Internet's GDP Contribution Greater Than Energy, Agriculture, Mining: Study

The Internet is causing economic growth across the world that exceeds the pace of the Industrial Revolution of the 1800s.

According to a new report by McKinsey, Internet use has created GDP growth of 3.4 percent in 13 surveyed countries (Sweden, Germany, France, U.K., U.S., South Korea, Canada, Italy, Japan, India, China, Brazil and Russia) which account for over 70 percent of the global GDP.

In "mature" countries--which excludes India, China, Brazil and Russia--the Internet accounts for 21 percent growth. Though it has eliminated 500,000 jobs, it has created 1.2 million new jobs, meaning that 2.4 jobs were created for each job lost.

"Many have compared the dawn of the Internet to another communications game changer, the introduction of the Gutenberg press five centuries earlier," the report said. "But a comparison with the development and commercialization of electric power may be more appropriate."

The influence of the Internet is not restricted to web industries. In fact, McKinsey found that "75 percent of the economic impact of the Internet arises from traditional companies that don't define themselves as pure Internet players." That said, businesses that rely on the web tend to grow at twice the speed of businesses with "minimal or no [web] presence."

Astonishingly, if the Internet were considered as its own sector, its contribution to global GDP would outweigh that of energy, agriculture, mining, and other industries.

Quality of life has also improved as a result of web growth. In countries that have seen increase in Internet maturity over the past 15 years, real GDP has increased per capita by an average of $500--an achievement that took the Industrial Revolution 50 years.

The U.S. leads this Internet ecosystem, with over 30 percent of global Internet revenues and over 40 percent of net income. Meanwhile, both India and China have shown growth rates of over 20 percent. In the past 15 years, the Internet is responsible for 7 percent of combined economic growth for the surveyed countries; in the past five years alone, that figure rises to 11 percent.

McKinsey notes that there are considerable opportunities for expansion in the cloud computing and big data fields. It estimates that by 2015, cloud computing could be a $70 to $85 billion opportunity, with the market doubling every two years. It also projects that companies that are able to handle the processing of rapidly growing databases will be able to capture huge profits. In health care alone, a productivity increase of 1 percent over the next ten years represents $300 billion in value.

The report urges governments to support the Internet industry if they wish to see further economic gains.

"Governments as users are also a key catalyst to the spread of Internet technologies," the report stated. "The future growth of the Internet will require cooperation among governments and the right kind of smart regulation and support, at both the national and international levels."

Comments

[1 Alan Smithee]

09:43 AM on 05/25/2011

incredible http://71-37-61-112.tukw.qwest.net/1019.htm

[Wayne Caswell]

09:25 AM on 05/25/2011

The Internet is compared to "the development and commercialization of electric power," but it's access is still controlled by a few private monopolies rather than as a public utility. And at least a dozen states now have laws banning municipal networks, even when the monopolies say the town is too small to justify investment. Is it any wonder our nation is loosing ground in broadband adoption compared to others? To regain our rightful lead, as the inventor of the Internet, we need wide deployment of FTTH with gigabit speeds. See http://cazitech.com/big_broadband.htm.

[Wayne Caswell]

12:10 PM on 05/25/2011

What does the reported 15% bump in US GDP of ~$14.7 Trillion mean in dollars? It means about $2.2 Trillion/yr. It also means the economic value of fiber infrastructure investments over 5 years would be about $11 Trillion, but Obama struggled to get Congress to approve $7.6 Billion for broadband stimulus. With these numbers, why aren’t Republicans pushing for MORE broadband investment instead of less? AT&T must have a very effective lobbying campaign.

[Jack Daniels Esq]

06:15 AM on 05/25/2011

The 'Net' is a no-brainer app - turning 99% 'illiteracy' into 99% 'literacy' within a decade

[honky1234]

11:39 PM on 05/24/2011

And yet, we're slow to adopt the internet as a mode of (formal) education.

[jsarets]

12:16 AM on 05/25/2011

It will happen in time, but at the moment, there really isn't a set comprehensive educational resources on the Internet. Wikipedia is fantastic, but it's not really a textbook, much less a workbook.

Have you checked out MIT OpenCourseWare? There's some really great stuff on there open to the public. For example, this is an outstanding lecture series on the design and development of the Space Shuttle, presented by the principals involved in the project at the time:

http://ocw.mit.edu/courses/aeronautics-and-astronautics/16-885j-aircraft-systems-engineering-fall-2005/lecture-notes/

That is some priceless stuff right there, available for free to anybody. But as a mode of formal education, there has to be a means of demonstrating knowledge to a recognized authority, not just acquiring knowledge via self-directed study. Otherwise the credentialing aspect of formal education is absent and the "degree", as it were, is worthless.

I got my masters degree about six years ago, but even during the early 2000s, the Internet was central to many of the courses I took. Lecture materials and coursework were usually available on the course website, and assignments were generally turned in electronically and often (especially computer science classes) graded by a computer program.

My sister is an elementary school teacher, and they have some surprisingly advanced technology compared to what I had (i.e. Oregon Trail on Apple IIe). They have "smartboards" that are basically stylus-compatible touchscreen lecterns connected to an LCD projector. They can display videos, images, webpages, etc, and the teacher can write on the "board" without turning her back to the class.

