and financiers have drawn considerable interest from would-be buyers. 

Still, foreigners are not allowed to own land in Macedonia - I observe - although local subsidiaries of foreign firms are treated as domestic entities and can freely transact in both land and real estate.  

This renders cross-border transactions somewhat complicated - Trajkova and Vojnovik agree, though Zintl adds that "there are no legal obstacles" to cross-border financing and that such transactions have come to dominate the portfolios of leasing companies in countries such as Croatia (1.7 billion euros annually) and even Serbia (with 1 billion euros a year). 

How does one go about leasing real estate in Macedonia? - I enquire. 

The procedure is simple: the applicant must produce an extract from the cadastre (called "property list"), proof of monthly income (Hypo Alpe demands proof of the income of the entire family), and some other basic and easy to obtain documents. Companies provide business plans with detailed projections. Lessees sign promissory notes on their monthly income and on the property. This covers the leasing company in case the property's value declines, "for instance, as a result of arson," - says Trajkova. As opposed to practice in the West, in Macedonia, it is the client who must insure the property. On the bright side, these conservative practices guarantee that Macedonia will not experience its own version of a subprime mortgage crisis.

Yet, while the leasing contract itself can be signed within days, dealings with the tax authorities and the cadastre can stretch into 3 months or more. This red tape poses difficulties as "sellers want their money immediately," - sighs Trajkova.  

Moreover, only 60% of all real estate in Macedonia is registered with the cadastre. About one third of owners have no proof of ownership. Existing liens are not updated anywhere. Much of the land is owned by the state and is designated as agricultural. The processing of requests for construction licenses is tortuously long.  

Both NLB Leasing and Alpe Adria emphasize commercial, office, and industrial real-estate, but regard residential property, including single family housing, as the area of future growth. Both leasing companies embarked on their own construction projects. This spring, NLB Leasing will start constructing residential property in Skopje's coveted center. They act as principals, both in financing and in contracting the work, thus avoiding having to pay taxes. Hypo Alpe Adria Leasing has similar plans, but they intend to rent the property out. The projects will be completed in about 2 years time. 

Zintl describes the varied activities of the Austria-based Hypo Alpe Adria Leasing group in building and managing shopping malls and hotels. The availability of leasing in Macedonia will facilitate the entry of foreign investors, including his own group, replete with Austrian anchors in its newly constructed shopping malls, - he says. 

Are residential real estate prices in Macedonia inflated? Are we witnessing an American-style bubble? 

"Prices are exaggerated in terms of average monthly wages and taking into consideration macroeconomic conditions," - says Vojnovik. "Still, there is a big mismatch between demand and supply" and the scandal-ridden scene has made it difficult to find property with clean provenance and credentials. "When the leasing companies will enter, prices will go down."

Recessions, Economic

The fate of modern economies is determined by four types of demand: the demand for consumer goods; the demand for investment goods; the demand for money; and the demand for assets, which represent the expected utility of money (deferred money).

Periods of economic boom are characterized by a heightened demand for goods, both consumer and investment; a rising demand for assets; and low demand for actual money (low savings, low capitalization, high leverage).

Investment booms foster excesses (for instance: excess capacity) that, invariably lead to investment busts. But, economy-wide recessions are not triggered exclusively and merely by investment busts. They are the outcomes of a shift in sentiment: a rising demand for money at the expense of the demand for goods and assets.

In other words, a recession is brought about when people start to rid themselves of assets (and, in the process, deleverage); when they consume and lend less and save more; and when they invest less and hire fewer workers. A newfound predilection for cash and cash-equivalents is a surefire sign of impending and imminent economic collapse.

This etiology indicates the cure: reflation. Printing money and increasing the money supply are bound to have inflationary effects. Inflation ought to reduce the public's appetite for a depreciating currency and push individuals, firms, and banks to invest in goods and assets and reboot the economy. Government funds can also be used directly to consume and invest, although the impact of such interventions is far from certain.

The Wikipedia was touted as the greatest reference work in history. A collaborative effort of contributors and editors across time and space, it bloated into hundreds of thousands of articles on subjects both deserving and risible. Anyone with a connection to the Internet and a browser can edit the Wikipedia, regardless of his or her qualifications to do so.

Events in 2005-6 exposed the underbelly and weaknesses of this mammoth enterprise. Entries are routinely vandalized, libel and falsities often find their way into existing articles as a way to settle scores, manipulate public opinion, or express outrage.

