ICT, ECONOMIC DEVELOPMENT AND POVERTY REDUCTION

The Development Gateway ICT for Development Topic has posted a new discussion on this topic, that makes available several new papers, plus more than 100 online resources.

ICT, Economic Development and Poverty Reduction

In editing the materials I was struck by the difference between the macro-economic approaches and the project level approaches. In the 1970’s there was a lot of concern for “trickle down” theories of development. The concern was occasioned by the recognition that poverty was continuing in countries in spite of efforts to improve rates of growth of per capita income. I think the concern led to some very positive outcomes. For example, I think it led to more attention to primary education, primary health services for the poor, micro-finance programming, and focus on small and medium enterprises – all targeting assistance to the multidimensional aspects of poverty. Eventually it led to the realization that pro-poor policies were as necessary to poverty reduction as pro-growth policies to economic growth.

At the time, U.S. foreign assistance was in some peril. It became apparent that while there was considerable U.S. public support for helping the poor, and especially for humanitarian relief, helping kids, and preventing communicable diseases, there was less willingness to support foreign nations that might become competitors to the U.S. in international markets. While there is reason to believe that the reconstruction of Europe and Japan were “economic motors” that helped fuel the growth of the U.S. in the post World War II period, that argument was not recognized by the public; the visibility of Japanese consumer electronics and European automobiles was more vivid. The U.S. had not won the hearts and minds of the Vietnamese, and the Congress was well into the long term process of reducing foreign assistance budgets.

Since that time, an entire industry has been created around development projects intended to intervene directly in the battle to reduce poverty. Many ICT for development efforts are conceptualized within such a conceptual framework. From such a view, concern for the macro-economic impacts of ICT on developing nations might seem a throwback to “trickle down” theories.

I would point out that the work of David Dollar and others (cf “Growth Is Good for the Poor”) has demonstrated that increase in per capita GDP is indeed highly correlated with the reduction of poverty. Moreover, major international donors such as the World Bank can argue persuasively for pro-growth policies, and indeed make such policies conditions for resource mobilization and concessional financing of poverty reduction projects and programs.

Moreover, in the case of the technological revolution that is occurring around ICT, it is important to understand the macro-economic implications, and the policies that may help lagging nations to benefit economically, and that may ease the potential effects of skewing income distribution toward those most prepared to appropriate the technology to their own needs. In short, macro-economic analysis of the effects of ICT is an important activity, as is policy dialog for pro-growth and pro-poor technological policies.

The experience of preparing for and editing the Development Gateway highlight identified above left some impressions. One is that the macro-economic effects of ICT are still controversial; some of the hype of the dot.com boom seems to have been deflated. The confidence that the rate of total factor productivity had increased is tempered by new appreciation for the business cycle and the difficulties of accounting for ICT in productivity figures. Secondly, some expectations for developing nations still seem inflated; a country with $1,000 per capita GNP, that is spending two percent of that GNP on ICT, is spending $20 per person per year on the technology. That doesn’t buy many telephones, faxes, computers, and the like. Developing countries with good policies and institutions generally already show high rates of economic growth, and high rates of return to capital investment. Even if one increases per capita ICT spending by $5 or even $10 per year (25 to 50 percent) what difference will it make? How much of an increase in the rate of economic growth can one really expect from that level of investment? In poverty reduction?

Don't get me wrong. I am an aficianado of ICT, and I think it has an important contribution to make. But excess expectations are probably not helpful to our efforts.