When framing all the impact of ICTs in society — and not only at the economic level — it is unavoidable to speak of Manuel Castells’s work, maybe the most acknowledged scholar in this field. Summing up and focusing on what is of interest here, Castells presents a society structured in three layers — relationships of production, experience and power — that by acting over matter (i.e. nature) — the former — and establishing relationships amongst them three layers, end up shaping a culture in a specific configuration of time and space. As technology plays and important role in both the relationships amongst layers and in the creation of culture, Castells theorizes on how ICTs are actually shaping nowadays culture in a very broad sense. His thesis is that the Informational Paradigm leads to a globalized Network Society that pervades each and every aspect of human life. Besides the effect on the Economy, it affects all the way the society shaped, thus the way we work, how culture and communication take place, a redefinition of politics, and even the concepts of time and space.
We can summarize the preceding ideas in the following figure, which presents the three layered society structure in a drastically simplified way:
Concerning development, Welzel et al. (2003) describe in their work a framework that, to our appeal, is very interesting as it goes beyond economic development, overcoming the usual focus on infrastructures.
Their three tier approach is based on the three main trends in development studies. The first one is socioeconomic development, mainly based in Economy issues (translated into indicators) plus some others mainly measuring Health or Education. Socioeconomic development ends up measuring the resources the individual actually has, thus enhancing his objective means of choice. The second one is value change shifting to emancipative values. In this case, what is enhanced is not the objective but the subjective ability towards human choice. The third one is democratization that, if accompanied – as it would be expected – by an increase of freedom rights, would actually make possible the objective and subjective power of choice that the two former development trends explained.
Again, next figure tries and pictures these ideas:
If we take Ferran Sabaté’s work (2007a, 2007b) after the World Economic Forum’s Networking Readiness Index 2006 for Spain, we clearly see that infrastructures are not the problem (they are undoubtedly and still a problem, but they are far from being the problem). As it it put clear in his two articles, as a quite e-developed country, Spain has reached a certain satisfactory degree of e-readiness based on a deep and wide development of infrastructures. What is lacking, and impedes a further e-development, is everything else that should accompany the deployment of infrastructures, namely a proper political strategy, digital literacy and, above all, a strong demand driven by private (mainly individual, but also corporate) interest — it is my opinion that, at the state we are in, lack of interest and digital illiteracy are almost the same thing and can be generalized as lack of e-Awareness.
What to do about it?
Let’s take the previous figure, let’s only keep the central column and let’s put two layers on top of it: first layer is how the web (we could actually speak of ICTs in general) has developed, from 1.0 — based on infrastructures and one-way information — to 2.0 — based on content and services and participation. Second layer is about two kinds of policies, one based on push strategies (wire cities, subsidize computer acquisition), the other one based on pull strategies (make people aware of their needs and how computers can help fulfill them, empower Administrations so citizens know they can ask for more public e-Services).
It is my opinion that Spain — as many other (almost) e-developed countries — is just at the hinge between an Information Society based on infrastructures and the creation of a strong ICT sector, and another one based on highly digitally literate people that demand high quality digital content and services in an adequate regulation framework (adequate not for incumbent carriers, but for digital content and services provision: privacy, intellectual property rights, cyberlaw, etc.).
Not to stay forever at that hinge, the transition from 1.0 to 2.0 must be boosted. And it is my believe that, after a successful push strategies to set up the basements of a first phase of the Information Society, what is needed is pull strategies so that the growth, both in depth and width, of the Information Society is made socially sustainable according to citizens’ needs and, at the same time, economically sustainable according to customers’ will to pay.
As in a pendulum movement, the reflections about the impact of ICTs in the Economy have swung from enthusiasm to realism and back to optimism, being each of these states really subjective and implying a wide range of shades within.
After a first period of cyberoptimism, people that “wanted to see” and people that thought “waiting to see” was a bad strategy because “it will then be too late”, followed a timespan where scientists — mainly economists — stuck to strict evidence from reality, being their main conclusion that the more you spend/invest in ICTs the more they affect both the share and the growth of the GDP — an obvious conclusion to many, I’d dare say, as it’ll happen with sweets if you spent half your national budget in candy.
In the last years, due to more data available and more and better analyses, we have been seeing new findings that, at last, seem to bring more light to the issue of the impact of ICTs on the Economy. In the following table I present a summary of a good bunch of such positive impacts. One caveat is due: as it is clarified in most of the documents listed below, evidence is not always subject to generalization. While sometimes it actually is, some findings apply only to specific contexts such as countries, economies, moments of time, constellations of conditions and so forth. I nevertheless believe that these impacts are worth listing because some were predicted — or expected — ten years or more before they could be measured. On the other hand, some caveats about the applicability of these findings are mainly based on (non) availability of data. Last, but not least, because even if some results only apply, as we have said, to specific economic setups, some of these setups could be reproduced in other contexts — e.g. in developing countries — in order to try to provide the same results.
