South Korea looks pretty impressive in the following graph:
But the graph can lead us to the wrong conclusion.
Where are we going? To the connection between the internet and economic growth.
E-Friction
In their “Greasing the Wheels of the Internet Economy,” the Boston Consulting Group (BCG) gives us a bit of perspective on the role of internet speed. Their focus was e-friction.
The message was that speed is one of many variables we have to consider when evaluating a nation’s internet activity. Those variables can be divided into four categories:
- It makes sense that you need a viable infrastructure for the internet to function. To quantify infrastructure quality, BCG’s categories included potential access through registrations, price, actual volume, and architecture. And yes, this is the category that included internet speed as an important variable.
- Here, dependable electricity made a difference as well as qualified engineers, financing, intellectual property protection and the ease of establishing a business.
Individual
- With a human capital focus, the individual category ranged from education to banking services to payments potential.
Information
- Finally, we have a look at local domain registrations, online prevalence of the home language and freedom of speech.
Ranking Internet Accessibility
Putting it all together, BCG created the following e-friction ranking for 65 countries. Smaller horizontal bars indicate there is less e-friction to constrain internet access:
Our Bottom Line: Internet Access and Economic Growth
This is the tough part. I did discover some studies that created an internet/GDP ratio, others that cited a causal relationship between the two because both grew at the same time, and a third group that stuck with correlation.
My conclusion?
When we see that South Korea has a very speedy internet or that Sweden has the lowest e-friction in the world, we can say that easier online access makes education, government services, commerce, entertainment and social media more available. (The list is endless.) But because those capabilities can boost GDP directly and indirectly, it is impossible to quantify the connection.
Your opinion?
