October 2012 - Teletimes

contributes a gain in per capitaGDP of just 0.16 percent —approximately half as muchimpact. The more advanced thecountry, the greater the impactof digitization appears to be,which establishes a virtuousfeedback cycle: A countryreinforces and acceleratesits own progress as it movesalong the line. On the basis ofdata from 2009 and 2010, weestimate that the total globaleconomic impact of digitization,in terms of added GDP, wasUS$395 billion per year. (It has, ifanything, increased since then.)Digitization also has asignificant impact on jobcreation:A 10 percent increase indigitization reduces a nation’sunemployment rate by 0.84percent. From 2009 to 2010,digitization added an estimated19 million jobs to the globaleconomy, up 5 percent fromthe estimated 18 million jobsadded from 2007 to 2008.This is an especially criticalfinding for emerging markets,which will need to createhundreds of millions of jobs inthe coming decade to ensurethat a booming population ofyoung people can contributeto their national economy.Finally, a 10-point increase indigitization has, on average,led to a six-point increase in thecountry’s score on the INSEADGlobal Innovation Index, whichranks countries according toinnovation potential. In otherwords, as a country progressesin its digitization development,it appears to become moreinnovative.Assessing the social impact ofdigitization is more complicatedbecause no metrics apply to allgeographies in the same way.Many studies have trackedincome disparity as a proxyfor social inequality, using theGini coefficient (a measure ofstatistical dispersion), but inemerging economies that are inthe process of elevating millionsof people out of poverty, therelationship between economicgrowth and inequality iscomplex. Therefore, we focusedour study of the social impact ofdigitization on two measures:quality of life and equality ofaccess to basic services. Weused the widely publishedGallup Wellbeing Index andthe Organisation for EconomicCo-operation and Development(OECD) Better Life Index tomeasure the former, and theUnited Nations DevelopmentProgramme’s (UNDP’s) HumanDevelopment Index to measurethe latter.In developed economies,increasing digitizationsignificantly boosts qualityof life: OECD countries gainan average of 1.3 points onthe Better Life Index forevery 10-point increase in thedigitization score. However,in countries with lower levelsof economic development,the impact of digitizationis less pronounced, mostlikely because quality-of-lifefactors beyond digitization— food, housing, clothing,water, energy, health, andtransportation — are in shortersupply and thus more critical.In other words, digitizationimproves a country’s quality oflife only when the basic needs ofits population have been met.Yet when we examine accessto basic services, we see theopposite effect. Digitization’simpact is greatest in constrainedand emerging economies.A 10-point increase in thedigitization score leads to anincrease of approximately0.13 points in the HumanDevelopment Index. In moredeveloped economies wherebasic human needs are moreeasily met, digitization playsa less pronounced role inexpanding access to education,sanitation, water, andhealthcare.To assess governmenteffectiveness, we used threemetrics: the 2010 CorruptionPerceptions Index publishedby Transparency International;the e-government developmentindex created by the UnitedNations Public AdministrationNetwork to gauge theprovision of electronicservices by governments;and the Inequality-AdjustedEducation Index, measured bythe UNDP to show the extentof public education, a keygovernment service. We foundthat greater digitization ledto improvement on all threecounts. Digitization enables asociety to be more transparent,increasing public participationand the government’s abilityto disseminate informationeffectively: A 10-point increasein digitization increases theTransparency Internationalindex by approximately 1.2points. Digitization raisese-government effectiveness byapproximately 0.1 points (andkick-starts another virtuouscycle, as greater e-governmenteffectiveness acceleratesdigitization). And digitizationgives the population moreinsight into government policiesand functions, which might,in turn, lead to more activepolitical participation andsupport the development ofhuman rights.Finally, digitization supportsbetter delivery of publiceducation and othergovernment services. Hereagain, digitization’s impact ismore pronounced in the case ofdeveloping countries, where aThe more advanced the country, the greater the impactof digitization, which establishes a virtuous cycle: Acountry reinforces and accelerates its own progress as itmoves along the line.10-point increase in digitizationresults in an average 0.17-pointincrease in the Inequality-Adjusted Education Index.This trend has less effect indeveloped countries becausethey already have greater accessto universal basic education.What can governments do?The digitization index can bean invaluable tool for countriesseeking to advance their placein the world. Investment inbroadband infrastructure hashelped ensure widespread highspeedaccess to the Internet andcommunications services. Butthis investment is not enough.Nor is the next step to simplyinvest more money — even ifthe money is available. Instead,policymakers can play a pivotalrole by focusing on five keyimperatives.1. Elevating digitization on thenational agenda.To realize the wide-rangingbenefits that digitizationoffers, countries need supportOctober 2012www.teletimesinternational.com45