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The Paradox of ICT’s Impact on Growth and Inequality

Thirty years ago a UN commission published the Maitland Report, proposing that by the early 21st century, every individual on the planet should “be within easy reach of a telephone” given the economic benefits. That was interpreted as being within a one day walk of a phone. Anyone suggesting back then that over 90% of the global population would be covered by mobile cellular signals, and over half of the world’s population would have a phone in their pocket, would have been labeled a crazy optimist. Yet, today it’s all about high-speed broadband connections, which total over 3.4 billion as of 2014 – nearly half of the world’s population.

This year’s Global Information Technology Report, and chapter 1.2 in particular, details this history of ICTs as a powerful driver of economic growth, and discusses the remaining barriers to more inclusive prosperity. While ICTs have a multiplying effect on income and growth, unconnected countries and people are being left behind. To address a widening income gap, particularly within countries, more needs to be done to increase broadband adoption, particularly through policies that focus on universal access, affordability, digital skills and the gender gap.

Evidence from the last two decades demonstrates that ICTs, particularly broadband Internet, are an income multipliers. At the country level, macroeconomic data links fixed telephony, mobile telephony, Internet use, and broadband use to gross domestic product (GDP) growth in a causal relationship across developed and developing countries. , And increasing the intensity of data use also drives per capita income growth. This growing body of evidence highlights the fact that we are long past the days of the “Solow paradox,” when, in 1987, Nobel Prize–winning economist Robert Solow noted, “you can see the computer age everywhere but in the productivity statistics.”

At the microeconomic level, emerging analysis highlights the impact that ICTs can have on driving income growth at the bottom of the economic pyramid. Mobile phones in particular, have spread across the developing world and this ‘mobile miracle’ is contributing to income growth as handsets act not only as a communications device for sharing public and private information, but also as educational tools delivering learning content, and as a financial transfer and savings device.

A direct result of ICT adoption is the steady decline in absolute poverty across developing regions. The global extreme poverty rate (those individuals surviving on less than US$1.25 per day) dropped from 1.9 billion people in 1981 to 1.3 billion in 2010 according to the World Bank: extreme poverty rates in developing countries dropped from more than 50 percent to 21 percent. This decline in extreme poverty has been driven by long-run economic growth in China and India, recent growth across Africa, and the impact of social programs in Latin America.


The picture is more mixed, however, when looking at ICTs’ impact on income inequality. At the global level, the latest available data from the World Bank show income inequality (the distribution of income across all people in the world) to be on the decline. The most recent analysis finds that global income inequality has fallen steadily from a Gini coefficient of 72.2 in 1988 to 70.5 in 2008 with the decrease attributed to the large overall income gains of the global median (around the 50th percentile) of the population.

However, the decrease in global income inequality masks the income inequality increases observed within individual countries. With-in country income inequality appears to be rising in many countries (developed and developing) and one analysis by the International Monetary Fund suggests that technological progress, measured as the share of ICT capital stock, has a statistically significant impact on inequality. The available evidence presents a paradox where ICTs are driving economic growth and decreasing global inequality while at the same time contributing to rising within-country income inequality.

While this paradox appears, the full benefit of ICTs has yet to accrue to lower income groups. For example, network effects and externalities that multiply the impacts of ICTs require minimum adoption thresholds before those impacts begin to materialize. One analysis finds a positive impact of a 2.8% increase on GDP resulting from a 10% increase in telecommunications infrastructure, but only once a minimum threshold density is reached. In this case, the threshold was at 24% of the population. In other words, countries will only experience the full growth impacts of ICTs once penetration passes that point. Similarly, a 2009 analysis determined that increasing returns to broadband investment occurs when a critical mass of penetration—above 20% (20 subscriptions per 100 people)—is reached. Greater access and adoption of ICTs in lower-income groups will further accelerate income gains at the base of the economic pyramid.

To counter the disparity in the utilization of ICTs between lower- and higher-income groups, immediate actions should focus on closing the disparity in ICT adoption/penetration. To ensure that benefits of ICT accrue to lower income populations, more needs to be done to increase broadband availability and adoption, particularly through policies that achieve universal access, increase affordability, increases digital skills and close the gender gap. These include:

1) Focusing public resources and incentives for building broadband Internet access out to rural and underserved communities
2) Connecting schools and libraries to broadband Internet service and ensure widespread connectivity within schools
3) Removing excessive taxation on devices and access, and consider targeted subsidies for certain populations
4) Developing robust ICT training curricula and programs
5) Focusing on closing the gender gap in ICTs

The data in this year’s Global Information Technology Report leave no question that the adoption and use of ICTs has a positive effect on income and growth on lower-income countries and populations. However, the challenge to accelerate ICT adoption, particularly among lower-income groups, remains. Combining the positive economic growth impact of ICTs with targeted interventions focusing on alleviating poverty, will improve the well-being of citizens everywhere, especially those in absolute poverty at the bottom of the pyramid.


On Wednesday, April 15, at 10am US EDT, please join me and colleagues from the World Economic Forum to discuss the findings of the 2015 Global Information Technology Report. 

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India: Transforming Promise into Performance

Seven years ago, many people (including my mother-in-law) thought I had made a career-ending decision to accept a high-risk assignment and relocate to India. My mission:  build from the ground up Cisco’s second headquarters, a Globalization Centre East in Bangalore focused on innovation, talent and partner development that envisioned 10,000 employees in three years, including the top 10% of worldwide talent. My charter included developing a world-class technology campus that also served as a showcase for incubating and advancing Smart City services worldwide, and to become the most relevant ICT company in India.

