The First of Many

At first, the central idea of our first week—that investing in information and communication technologies can spur development—seemed rather intuitive. Growing up in the digital age, I have witnessed firsthand the incredible opportunities that can result from technological proliferation. The advent of the Internet has created new, lucrative economic markets. It has revolutionized the way we can communicate. Social networking has even changed the way we have friendships and relationships. Anyone with an Internet connection effectively has equal access to almost limitless information. It seems technology has already permanently altered the social, political and economic landscapes of most industrialized nations.

So once again the idea to invest in ICTDs in developing countries seems rather intuitive. It is obvious that the world is already heading in this direction. As of 2008, 15 percent of the population in developing countries were Internet users. This figure will only increase with an annual growth rate of 21 percent. It is only a matter of time until these developing nations begin to catch up. This will occur for many reasons, but perhaps most importantly, it will occur because it is so profitable. The slow development that occurred in the United States in the eighties and nineties will be less pronounced since the Internet infrastructure has already been created. If we invest in basic technological and computer education and training programs in developing nations, we will give the people of these countries the ability to benefit from the technology already in place while also expanding the possibility for innovation to an even wider number of individuals and companies.

Despite these investments being so clearly profitable in the long run, it is not clear how profitable they will be in the short-run. First of all, any investment in ICTDs must be large enough and concentrated enough to make a difference. Investing, say one million dollars, and spreading it evenly around the entire developing world will not make enough of an impact to matter. Because of the necessity that any investment be large and due to the uncertain time horizons for recouping the investment, it seems that, at least at first, the private sector will not drive this. It is for this reason that entities like the World Bank invest “around US$800m per year in specific loans and guarantees on ICTs and development, and US$1-1.5bn per year on projects with significant ICT components” (Heeks 626). Moreover, any investment in ICTDs must be coupled with an investment in education. For example, giving iPads to rural Asian farmers with no computer experience will have no significant effect on development. In fact, this type of program would probably have more costs than benefits as the iPads would be expensive, but they would go unused. Again, this is why these investments may not be attractive to the private sector.

However, if we take a cursory look at simple economics, it is clear that these investments will have significant effects if employed correctly. If we assume that technology and capital have diminishing marginal returns and if we assume that people with equal education levels are equally productive, regardless of their nationality or race, one can make the argument that investing in developing countries will be more profitable than continuing to invest in industrialized countries. For example, if two equally educated people are both given computers, they will be much more productive. If you then give them mobile phones, then iPods, then flash drives, they will continue to become more productive, but each additional technological investment will yield smaller returns than the one prior. This will hold true unless the next technology is so innovative that it defies the diminishing marginal returns model. Therefore, if we commit to investing in educational programs as well as to making the investment large enough to be significant, it will be more profitable to invest in these developing countries that are still on the steep part of the diminishing marginal returns curve rather than the flat part where it seems industrialized nations currently reside.