Ikea, Facebook, Alibaba, Amazon, Google… These are just some examples of companies that have their foundation in the internet. Since its creation, it’s unquestionable that the internet opened doors to entrepreneurship, and potentiated the creation power of mankind. Economic analyses prove that with data from American planned investment in the 90-00’s.
Even though taxes were higher with the Clinton administration, companies and people were investing in tech companies.The excitement about these companies was so high that it overruled budget cuts and a rather high interest rate.
However, can this effect be quantified? Can we actually prove the power of the internet / fast flowing information, in economical terms? After extensive research, I found very few papers (to my own disappointment) talking about this matter. Using the USA as a reference, the “Hamilton Consultants for the Interactive Advertising Bureau” found two very interesting data about the effects of the internet in the American economy:
Employment Value – The internet employs, only in the advertising sector, more than 1.2 million people, and it’s estimated that each position supports at least 1.54 other positions, internet-related or not.
Payment Value – The direct economic value the internet provides to the rest of the U.S. economy is estimated to be $175 billion. Using the same multiplier as for employment, 1.54, then the advertising-supported internet creates annual value of $444 billion.
Another study made by “MGI” (MCKINSEY GLOBAL INSTITUTE) shows even more significance in the role of the internet:
The internet is responsible for at least 20% of the growth in GDP of developing countries over the past 5 years.
If the internet were a sector, it would have more weight in GDP then agriculture and utilities.
The enhancing participation of the internet in the economy only shows the shift towards a different type of economy than than of the early 2000s: more and more, the exploitation of information becomes the centre of a successful business. Companies like Ikea, which don’t have their own production (or at least it’s negligible compared to total production), Alibaba, and even Spotify primarily sell information. They connect people with a specific demand to producers with a specific supply, that being, cheap and good quality furniture, cheap utensils, or high and low quality music. The fact that there already exist companies that rely mainly on information to survive, proves that we live in a totally new economic environment.
Some scholars that have been studying these phenomenons say that this might just be the tip of the iceberg of what is the so-called Fourth Industrial Revolution. In this new era, the main change in production would be the incorporation of technology in our lives, biologically speaking. But isn’t that what we already do with smartphones, tablets, and even information companies? Let me ask you a question. Nowadays, how do you search for new songs, if you are already signed in to Spotify, Deezer, or any other music app? Well, most likely you listen to suggestions that this app gives you. Or, if you need to research the cheapest prices of a product? Most likely you are going to look at Amazon or other websites that gather this information, right?
These scholars fail to see that the incorporation of technology in our lives doesn’t have to be literally biological; it can also be related to the type of incorporation that we already use in our day-to-day lives. The internet and technology already changed the way we produced, connected, and consumed in the past decade, and our production system today is already completely different from the one we had in the beginning of the so called “.com” years.
The lack of attention given to the type of changes we are suffering will surely have consequences in the future, but it already shows some symptoms of what could be a way worse disease: state-controlled internet centers; growth of economic volatility, especially in the financial system; economic consumption patterns that are spread throughout the world; and so on. Problems are going to keep emerging and solutions will hardly be found, unless we decide to really enter our new “.com” era. Even though humans are considered to be one of the most fast adapting living creatures in the world, we do take a lot of time to embrace big changes. It’s time to accept the fact that internet has brought to us a new type of economic system. We should accept this, study this new phenomenon thoroughly, and change the way we deal with all the new problems that this new “era” brings upon us. It’s time to move forward.