Of Internet Cafes and Power Cuts
Monday, February 11, 2008
Within a few months China will overtake America as the country with the world’s largest number of internet users. Even when you factor in China’s size and its astonishing rate of GDP growth, this will be a remarkable achievement for what remains a poor economy. For the past three years China has also been the world’s largest exporter of information and communications technology (ICT). It already has the same number of mobile-phone users (500m) as the whole of Europe.
China is by no means the only emerging economy in which new technology is being eagerly embraced. In frenetic Mumbai, everyone seems to be jabbering non-stop on their mobile phones: according to India’s telecoms regulator, half of all urban dwellers have mobile- or fixed-telephone subscriptions and the number is growing by 8m a month. The India of internet caf?s and internet tycoons produces more engineering graduates than America, makes software for racing cars and jet engines and is one of the top four pharmaceutical producers in the world. In a different manifestation of technological progress, the country’s largest private enterprise, Tata, recently unveiled the ?one lakh car?; priced at the equivalent of $2,500, it is the world’s cheapest. Meanwhile, in Africa, people who live in mud huts use mobile phones to pay bills or to check fish prices and find the best market for their catch.
Yet this picture of emerging-market technarcadia is belied by parallel accounts of misery and incompetence. Last year ants ate the hard drive of a photographer in Thailand. Last week internet usage from Cairo to Kolkata was disrupted after something?probably an earthquake?sliced through two undersea cables. Personal computers have spread slowly in most emerging economies: three-quarters of low-income countries have fewer than 15 PCs per 1,000 people?and many of those computers are gathering dust.
And the feting of prominent technology projects in emerging economies is sometimes premature. Nicholas Negroponte, of the Massachusetts Institute of Technology, has long been championing a $100 laptop computer, presented with most fanfare at the World Economic Forum in Davos two years ago. The laptop was supposed to sweep through poor countries, scattering knowledge and connectivity all around. But the project is behind schedule, the computer does not work properly and one prominent backer, Intel, a chipmaker, has pulled out.
So how well are emerging economies using new technology, really? Hitherto, judgments have had to be based largely on anecdotes. Now the World Bank has supplemented the snapshot evidence with more comprehensive measures.
Take-off to tomorrow, and to yesterday
The bank has drawn up indices based on the usual array of numbers: computers and mobile phones per head, patents and scientific papers published; imports of high-tech and capital goods. In addition, it uses things such as the number of hours of electricity per day and airline take-offs to capture the absorption of 19th- and 20th-century technologies. It tops this off with measures of educational standards and financial structure, which show whether technology companies can get qualified workers and enough capital. The results, laid out last month in the bank’s annual Global Economic Prospects report, measure technological progress in its broadest sense: as the spread of ideas, techniques and new forms of business organisation.
Technology so defined is fundamental to economic advance. Without it, growth would be limited to the contributions of increases in the size of the labour force and the capital stock. With it, labour and capital can be used and combined far more effectively. So it is good news that the bank finds that the use of modern technology in emerging economies is coming on in leaps and bounds.
Between the early 1990s and the early 2000s, the index that summarises the indicators rose by 160% in poor countries (with incomes per person of less than about $900 a year at current exchange rates) and by 100% in middle-income ones ($900-11,000). The index went up by only 77% in industrialised countries (with average incomes above $11,000), where technology was more advanced to start with. Poor and middle-income nations, the bank concludes, are catching up with the West.
The main channels through which technology is diffused in emerging economies are foreign trade (buying equipment and new ideas directly); foreign investment (having foreign firms bring them to you); and emigrants in the West, who keep families and firms in their countries of origin abreast of new ideas. All are going great guns.
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