Technology
Adapted from theGlobalization101.org Issue Brief
Information Technology
Recent advances in our ability to communicate and process information in digital form—series of developments sometimes described as an "IT revolution"—are reshaping the economies and social lives of many countries around the world.
Products based upon or enhanced by information technology are used in nearly every aspect of life in contemporary industrial societies. The spread of IT and its applications has been extraordinarily rapid. Just 20 years ago, for example, the use of desktop personal computers was still limited to a fairly small number of technologically advanced people. The overwhelming majority of people still produced documents with typewriters, which permit no manipulation of text and offer no storage. Fifteen years ago, large and bulky mobile telephones were carried only by a small number of users in just a few U.S. cities. Today, more than half of all Americans use a mobile phone, and in some developing countries, mobile phones are used by more people than the fixed line telephone network.
But perhaps most dramatically, just fifteen years ago, only scientists were using (or had even heard about) the Internet; the World Wide Web was not up and running, and the browsers that help users navigate the Web had not even been invented yet. Today, of course, the Internet and the Web have transformed commerce, creating entirely new ways for retailers and their customers to make transactions, for businesses to manage the flow of production inputs and market products, and for job seekers and job recruiters to find each other.
The news industry also has been dramatically transformed by the emergence of numerous Internet -enabled news- gathering and dissemination outlets. Websites, chat rooms, instant messaging systems, e-mail, electronic bulletin boards and other Internet-based communication systems have made it much easier for people with common interests to find each other, exchange information, and collaborate with each other. Education at all levels is being transformed by communication, education, and presentation software and by websites and other sources of information and analysis on the Internet.
Advances in Information Technology
The IT revolution has been driven by the extraordinarily rapid decline in the cost and rapid increase in the processing power of digital technologies. The digital device whose technological advance has perhaps been most crucial to the IT revolution is the microprocessor, the collections of millions of tiny circuits that serve as the "brains" of personal computers and that are being embedded in an ever-expanding number of products, from video games, to cars, to refrigerators. Over the past two decades, the processing power of microprocessors has doubled roughly every six months.
Another set of advances that has been critical to the IT revolution has occurred in fiber optics. Fiber optics technology enables data, including voices captured in digital form, to be converted into tiny pulses of light and then transmitted at high speeds through glass fibers wrapped into large capacity telecommunication cables. Hundreds of thousands of miles of these cables have been installed over the past ten years, boosting the speed and capacity of telecommunications networks.
Advances in microprocessors, fiber optics, and a number of other complementary technologies, such as telecommunications switching devices and memory chips, have dramatically increased the speed, processing capacity, and storage space of computers and dramatically increased the speed and carrying capacity of telecommunications networks.
A key reason why these advances in IT have spread so quickly is that they have progressively reduced the cost of a unit of computing power or the transmission of a message. For less than $1,000, Americans without any advanced technical training can purchase and use a desktop computer whose data processing power far exceeds the room-sized computers that powered the spacecraft that carried astronauts to the moon and back in the late 1960s and early 1970s.
The spread of digital technologies also has been spurred by several unique attributes of information, the principal input and product of many IT industries. In contrast to more tangible products, like consumer goods, one person's "consumption" of a piece of information does not necessarily reduce or eliminate the possibility that another person might benefit from the same piece of information.
Furthermore, networks built upon the exchange of information, like the Internet, tend to become more valuable to existing participants as new participants link up with them. Finally, the cost of using digital technologies, such as Internet service providers, decreases as the number of users increases. All of these factors have worked together to promote rapid growth in the demand for and supply of IT products and services. During the second half of the 1990s, as more people bought computers and went online, the average cost of the equipment and services necessary to access the Internet declined.
Industrial Structure and Jobs
Developments in computing and telecommunications technology are changing America's industrial landscape and its workforce. The application of new digital technologies to management, manufacturing, distribution, and services has produced significant and lasting increases in productivity, or output per hour. The new technologies have also created new industries (e.g., Internet access providers) and entirely new kinds of work (e.g., website designers) and boosted other industries. But the new technologies have also shrunk or even eliminated other industries and the jobs associated with them (e.g., electric typewriters).
