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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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John Chambers: “What does the Internet of Everything Mean for Security?”

Last week, Cisco CEO John Chambers attended the World Economic Forum in Davos, Switzerland. A major theme of the week was security and the implications of the Internet of Everything…the topic which John focused on in his contributed article to the WEF blog, Agenda. You can read the full article here.

In the article he stated:

WEF graphic - John Chambers on Security 2014

WEF graphic – John Chambers on Security 2015

Additionally, last week, Cisco issued our Annual Security Report which includes data about the number of breaches, attacks and how to mitigate these increasing threats. Cisco SVP and Chief Security Officer John Stewart blogged on this report here. A key call to action of the report is for corporate boards to take a more active role and focus on security as they help run their companies. He also talked to BloombergWest’s Cory Johnson. You can view that interview here.

In Davos, John Chambers talked to a few reporters about the implications of more things being connected…overall, of course, the impact will be very positive. As we move from 14B connected devices to 50B by 2020, John argues that each of those end points cannot be trusted to be secure, therefore you need to focus on security from an architectural approach…something, of course, where the network has a distinct advantage.

See John’s interview with USAToday Editor-in-Chief Dave Callaway.

See John’s interview with New York Times reporter David Gelles.

And, see here, for how many devices are connected to the Internet. Right. Now.

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Cisco Joins Global Problem Solvers at 2015 World Economic Forum Annual Meeting

This week, the World Economic Forum (WEF) Annual Meeting will convene 2500 leaders from business, government, academia, and civil society in Davos, Switzerland. There, these global problem solvers will engage in strategic discussions about the political, economic, social, and technological transformations reshaping the world.

Cisco has been a WEF strategic partner for 17 years, putting us among a select group of 100 global companies committed to improving the state of the world. Being part of WEF gives us an opportunity to build and strengthen the relationships that help us address some of the world’s biggest challenges.

Cisco Chairman and CEO John Chambers speaks during the session 'The Global Business Context' at the WEF Annual Meeting in 2012. Photo: World Economic Forum

Cisco Chairman and CEO John Chambers speaks during the session ‘The Global Business Context’ at the WEF Annual Meeting in 2012. Photo: World Economic Forum

On Wednesday, January 21, Cisco Chairman and CEO John Chambers will participate in a livestreamed panel on The New Digital Context at 9 a.m. CET (midnight PT). He will discuss how regulatory, behavioral, and technological changes are transforming the digital landscape with Liu Jiren, chairman and CEO of Neusoft Corp.; José María Álvarez-Pallete, chief operating officer of Telefónica; Max Levchi, co-founder of PayPal and CEO of Affirm; and Pierre Nanterme, chairman and CEO of Accenture.

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Cisco Multiples Impact at the World Economic Forum

 Profound political, economic, social and, above all, technological forces are transforming our lives, communities and institutions. New global social communication channels are shifting the way decisions are being made from a hierarchical approach to a networked approach, with more access regardless of age, gender, and location. Given these large scale global changes, how do world leaders develop the insights, initiatives, and actions necessary to respond to current and emerging challenges?

That is what Cisco Chairman and CEO John Chambers and a team of Cisco executives will discuss this week at the annual World Economic Forum (WEF) in Davos, Switzerland. They will join other business leaders to meet with 250 top political leaders and heads of international organizations to discuss how global governance can be improved through public-private cooperation. The theme of the event is “The Reshaping of the World: Consequences for Society, Politics and Business.”

John will speak on a panel entitled “The New Digital Context: What societal, economic and technological forces are reshaping the digital landscape?” The panel will be moderated by George Cologny, Chairman of the Board and CEO of Forrester Research and also includes Marc Benioff, Chairman and CEO of, and Gavin Patterson, CEO of the BT Group. You can watch the panel on the WEF website from 9 to 10 a.m. CET (12 to 1 a.m. PST) on Wednesday, January 22.

WEF 2014 logo

Cisco executives in attendance will be Tae Yoo, Senior Vice President , Corporate Affairs; Chris Dedicoat, President, Europe, Middle East, Africa and Russia; Chuck Robbins, Senior Vice President, Worldwide Field Operations; and Padmasree Warrior, Chief Technology and Strategy Officer. Cisco attendees will share their insights on how information and communication technology (ICT) can drive continuous innovation and enable sustainable growth. They will also share information about Cisco’s leading corporate social responsibility (CSR) initiatives, which use the Internet of Everything to deliver positive impact through public-private partnerships.

This video overview of CSR activities will be shown at WEF:

Tae Yoo is a table host at a discussion about Technology for Humanity moderated by Al Gore on Wednesday. Tae recently wrote a blog for the Cisco CSR-sponsored Impact X section of the Huffington Post called How Empowering Women in IT Can Spur Economic Development. CTO Padmasree Warrior is a well-known Twitter user.  You can follow the account of her activities at WEF at http//

John’s talk and the WEF twitter conversation (#WEF2014) will be shown live on the Cisco CSR website, For more information about how to watch the public WEF sessions and follow the conversation, please refer to the World Economic Forum website.


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Why Good Job Creation is Top of Mind for Policymakers

Today’s economic development business news frequently includes stories about local digital and technology start-up incubators. What’s happening here that attracts so much attention? Pure and simple, it’s driven by the ongoing quest for communities to support sustainable twenty-first century job creation.

During the industrial revolution the residents of many major cities benefited from full employment, the large employers prospered and the collective local economy thrived. Most people made a good living and the populous was satisfied. But over time, things began to change – slowly at first, the reports of unrest seemed like isolated incidents. Then it happens, the big revelation – the day of reckoning arrives.

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