Economic Benefits of ICTs
ICTs, in general, facilitate economic growth, having a positive impact in national GDP growth
Specifically, the greater the size of the ICT sector (products and services), the larger the positive impact of ICT on growth.
Enabling of larger markets coverage
Increase of reach of businesses
Reduction of economic downturns and dampens business cycles
Boost of economic output thanks to employment creation
Allowing of diversified growth strategies, especially due to changes in trade
Promote integration of isolated communities into the global economy
New information-based products, new business niches
Scaling-up of international competition thanks to more transparency and trade
Energizing of the market due to shortening of product life cycles and
Growth in global investment
Positive impact on system development cost, risk and timescale effects
Reduction of information asymmetries, especially in banking and finance, thus improving market behavior due to more transparency
Positive confidence and risk assessment effects
Impact of ICT-related capital investments on overall capital deepening
Developmental gains from investing in ICT consumption
Developmental gains from investing in ICT production (even greater than for investment in ICT consumption)
High returns on investment in telecommunications equipment and, more generally, in the telecommunications sector
Facilitation of cost-effective public and private services
Enabling of more efficient goods and services allocation
Cost savings, in general, for industry
Fostering of effective use of development resources: capital and natural resources
Improvement of inventory management, better flow control, better integration between sales and production and, therefore, enhancing management of production
Increased transport efficiency
Reduction of transaction and search costs and information asymmetries in product, services and factor markets
Improved performance in firms, increasing efficiency in combining capital and labor (multifactor productivity)
Reduction of site dependency of data processing
Enabling of higher quality products and services
Improvement of quality monitoring
Fostering of mass customization
Enabling of dis-intermediation
Creation of new intermediaries, new business niches
Better access to knowledge and information by enabling of rich information flow
Greater flexibility on the part of firms in catering to a diversified customer base
Network externality effects
Lowering of technology cost
Increase in the volume and innovation effects
Benefits from international standardization
Positive impact of rapid technological progress
Impact on skills and organizational change
Productivity in Firms
Productivity in Industries
Productivity in Economies
Increase of labor productivity, especially in more skilled workers and/or after an initial period of adoption/training
Increase of multifactor productivity
Significant contribution to value-added by ICT skilled jobs
Greater impact of broadband on productivity
Contribution to the increase of capital input per worker (capital deepening) thus increasing efficiency and productivity
Growth in global trade
Intensification of trade
Growing trade in ICT goods and ICT-enabled services, increasing its share in total goods and services exports
Emergence of a global information infrastructure
Enabling of outsourcing, thus reducing costs – on one side – and creating business – on the other one.
Increase of foreign investment
Positive effects on employment creation
ICT-producing enable better paid ICT-related jobs
Energizing of occupational structure and changing demand for competencies
Positive impact on high-skilled workers’ wages
Increased transparency and efficiency in labor markets, allowing better allocation of workers and skills
Compensation of deficient growth of employment opportunities in manufacturing by significant increases in ICT business employment
Creation of new kind of jobs
Improved social development
Increase of user expectations
Strengthening of ICT-products and -services demand
Enabling of new forms of interaction between firms and other parties such as consumers thanks to networking
Surprisingly — or not — there are few papers stating the negative impact of ICTs in the Economy. Some of them do not dare talking about negative impacts but of changes in the Economy: change of paradigm, organizational changes, turbulences in international markets, etc. and speak of them quite neutrally: they are neither positive nor negative on their own, but it will depend on a firm or a sector strength and position to benefit from them or to suffer them.
To be true, the only potential negative impact I have been able to find in economic papers — and also in sociological papers — is about employment. Again, a caveat: as I have shown before, most authors predict that the net effect on employment will be positive, and will be in the lines shown in the table. Nevertheless, some — among them Greenwood (1999) and Castells (2000) — picture some drawbacks of ICTs entering workers’ life. While the first one describes an impasse scenario where skilled workers will benefit while non-skilled will have to adapt to new technologies — losing productivity, competitiveness and earnings in the meanwhile — Castells is certainly more frightening, as he depicts the segmentation of workers in two axes: networked vs. switched-off labor, and self-programmable vs. generic labour. The conclusions are similar to Greenwood’s, but presumably to stay in the long run and with deeper consequences that spill from the labor market over the social and cultural arenas in a not really promising future for the switched-off and/or generic kind of workers.