IT is fundamentally restructuring business practices. IT innovations have increased the efficiency of business operations. New IT-based inventory systems allow businesses to cut costs by delivering or receiving parts for "just-in-time" assembly. By reducing delivery times and inventories, "just-in-time" assembly allows businesses to meet consumer demand more quickly and cheaply.
IT and the use of the Internet have also dramatically transformed exchanges between buyers and sellers. Some Web- based businesses, such as Amazon.com, are using the Internet to sell and arrange for the delivery of large quantities of goods without access to a network of wholesalers and retail stores. "Business-to-business" (“B2B”) commerce over the Internet is helping many companies streamline their sourcing of production inputs and sell products or services to other companies. Companies are using the Internet to find other businesses that might want to buy their products or services or sell them products or services. The value of B2B e-commerce exceeds the value of e-commerce between Internet retailers and individual consumers.
Over the past five years there has also been a proliferation of online employment marketplaces, which offer new tools for buyers and sellers of labor to link up with each other. Internet-based recruitment services enable employers to post job announcements on the Internet and prospective employees to search job listings or post their resumes.
Global E-commerce is expected to surge from $130.2 billion in 1999 to nearly $1.64 trillion by 2003. This projected increase in global e-commerce of $1.5 trillion dollars during a four-year time period highlights the incredible growth potential of e-commerce. Most economists attribute this sustained increase in annual productivity growth to the pairing of labor with new kinds of IT across a broad swath of the U.S. economy. Many economists believe the recent productivity gains will endure for the foreseeable future.
Extraordinary labor productivity growth, coupled with a rapid increase in Internet usage by businesses and individual, has prompted some economists and other analysts to argue that the United States now has a "new economy." According to this view, permanently higher productivity, more versatile and flexible corporations, and a likely reduction in the periodic ups and downs of economic activity, known as the business cycle, characterize the new economy.
One significant implication of the new economy theory, if it is correct, is that the United States will be able to grow at a faster rate than has been the historical norm, without generating price inflation. Among other things, higher, noninflationary growth would enable further reductions in our unemployment rate.
Workforce
These information technology-induced changes in the structure and performance of the U.S. economy have had significant consequences for the American workforce. The incorporation of new digital technologies into all sectors of the U.S. economy has created substantial new demand for expertise in software development, the management of computer and information systems, technical support services, and the manufacturing of high-tech gear. The graph below depicts the changes in IT-employment from 1993 through 2002. From 1993 to 2002, the IT workforce, in services and manufacturing, grew from 3.5 million to 4.8 million (Source U.S. Department of Commerce's (DOC's) Economics and Statistics Administration).
Growing demand for workers in the information-technology sectors has pushed up their wages relative to workers in other industries. According to the US Economics and Statistics Administration, salaries of information technology workers increased 19 percent from 1999 to 2002. According to the Bureau of Labor Statistics, in 2004, information workers earned $223 more dollars per week than workers in other industries. Over 60 percent of workers in the U.S. economy are knowledge workers. Knowledge workers are also called "symbolic workers," as they use very little physical or mechanical labor, and unlike their industrial counterparts, spend their time at work manipulating information rather than machines. This increase in knowledge workers has lead to a decline in other sectors of the economy
The flip side of increased demand for high-tech workers is decreasing demand for workers in industries where computers and other high-tech devices have replaced all or some of the tasks that used to be performed by people. Workers have also lost jobs in industries or firms that have been unable to adopt new information technologies as effectively as industries or other firms that offer comparable products or services. For example, the U.S. manufacturing sector lost 542,000 jobs between 1988 and 1998. Projections for the U.S. Bureau of Labor Statistics conclude that a further 89,000 jobs in the manufacturing sector will be lost by the year 2008.
Many of those workers who lose jobs in declining firms or industries lack the education or training to take up jobs in the high-tech sector. A person who spent 30 years in a steel plant that is shutting down may not be equipped to work for many of the industries that are adding jobs as our economy transforms itself. State governments and the federal government offer programs designed to help workers acquire the training and education needed to make the transition from declining to growing sectors of our economy, but the record of these programs has been mixed.