The prestigious magazine "Nature" studied Wikipedia articles on the sciences and found them similar in quality to peer reviewed and edited encyclopedias. Indeed, the problems cluster around the entries that deal with the softer edges of the human experience (where everyone feels qualified to comment and edit): the social "sciences", the humanities, arts and entertainment, politics, current affairs, celebrities, and the like. It is there that "edit wars" and thrashing are most ripe. The result is that nigh close to 90% of the Wikipedia contain highly dubious material and attract the least qualified "experts" and "editors".

This seems to prove the point that the gaining and preservation of knowledge should not be subjected to a democratic process (or, as in the Wikipedia's case, mob rule). As the promoters of "intelligent design" are finding out, what we learn cannot and must not be decided by vocal protests and voting.

The acquisition of expertise and its propagation across the generations by means of works of reference should remain an elitist endeavor. The mechanisms of peer-review and editorial board are far from fail-proof. But they do guarantee a modicum of accuracy and objectivity which the Wikipedia gravely fails to do.

There are examples of online encyclopedias that actually adhere to basic principles: their authors and editors are qualified to write about the topics they have chosen or have been assigned, and the entries are largely accurate and unbiased. The Stanford Encyclopedia of Philosophy (SEP) is one example. The Open Site Encyclopedia is a hybrid, a cross between the Wikipedia and the SEP models.

The Wikipedia is often contrasted with the crown jewel of encyclopedias, the Britannica.

There is no source of reference remotely as authoritative as the Encyclopaedia Britannica. There is no brand as venerable and as veteran as this mammoth labour of knowledge and ideas established in 1768. There is no better value for money. And, after a few sputters and bugs, it now comes in all shapes and sizes, including two CD-ROM versions (standard and deluxe) and an appealing and reader-friendly web site. So, why does it always appear to be on the brink of extinction?

The Britannica provides for an interesting study of the changing fortunes (and formats) of vendors of reference. As late as a decade ago, it was still selling in a leather-imitation bound set of 32 volumes. As print encyclopaedias went, it was a daring innovator and a pioneer of hyperlinked-like textual design. It sported a subject index, a lexical part and an alphabetically arranged series of in-depth essays authored by the best in every field of human erudition.

When the CD-ROM erupted on the scene, the Britannica mismanaged the transition. As late as 1997, it was still selling a sordid text-only compact disc which included a part of the encyclopaedia. Only in 1998, did the Britannica switch to multimedia and added tables and graphs to the CD. Video and sound were to make their appearance even later. This error in trend analysis left the field wide open to the likes of Encarta and Grolier. The Britannica failed to grasp the irreversible shift from cumbersome print volumes to slender and freely searchable CD-ROMs. Reference was going digital and the Britannica's sales plummeted.

The Britannica was also late to cash on the web revolution - but, when it did, it became a world leader overnight. Its unbeatable brand was a decisive factor. A failed experiment with an annoying subscription model gave way to unrestricted access to the full contents of the Encyclopaedia and much more besides: specially commissioned articles, fora, an annotated internet guide, news in context, downloads and shopping. The site enjoys healthy traffic and the Britannica's CD-ROM interacts synergistically with its contents (through hyperlinks).

Yet, recently, the Britannica had to fire hundreds of workers (in its web division) and return to a pay-for-content model. What went wrong again? Internet advertising did. The Britannica's revenue model was based on monetizing eyeballs, to use a faddish refrain. When the perpetuum mobile of "advertisers pay for content and users get it free" crumbled - the Britannica found itself in familiar dire straits.

Is there a lesson to be learned from this arduous and convoluted tale? Are works of reference not self-supporting regardless of the revenue model (subscription, ad-based, print, CD-ROM)? This might well be the case.

Classic works of reference - from Diderot to the Encarta - offered a series of advantages to their users:

1. 
   Authority - Works of reference are authored by experts in their fields and peer-reviewed. This ensures both objectivity and accuracy.
   

2. 
   Accessibility - Huge amounts of material were assembled under one "roof". This abolished the need to scour numerous sources of variable quality to obtain the data one needed.
   

3. 
   Organization - This pile of knowledge was organized in a convenient and recognizable manner (alphabetically or by subject).
   

Yet, all these advantages were eroded to fine dust by the Internet. Wikipedia aside, the web offers a plethora of highly authoritative information authored and released by the leading names in every field of human knowledge and endeavour. The Internet, is, in effect, an encyclopaedia - far more detailed, far more authoritative, and far more comprehensive that any encyclopaedia can ever hope to be. The web is also fully accessible and fully searchable. What it lacks in organization it compensates in breadth and depth and recently emergent subject portals (directories such as Yahoo! or The Open Directory) have become the indices of the Internet. The aforementioned anti-competition barriers to entry are gone: web publishing is cheap and immediate. Technologies such as web communities, chat, and e-mail enable massive collaborative efforts. And, most important, the bulk of the Internet is free. Users pay only the communication costs.

