The Economist : IT Led Global Recovery ?

Saturday, October 24, 2009

…..Just how much of a boost IT can provide [to the global economic recovery] is a subject of some contention…..Moreover, it is likelier that the economy, supported by low interest rates and stimulus programmes, is reviving IT, rather than the other way around—a function of IT’s increasing pervasiveness.  It now accounts for over half of American firms’ investment in equipment (see chart).  In the countries of the OECD, the organisation’s secretariat estimates, it accounts for more than 8% of value-added and nearly 6% of employment.  Sacha Wunsch-Vincent, an economist at the OECD, says, “For most OECD countries, the prospects are of a very fragile and weak recovery, for the overall economy and thus for IT.”

…..the recession has also accelerated trends that could make for a bigger celebration later.  It has speeded up the adoption of promising new technologies, such as cloud and mobile computing. Without the crisis, consumers might not have rushed to buy cheap netbooks or even smart-phones.  Needing to cut investment, companies looked more closely at software delivered as a service over the internet.  One firm that has grown consistently this year is, the largest provider of such offerings.  These trends have also been fuelled by the shift of the industry’s centre of gravity to emerging markets, where consumers have less money to spend on technology and companies are more likely to outsource their IT.  Countries such as China and India have seen IT spending increase by up to 30% annually in recent years and account for much of the industry’s recent growth.  Between 2003 and 2008, developing countries’ share of spending on IT grew from 15% to 24%, according to the OECD.  Developing countries also make more than half of the world’s electronics.  China alone churns out more than a quarter, compared with just 3% in 1995, according to Reed Electronics, another market-research firm.  As for rich countries, the crisis has prompted governments to speed up IT investments which might otherwise not have become a priority for years, says the OECD’s Mr Wunsch-Vincent.  The stimulus packages of most countries in the OECD include large sums for smart power grids, digitisation of health records and the deployment of broadband networks.  All this, he says, should boost productivity and employment in time, provided the politicians have spent wisely—a big if.

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