Unfortunately, many firms in the industries that are succeeding also have a bias in their hiring practices toward younger workers. They may believe that younger workers are more flexible and more easily trained than older workers, and they may undervalue the importance of experience and maturity. The IT-driven cycle of job creation and job destruction can be seen in almost every sector of the new, knowledge-based economy. The automation of assembly lines has reduced jobs in manufacturing, for example, but it has created new jobs in robotics technology and computer engineering. The introduction of computers has reduced the need for many kinds of clerical work in offices, but it has also created a new demand for computer designers, software writers, computer system managers, service personnel, and data entry workers.
Financial Markets
A second area in which the impact of information technology has been profound is in financial markets. Financial markets encompass a wide variety of institutions and practices through which lenders and borrowers are able to interact. Lenders include banks and other financial institutions that make loans to individuals (e.g., for house or car purchases) and to institutions (e.g., for expansion or acquisitions).
These lenders are typically compensated for the money they lend through interest payments or, in some cases, an ownership stake in an enterprise. Individual investors who buy corporate stocks and bonds or government bonds are also lenders, and the companies and governments that sell the investors the stock or bonds are borrowers. The borrowers hope to use the money raised through these transactions for new equipment, new lines of business, or other productive purposes. The investor-lenders receive compensation for their investments through interest earnings, dividends, or an increase in the value of their stock or bond holdings.
Stock markets are perhaps the most familiar institutions in the financial marketplace, but a wide variety of other institutions and investment vehicle, or "instruments" are available to those hoping to earn or raise money. These include bond markets, foreign exchange markets, futures markets and options markets to mention a few. Each of these markets for financial markets has been impacted by the efficiency improvements from IT. A combination of policy reforms and IT innovations has transformed financial markets over the past two decades. Governments around the world have modified or eliminated regulations that limited innovation and competition in their financial markets. They have also reduced barriers to foreign participation in their markets.
New IT developments have spurred innovation and international expansion in financial markets in three ways:
Building upon policy reforms and technological developments, private financial firms have over the past two decades created numerous new vehicles, or "instruments," through which people and institutions can lend, invest, or raise money. Reforms and technology have also helped multiply cross-border linkages among national financial markets. As recently as the 1970s, individual investors, firms, and governments were generally able to invest or raise capital only within their own self-contained, national financial systems. Access to foreign bank loans, stocks, and other financial instruments was available only to the most sophisticated investors.
Closed markets like these are hard to imagine today. Cross-border financial arrangements have become commonplace. A global financial market has emerged, and the volume and value of the transactions it supports is staggering. The total daily value of foreign exchange transactions (exchanges of one national currency for another) has increased from 18.3 billion dollars in 1977 to 1.9 trillion dollars in 2004 (An Overview of the Foreign Exchange Market and Triennial Central Bank Survey).
Benefits
The global financial market built with IT offers an extraordinary range of opportunities to invest and borrow money, benefiting investors, firms, and economies. On the borrowing side, if a U.S. entrepreneur is not satisfied with her American options for raising funds for a new business, she can seek funds in Europe or Japan. The wider range of options available to borrowers like these has increased competition among lenders, helping to keep the cost of borrowing down. This has made it easier for firms to finance business expansion plans and acquisitions, generating jobs and economic growth.
Likewise, on the investing side, a European stock investor hoping to earn a higher return than he can earn in his home stock market can now explore alternative investments in the United States. Access to a wider range of international opportunities has helped successful investors increase their earnings and minimize risk through diversification of their investment portfolios.
The global financial market has increased the growth potential of individual countries. By opening up their financial sectors to international flows of capital, countries have been able to acquire the funds they need to support all sorts of private and public sector development initiatives. These funds have the potential to spur higher levels of growth.
Concerns
The same technologies that have helped create a nearly seamless international financial market have also increased both the probability and the potential cost of market volatility. The chief problem is this: the openness of national financial systems and the technologies that facilitate transactions not only make it easier for investors to find places around the world to put their money; they also make it possible for investors to pull their money out of particular investments or countries very quickly, sometimes with devastating consequences for the countries concerned.
The funds that investors are able to withdraw on short notice from foreign markets are often called short-term capital. International flows of short-term capital have increased at an astonishing rate over the past decade, thanks largely to new communication and IT. The buying and selling of currencies has generated perhaps the largest and fastest-growing flows of short-term capital in recent years, 1.5 trillion dollars daily in the foreign exchange market. Currency speculation can cause rapid swings in the value of a country's currency. These currency swings can make it difficult for a country's businesses or its trading partners to make trade and investment plans.
