Thursday, May 26, 2011

Internet IMPACTS - Growth, Jobs and Prosperity

The Internet has transformed the way we live, work, socialize and meet, and the way our countries develop and grow. Two billion people are now connected to the Internet, and this number is growing by 200 million each year. But the magnitude of the economic impact of Internet-related activities is not obvious. 

There are many studies on the impact of IT or telecommunications but little analysis on the global impact of the Internet on growth, jobs, and wealth creation. Does the Internet really create wealth or just displace it? How large is the economic impact of the Internet in objective terms? etc. 

To this effect McKinsey Global Institute (MGI) has come out with an excellent research report “Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity with an aim to estimate the magnitude of the impact of the Internet on the world economy.

This research focuses on 13 countries that account for more than 70 percent of global GDP and finds that the Internet has delivered substantial economic growth and created jobs on a large scale. It offers the first quantitative assessment of the impact of the Internet on GDP and growth, while also considering the most relevant tools governments and businesses can use to get the most benefit from the digital transformation. 

Key Findings: 
  • Internet accounts for 3.4%of GDP in 13 countries. 
  • Internet accounted for 21% of GDP growth in the last 5 years in mature countries 
  • 2.6 jobs created for 1 job lost. 
  • 75% of Internet impact arises from traditional industries, primarily from increased productivity. 
  • 10% increase in productivity for small and medium businesses from Internet usage 
  • Small and medium businesses heavily using Web technologies grow and export 2X as much as others 

Report also has many interesting slides. However, I wanted to share one chart in particular:

Countries that create strong Internet ecosystems reap huge economic benefits
Common sense tells us that the Internet is a vital part of a modern, healthy, growing economy. And while previous studies have examined parts of the picture, McKinsey research for the first time shows the full extent of the Internet’s economic power. And that power is massive. 

Understanding just how much the Internet contributes to national economies should spur government and business leaders to seek ways to optimize their participation in the global Internet ecosystem. Encouraging usage is an unavoidable first step in leveraging public spending, but leaders must also focus on providing human capital, financial capital, infrastructure, and the appropriate business environment 

Internet maturity correlates with wealth creation, and we find that the Internet is, and will remain over coming decades, one of the biggest drivers of global economic growth. 

The complete report can be downloaded here.

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