Was it the right decision?

Wim #1Although half a world away from Cisco’s corporate headquarters in the Silicon Valley, I thought the new job was still full of great promise. India was and still is the world’s largest democracy, had a growing talent pool, a zest for innovation, a co-operative government, aspirational middle class and a potentially huge economy purring along at 8% annual growth.

In four years, we partnered with national and local governments as well as an ecosystem of commercial businesses to architect and develop a fully networked campus.The Smart + Connected Community inBangalore integrated building systems with IT systems and applications onto one IP network, enveloped by artfully designed buildings and collaborative work spaces.

Today, the 1-million-square-foot Globalization Centre East campus employs more than 11,000 people, houses Cisco’s Research and Development, IT and customer support teams with the best talent in industry. The campus also meets my original charter Wim #2as the incubator for validating our industry-leading Smart + Connected Communities, especially Smart Cities, which today has projects on nearly every continent worldwide, encompassing more than 90 engagements.

All that has been extremely rewarding to see, but was it the right decision?

We achieved every critical objective except one: growing ICT technology throughout India itself. In my four years of living in India and after a number of subsequent trips revisiting there, I now realize that the promise and opportunity of India can be unpredictable.  After several years of nearly double digit growth, India’s economy spiraled down, experienced high inflation, a weakening rupee, allegations of government corruption and financial policy decisions that spooked the international investment community.

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Why Information and Communication Technology (ICT) Matters for Girls

I am writing this blog as the 2014 recipient of the IEEE Women in Engineering Region 8 Clementina Saduwa Award named after an amazing woman whose life was cut short in 2007. On a personal level, I am extremely passionate about the possibilities that technology presents for young girls and aspiring women. As a CTO for Cisco Services, my own role is concentrated on the use of technologies to develop architectures that will delight our customers. Why is technology interesting to me?  It’s what one can do with the technology as an enabler to solving problems and to creating opportunities.

I became interested in technology because of my curiosity and encouragement from wonderful individuals who helped pave the way for me. My personal career highlights are numerous where risk taking and passion for making a difference in this world are common attributes. Our world needs young girls to create their own career path in Information and Communication Technology (ICT). A career in technology can be fun!

My mother was role model and encouraged me to be the person I want to be. Coming together to solve a problem and to create opportunities – we can rise above gender discrimination – but it’s about being bold in the process and having the courage to do so -make no doubt about this fact.  I dream of a society where such a topic is no longer an issue but so engrained in our DNA !

What is Cisco doing?

Cisco has been very active in the ITU’s Girls in ICT initiative, where girls from secondary schools or universities are invited to spend the day at the office of ICT companies and government agencies so they better understand the opportunities the ICT sector holds for their future see.

ITU will have a live webcast on April 15 2014 at 12:30 CET.

Cisco wants to encourage girls to consider ICT as a valuable career option. We understand the value of diversity in the workforce and it is our aspiration to build a gender -balanced workforce. At Cisco, two of the top technology positions are held by women: both the Chief Technology Officer (CTO) and the CIO (Chief Information Officer) of Cisco are female. “If you cannot see it, you cannot be it!”

At Cisco, we take our commitment to making ICT career opportunities open to all seriously. We understand the value of a diverse workforce and believe that many more girls would pursue careers in ICT if they were better informed about the many different types of jobs available within the sector. By 2020 there will be approximately 50 billion things connected to the Internet. At its essence, the Internet of Everything is the networked connection of people, process, data and things…and is set to create an unprecedented level of disruption across industries, globally.

In fact,  Cisco offices around the world are getting ready to host #GirlsInICT Day 2014! Girls to create ICT jobs of tomorrow #STEM #GirlsInIC

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Cisco Celebrates International Girls in ICT Day

Women earn 57% of all U.S. undergraduate degrees but only 18% of undergraduate computer and information sciences degrees, according to the National Center for Women in Technology. Yet according to U.S. Department of Labor estimates, more than 1.4 million computing-related job openings will exist by 2020, with only enough computer degree graduates to fill 30% of them.

And globally, women comprise less than a third of workers in the computer science, engineering, and physics fields in some of the world’s key emerging economies, according to a report by Women in Global Science & Technology.

Attracting more girls and women to the technology field benefits women, their families, their communities, and the businesses they work for. Women are powerful catalysts for change in any society: When women are able to earn an income, they typically reinvest 90 percent of it back into their families and communities.

To help tap this valuable talent pool and attract more women to careers in the information and communications technology (ICT) field, Cisco is participating in Girls in ICT Day – an international event organized by the by the International Telecommunication Union (ITU).

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Educause: Bringing Together Technology and Education to Invest in Our Future

It’s amazing to think about the way a traditional classroom operated only a few years ago.  As Renee Patton recently pointed out in her blog post, there were rules, there were barriers, and they were all kept within the confines of an educational institution.  As technology has advanced, those rules have been challenged, barriers overcome, and an entirely new era of learning has emerged.

The collaborative nature of education, educators and learners has allowed new technologies to thrive and innovation to accelerate.  We’re flipping classrooms, implementing mobile learning programs and developing entirely new ways for students to connect and engage.  And we’re looking with excitement toward a future that will continually change the way we teach and learn. Read More »

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