Large volumes of short-term capital also flow around the world in response to changing assessments of the health of national economies. If an investor fears that the exchange value of the currency of an ailing economy is likely to drop by a significant amount, he may decide he wants to get rid of stocks or bonds he owns in that country. His hope is that he can sell those foreign stocks or bonds before the relevant currency drops too much, after which the amount of other dollars or other currencies he will be able to receive in exchange for the sale of the foreign investments will be much lower.
But if many investors share the same concern about the country's economy and decide to sell investments there at about the same time, the exchange value of the currency will, indeed, drop by a large amount, and perhaps even collapse.
When the value of a country's currency collapses, the currency loses its purchasing power relative to foreign currencies. What this means is that imported products become much more expensive. As imports rise in price, the prices for other domestic goods also typically rise. Basic necessities can end up beyond the reach of average citizens. To prevent crushing price inflation and reverse a currency's decline, countries typically must cut government spending and increase interest rates, which can cause more pain in the short run.
In an effort to minimize costs, governments have tried to find new ways to reduce financial volatility and avert financial crises before they start. A couple of developing countries have experimented with restrictions on the outflow of capital. Most countries have been reluctant to impose new regulations on wealth—generating capital flows. They have tried instead to use new data disclosure and monitoring tools to identify signs of financial or economic weaknesses before they are able to touch off a crisis. Not surprisingly, some of these new tools rely heavily upon IT.
Improving Sectors of Society: Health, Education, and Government
The information revolution is creating opportunities in many other sectors of society, including three that are fundamentally important to the quality of people's lives everywhere: health care, education, and government. Over the past decade, new applications of information and communication technology have improved services, transparency, and public access in each of these areas.
By improving access to health care and education, and by improving the delivery of government services, new IT has the potential to help people around the world overcome geographic or income barriers that have degraded the quality of their lives. By dramatically increasing access to information, the technologies can enhance knowledge, break down barriers to participation, and improve the accountability of public institutions to people. These developments will be especially beneficial to people in poor and underserved communities around the world.
But the great promise of these technologies to improve the quality of lives carries with it an implicit risk: that gaps in technological access will reinforce and perhaps even widen existing gaps in living standards. Access to the promising things that information technology can provide requires access to the technology itself—not just the hardware, but the software and the knowledge necessary to make the hardware work.
There is already alarming evidence that access to IT varies widely from community to community and from country to country. These wide variations in access to IT could lead to the exclusion of large numbers of people from the benefits of the knowledge economy.
IT and Health Care
IT is dramatically improving health care in the following ways:
Efforts to contain outbreaks of dangerous infectious diseases require the rapid collection and transmission of detailed patient data to medical labs or public health centers. Health professionals need tools to communicate important scientific or epidemiological findings to other parts of the health care community. IT is enhancing capacity in each of these areas.
Many health problems in developing countries are being addressed using IT. Digital records and images utilizing digital cameras have made it possible for doctors around the world to share information or offer advice on treatments for complicated ailments. For example, using Internet connections, doctors working in remote regions of northern Uganda during an outbreak of the deadly Ebola virus would be able rapidly to transmit their findings to experts at the World Health Organization in Geneva and the U.S. Centers for Disease Control in Atlanta.
Before the arrival of the Internet, transferring detailed patient information of this kind could take as long as two weeks. In conditions like these, when the rapid dissemination of information is vital to treating infected persons and containing an outbreak, IT can provide tools for an efficient outbreak response.
Public health officials are also using new technologies to study the impact of health interventions and to target disease prevention programs. For example, health agencies have used satellite-based global positioning systems (GPS) to monitor the spread of West Nile Virus in the United States. Data collection and monitoring technologies like these increase the information available to public health officials when they make important health policy decisions.
Education
The use of IT to deliver lessons or training from instructors in one location to students in another is frequently called "distance learning." Distance learning has been around for a long time. For many years people have listened to recordings of classroom lectures or other educational presentations, and millions of people have watched educational programming on public televisions channels.