The long-heralded transition from free content to fee-based information may revive the fortunes of online reference vendors. But as long as the Internet - with its 5,000,000,000 (!) visible pages (and 5 times as many pages in its databases) - is free, encyclopaedias have little by way of a competitive advantage.

These are momentous times in the digital content industry. Within the past 60 days, Barnes and Noble withdrew from the e-books business, peddling its electronic publishing house to iUniverse and terminating the sale of digital titles from its barnesandnoble.com Web site. It then proceeded to take private its publicly listed online arm.

To the consternation of many authors, Amazon, its chief Internet competitor, introduced a "search inside the book" feature with an initial database of 120,000 titles. It was preceded by eBooks.com's less comprehensive but otherwise similar search engine.

Project Gutenberg - the pioneering and largest depository of free, mostly "plain-vanilla" (text only) e-books - added the 10,000-th title to its unsurpassed collection. In the meantime, e-book aggregators, such as blackmask.com, now proffer tens of thousands of free titles for download in up to 8 file formats. Even Microsoft has spent the last few months offering a free weekly selection of 3 commercial titles each, exclusively readable on its MS-Reader application.

Buffeted by these winds of e-commerce, vendors of online reference - textbooks, dictionaries, and encyclopedias - are eyeing the market warily and wearily.

Patrick Spain is Chairman and CEO of Alacritude, publisher of eLibrary and Encyclopedia.com. eLibrary is a digital archive of more than 13 million documents culled from over 2000 publications. It includes newswires, newspapers, magazines, journals, transcripts, photographs, maps and books - major works of literature, art, and reference.

Troy Williams founded Questia in 1998 and has served as its President & CEO ever since. Questia is a massive online library of over 400,000 books, journals, and articles organized into more than 4000 research topics. It caters mainly to students and offers cool features such as online annotation, page printing for free, and bibliography generator.

Tom Panelas is the Director of Corporate Communications of the Encyclopaedia Britannica - the Rolls Royce of reference works. It has been available online for a few years now - the 32 volumes, an interactive atlas, a student's version, a links directory, and a topical compilation of thousands of magazine articles and multimedia. The Britannica has alternated between revenue models: subscriptions only, then free access with advertising, and back to subscriptions.

People who were using free information on the Web eventually became fed up. Many of the sites they used disappeared because they had no self-sustaining economic model. Much of the information online was worthless. It became difficult to tell whether information on the Web was reliable.

As a result we've seen a growing realization among Internet users that not all types of information are equal, that authoritative information is valuable, somewhat rare, costs money to create, and for these reasons it's worth paying for. Many more people are willing to pay for high-quality information on the Internet than four years ago, especially since the price of online reference is at a nadir. We see online as the area that will grow the fastest, as far as the vending of reference goes. Many people will subscribe through third-party organizations such as Internet service providers with whom we have established relationships.  Subscribers to SBC Yahoo! DSL service, for example, can choose a subscription to Britannica.com along with their service.  In the future, publishers will probably provide one kind of service to such third-party distributors and create others, with better, premium offerings, for customers who pay them directly, since there's more revenue in such subscriptions.

Increasingly, information Web sites will "aggregate" content - that is, incorporate sources that go well together but could not be integrated before the Internet. Britannica.com, for example, includes three encyclopedias, magazines and journals, a guide to the best Web sites on various subjects, and other information. Thus sources that were previously spread throughout the library stacks, requiring the wearing out of much shoe leather to bring them together, now come to rest in one place, on the screen of your computer. This trend will no doubt continue.

Second, online access to scholarly information is an integral part of the trend towards online and distance education. The undergraduate population is diversifying and now includes students enrolled in distance learning programs, rural students without physical access to an adequate library, and older, community college students who work or have family obligations that prevent them from spending time in their campus library.

Third, the Internet has engendered a powerful trend toward personalization. Elibraries such as Questia enables its users to personalize their library. Notes and highlights in various colors in each book and article can be saved for future reference. Documents, “virtual bookshelves” and even previous term papers and bibliographies can be saved online and organized in various folders. 

Fourth, people increasingly expect complete mobility. ELibraries such as Questia enables researchers to access their personalized copies of books and journals as well as old term papers and current work-in-progress from anywhere.