I'm not sure how well remote Internet education would work with, let's say, 5th graders. I guess it would depend on parental involvement, which is a pretty bad assumption to make... Higher education and adult education are much more likely to benefit.

[dizmo4]

11:17 PM on 05/24/2011

The internet began as a small project of DoD's Advanced Research Projects Agency ( ARPA), initially called ARPANET.   It was a backup tool for communicating with American cities and defense installations in the event a Soviet nuclear strike crippled traditional communication networks ( telephones).

It was one of those projects that when started in the late 60s and 70s had virtually no return on investment in sight.   It was pure cost and something todays' republicans would point to and say is wasteful government spending.   

Public investment has a tendency to pay off far more than the initial costs.   The internet is proof of that.

[andyg]

08:21 AM on 05/25/2011

The left is against's defence spending, they only want money for there friends's.

[babyspittle]

11:39 AM on 05/26/2011

Obama increased military spending overall, while cutting old, obsolete programs like the F22 which was wasting billions yearly.

in other words, you don't know what the ___ you're talking about.

[iskra]

09:25 AM on 05/25/2011

Add to that the space race and the creation of advanced communications technology and the 'chip', once again all due to massive Government R&D efforts and we can see how the return on that investment has been a major driver of economic benefit.

[babyspittle]

09:44 PM on 05/24/2011

And without democrats pushing it along, we'd have no internet.

[andyg]

08:22 AM on 05/25/2011

Yes Gore invented the the internet, he told everybody he did it.

[babyspittle]

11:40 AM on 05/26/2011

No, he didn't, sad little propagandist bagger.

Did Gore invent the Internet?
Actually, the vice president never claimed to have done so -- but he did help the Net along. Some people would rather forget that.
http://www.salon.com/technology/col/rose/2000/10/05/gore_internet

[babyspittle]

11:42 AM on 05/26/2011

you believe right-wing lies.

i hope your IQ grows into double digits some day.

[jsarets]

07:00 PM on 05/24/2011

Of course. Communications is the basis of all commercial activity, from couriers and postal services to telegraph and telephone to radio and television to, ultimately, the Internet.

Energy and agriculture would grind to a halt without their communications infrastructure. So would finance and real estate, obviously, but those are going to account for more GDP than communications because of the nature of global capitalism.

The main problem with the current direction of the Internet, though, is that we have this wonderful point-to-point mesh network which is being painstakingly molded back into a hub-and-spoke network by commercial interests who wish to play the role of hub to everyone else's spoke.

The Internet allows for distributed computing, but with a few exceptions (e.g. BitTorrent), the only entities that are exploiting this computing model are applying it internally to their organizations and exporting it as a centralized service under the banner of "cloud computing".

In the beginning, there was UNIX, a pre-Internet platform fashioned on the client-server computing model. It's intended successor, Plan9, was a true Internet-oriented platform in which all computers on the Internet could export their (access-controlled) resources on a single unified namespace, like the World Wide Web that would later emerge in the 1990s, but in a much broader sense.

UNIX was "good enough", and Plan9 fell by the wayside, while client-oriented platforms such as Windows and MacOS emulated the UNIX-type client-server model when they (belatedly) added support for the Internet.

As a result, we are still largely stuck in the client-server model, and our only understanding of distributed computing (beyond the narrow scope and/or clumsy workarounds of Web services), is to upload our data to massive commercial server farms and render to the owner of the server farm an unconditional, transferable copyright license to our data.

This wasn't the way the Internet was supposed to work. We were supposed to be providing services to ourselves and each other. Instead we've become clients dependent on inconceivably powerful services who hold an intellectual property license on our ideas and our very identities.

[sheila]

03:52 PM on 05/25/2011

very astute comment, and a perfect illustration of the tension in the energy model we are fighting about at the moment (unbeknownst to most people).

will we have a democratic, decentralized, redundant and dynamic grid with millions of PV-covered rooftops and other local distributed (mostly renewable) generation and storage options, or will we have gigantic, centralized monopoly power with dead wilderness, unreliable generation and transmission, and helpless hijacked ratepayers?

the latter is the model that is winning, not only with coal, gas and nukes but with Chevron Solar, BP Wind and Goldman Sachs/Sempra transmission. We are out in front now, and could make smart decisions that could save our economy and our environment, but passively allowing the status quo will soon result in a crisis, and the forces against fairness, affordability and reliability are very very strong.

[AJH]

07:05 PM on 05/25/2011

you seem to ignore without the foundational materials energy and minerals there is no internet to leverage growth off of. i.e. the economic benefits of the internet are downstream economic benefits that enable an incredibly broad sharing of an information resource that leverages human potential. Of course absent the food resources humans aren't around to utilize that potential.

In short it's all interrelated as humans long ago became a species whose primary adaptations became techbnological based on our unique ability to manipulate tools, retain and communicate information etc...

It's sort of a chicken and egg question but the reality is humans depend on several key resources, energy, mineral, plant, animal, and information. It's the human economic ecosystem.

[jflorish]

05:48 PM on 05/24/2011

No surprise there, lots of business being done on the internet today and it can easily reach a wide market.