But the emergence of the Internet and developments in educational software has vastly enhanced distance education over the past decade. The geographic reach of distance education has been extended. There has been a substantial increase in the quantity and diversity of educational material available over the Internet or through the use of satellite video and audio linkups. Over the past decade, computers and Internet connections have been widely deployed in classrooms, from pre-K through the university level. Lessons delivered through computers can be interactive, which gives students real-time feedback on their work and enables them to work at their own pace. Kids love working with computers, so when they are intelligently integrated into classrooms, computers can create excitement about learning among students.
The Internet provides an extraordinary opportunity for students to extend the reach of their learning. Before the Internet, the resources available to students were largely those that could be found in their classrooms or in public libraries. The Internet enables students to reach well beyond the physical confines of their classrooms and gain access to virtually unlimited quantities of information on the topics or events they are discussing in their classrooms. The use of the Internet for school assignments also encourages students to give free rein to their curiosity, and strengthens their research and investigative skills.
IT offers especially valuable educational opportunities for poor people in developing countries. Students and other residents of poor countries are increasingly using the Internet—often in community Internet centers—to gain access to information and communicate via e-mail. Doctors, scientists, and other professional, for example, can achieve cheap or free access to journals and other professional publications that are too expensive to afford in hard-copy versions.
Government aid agencies, foundations, and private firms are sponsoring numerous distance education programs designed to teach skills to a wide variety of developing country professionals, government officials, engineers, scientists, and businesspeople. Internet or satellite connections enable students from developing countries to take courses offered in foreign institutions. In these and other ways, technology-enabled educational programs can help strengthen the people who will be called upon to provide leadership in developing countries in a wide variety of social welfare, economic, and political fields.
IT and Government
IT can enhance interactions between citizens and their governments in several ways. The use of IT in government, sometimes called "e-government," can enhance the efficiency and effectiveness of government services. E-government can also help achieve other important goals of good governance, such as accountability and transparency.
In democratic societies, information on government activities should be readily available for review by the public. Prior to the emergence of computer databases, the Internet, and other IT innovations, large quantities of government documents were not easily accessible to most citizens. Using these technologies, governments today can provide citizens with fast and free access to a wide variety of documents and records.
Access to official information is critical to ensuring that governments are accountable to citizens—that they are responsive to citizens and that they are doing what they are obligated to do under law. The capacity to track government budget expenditures, for example, enables taxpayers to ensure that governments are trustworthy stewards of the funds entrusted to them.
IT can also provide mechanisms through which governments can interact with citizens. Government websites can provide quick access to information on building regulations, motor vehicle licenses, or immunizations, for example. Information technology can also improve the performance and efficiency of government bureaucracies, and enhance interagency cooperation. In these ways, technology can strengthen the delivery of government services. For example, in India, an e- governance initiative is being implemented to improve citizen access to public services and increase the transparency of government transactions.
Digital Divide in the United States
The digital divide in the US has made improvements in recent years; however certain indicators such as race and income levels still show large disparities in access to IT. According to the 2005 Pew Digital Divisions report, 57 percent of African Americans go online vs. 70 percent of whites. A Pew English language survey found that English-speaking Hispanics and non-Hispanic whites both have 70 percent of the population using the Internet. However, US Census data, collected in Spanish and English, reveal that 37 percent of Hispanics (3 years and older) have Internet access vs . 65 percent of non- Hispanic whites (3 years old and older). There are also large divides between high-income households and low income households. In 2005, 97 percent of households earning $150,000 and higher had access to the Internet, while only 64.7 percent of households earning $50,000 or less had access to the Internet.
Despite the inequities in Internet access described above, the United States has made impressive progress in closing its digital divides over the past few years. In less than two years from 1997 to 2005, the share of all U.S. adults with Internet access increased from 24 percent to 79 percent. The level of broad band Internet access among rural households in the United States has grown 21 percent from 2001 to 2005. Nonetheless, rural households with broadband still lag behind both urban and suburban households with broadband by 14 percent -16 percent.
The use of IT has increased among all American population groups, regardless of income, education, race or ethnicity, geographic location, age, or gender. (See figures above). Groups that have traditionally fallen behind as new information and communication technologies have spread (rural populations, African Americans, women, and Hispanics) have been making dramatic gains in narrowing the digital gap. Women have closed the Internet usage gap with men, and the disparity between these two groups is now negligible.
