Europe’s Future Growth Rests on ICT
Information and Communications Technology (ICT) should hold the key to rescuing Europe from a bleak economic fate, reports Productivity and Digitalization in Europe: Paving the Road to Faster Growth, a special joint publication of The Conference Board and The Lisbon Council. The policy brief was authored by Bart van Ark, Chief Economist at The Conference Board.
Van Ark reported on his findings at the Europe 2020 Summit in Brussels on May 22. The report argues that a better use of ICT could provide a significant upside to an otherwise anemic projection of just 1.4 percent annual GDP growth for the EU-28 between 2014 and 2019, which is down from the pre-2008 average of 2.6 percent. “The most powerful way to improve structural growth conditions in Europe is to strengthen productivity growth,” van Ark says. “Maximizing the contribution of digitalization to these gains could accelerate the EU’s growth rate to 2 percent.”
“Like steam power and electricity before it, ICT is a true general-purpose technology,” van Ark says. “Its initial impacts on productivity are concentrated in a narrow range of applications and industries. But as digitalization spreads, the uses compound and proliferate through scale and network effects, ultimately delivering disproportionately large benefits to societies positioned to take advantage. This underlines the urgency of developing smart policy now, at the E.U.-level.”
Among the policy brief’s key findings:
• For the European Union, achieving a true single market for digital services is critical for obtain the scale effects from ICT.
• An improvement of Europe’s 2014–19 growth outlook from the baseline of 1.4 percent to 2.0 percent might be achievable through smarter policies given room to productivity-enhancing applications.
• Intangible investments in areas like training, organizational capital, and market research support materially support the impact of technology and innovation on economic growth.
• There is no unique “European” problem making growth more difficult than anywhere else in the advanced world. In fact one group of EU member states, including Germany and the countries of Central and Eastern Europe are best positioned to achieve sustainable ICT-driven productivity growth, through a strongly integrated value chain. At the other end the Mediterranean countries and the U.K. — for different reasons—face the largest difficulties to be benefit more strongly from ICT.
• Three key policy principles can help governments to pave a road to faster growth through productivity and digitalization:
o Secure high-quality and affordable ICT infrastructure for all sectors
o Make government and business work together to foster the skills and willingness to make better use of ICT and support overall ICT readiness;
o Facilitate a regulatory environment in which businesses in the ICT and non-ICT sector can thrive.
Illustration by watcharakun at Free Digital Photo.net
Source: Lisbon Council