The International Digital Divide
Access to IT is not equitably distributed around the globe. There are an estimated one billion people online globally, yet there are 6.1 billion people in the world. Thus only 12 percent of the world's population is online. As the figure below indicates, access to the Internet is extremely unequal around the world. The Internet access gap is partially explained by income levels. In most developing countries, the cost of Internet access constitutes a much larger proportion of income than in the developed world, as figure 10 indicates.
It is apparent that developing countries such as Nepal and Bangladesh, whose monthly Internet charges represent 270 percent and 175 percent of average monthly income respectively, require a much greater percentage of monthly income than developed counties such as the United States where the charge for monthly Internet access is less than one percent of the average monthly income. The implications of this gap for developing countries are significant. As one expert points out, "Continuing disconnectedness leaves developing countries less competitive in the newly wired global market place, and less participatory in the now electronically networked global knowledge systems than their more connected OECD [Organization for Economic Cooperation and Development] neighbors."
For instance, the infrastructure needed to deliver telephone lines could be eliminated in many developing countries by simply using mobile communication technologies. Eliminating this stage of the development process offers an opportunity to "catch up" to the countries of the developed world. Basic indicators show that in 2004 the number of telephone lines and cellular subscribers per 100 inhabitants is 8.19 in Sub-Saharan Africa, while the number of telephone lines per 100 inhabitants in the world is 46.42 and 130.06 in the developed world. Access to mobile networks would allow developing countries to access information without having to invest heavily in fixed phone line infrastructure.
Privacy and Security Concerns
The stunning growth of Internet usage in some countries is also raising concerns about privacy. The qualities that make computer networks such powerful tools for improving efficiency and living standards also give them extraordinary power to collect, store, or distribute medical data, financial data, and other personal or biographical information. Many individuals and consumers groups are calling for new privacy safeguards for the Internet and other computer networks.
Personal information that may be of interest to businesses or people with malevolent aims is generated whenever people surf the Internet. Companies, for example, are able to learn a great deal about web surfers who visit their websites. Using tracking devices known as "cookies," companies are able to track purchases and gather personal data. They can use this information to target their marketing efforts at individual consumers or groups of consumers.
While some may welcome increased attention to their consumer needs, others may consider it an invasion of their privacy. There is also growing concern about what online and conventional stores do with the purchasing or personal data they collect during transactions. Under pressure from consumers, some stores have recently begun to develop privacy policies, but consumer groups say many of these policies fall short. Finally, patients and consumer advocates want to set rules for the sharing of personal medical data. In each of these areas, it will be difficult to strike a balance between protecting privacy and ensuring a flow of information and data that can enhance quality of life.
The same Internet-based tools that can improve education, health, and governance can also cause considerable damage when used for purposes of theft or fraud. Companies and individual computer users are being increasingly affected by computer viruses and schemes to steal data or computer identities. Companies are spending enormous amounts of time and money to protect their networks and their data. Recent polls suggest that two thirds of American companies have experienced some form of "cyber-disruption."
Resources that could be directed toward improving Internet capacity are being used to thwart cyber criminals. According to an article published in the Financial Times, the average annual cost per company of these disruptions exceeds $2 million. The Federal Bureau of Investigation (FBI) has estimated annual losses to industry in the $10-15 billion range. U.S. spending on information security services was almost $5 billion in 1998, and is expected to grow to $23.5 billion by 2007. Internet or computer service disruptions have become a major problem not only for companies, but for governments, associations, international institutions, and private citizens around the world.
Conclusion
Advances in IT are producing many changes in our society. These changes have produced many benefits, but they have also raised several concerns. Innovations in IT have created new jobs, promoted the growth of new markets, and increased international trade and investment. However, the expansion of IT also introduces costs. Workers in certain sectors of the economy lose their jobs as innovations in IT create a greater demand for high-tech workers and introduce efficiencies that make jobs obsolete. Another negative consequence of the IT revolution is the inequitable distribution of access to IT, called the digital divide.
If the new technologies are to fulfill their promise, these costs and concerns will need to be addressed. Experience with previous technologies suggests that prudent policies can help us effectively manage the risks associated with new technologies without harm to their benefits. Experience also suggests that the required policies must be developed through close consultation between government and private sector experts and stakeholders.