Broadband Is Key to Economic Development

What is the bottom line for communities in this new century? It's all about the children.

Societies serve many purposes, but one outweighs all others. Societies exist to protect children. Like creatures whose first law is self-preservation, societies ensure their future by safeguarding the children who will bring it into being.

Communities are societies writ small. Whether small villages or immense cities - in developing nations or the industrialized world - their first priority is to be places where families can raise children and where those children can build a future. That starts with access to the basics of human survival: clean water, food, shelter and safety. It also takes what New York Times columnist and author Thomas Friedman has called the "software of society" - the customs, laws and attitudes that give life meaning and the individual an understandable place in the culture. And it takes economic opportunity. Money may not buy you love, but economic opportunity makes possible everything else we value in a community. Without it, communities can stagnate and die in a few generations.

In 1900, the single largest source of employment in the United States was farming. By the end of the century, fewer than 3 percent of Americans were farmers. As a consequence, the vast middle portions of the country emptied out as children and their parents left rural homes and headed for the cities and then the suburbs and exurbs.

In the first decade of the 21st century, the United Nations estimated that more than half of the world's people were living in cities - the first time in history. Much of the transformation has come from the rural poor in developing nations doing what Americans and Europeans did in earlier decades: fleeing to the cities in search of economic opportunity. They have done it in such numbers as to create a rising group of "mega-cities" with populations exceeding 10 million people. Of the 25 largest mega-cities, 19 are in developing nations. And they are not through yet. The United Nations forecasts that by 2030, three out of five people - or 5 billion people - will live in cities worldwide.

In the last quarter of the 20th century, the same out-migration struck the manufacturing centers of the world's industrial nations. Decades of investment in automation raised productivity and reduced labor needs. At the same time, markets for most manufactured goods in rich nations matured: Consumers only need so many cars, refrigerators, washing machines and light bulbs in a lifetime. Adding to the impact - and making the most headlines - was "the rise of the rest," a surge of economic growth and living standards in developing nations. Manufacturing moved to developing nations not only because they offered low-cost labor, but also because manufacturers expect them to be the next growth market for their products.

As a result, once-proud manufacturing centers like Germany's Ruhr Valley and the American Midwest suffered the same fate as agricultural regions had in the past. A 1982 pop music hit, Allentown, by singer-songwriter Billy Joel captured the spirit of the times in America's Rust Belt:

Every child had a pretty good shot to get at least as far as their old man got. Something happened on the way to that place. They threw an American flag in our face.

While the Rust Belt rusted, developing nations that escaped war and the extremes of bad governance started the long boom that continues today. Once mere assembly centers for components manufactured elsewhere, developing nations are striving with considerable success to become innovative producers of sophisticated equipment, systems and software. From 1990 to 2003, manufactured exports from developing nations rose 11.5 percent compared with 5.1 percent from industrialized nations. This was enough to boost developing nations' share of

global exports from 20 percent to nearly 35 percent. China is the overwhelming leader: Filter out China from the numbers, and the global share of manufactured exports from developing nations actually fell from 28.0 percent in 2000 to 27.4 percent in 2003.

In the last decade of the 20th century and first decade of the 21st, it began to seem that the industrialized world's once unshakeable grip on high-technology employment would go the same way as agriculture and manufacturing. Offshoring began to move call center, data entry, and programming and systems jobs to developing nations. Headlines blared about X-rays being transmitted overseas to be read by Indian doctors, and U.S. and European multinationals opening development centers in India, China, Vietnam and Malaysia.

It's easy to make too much of this. Manufacturing will not vanish from industrialized nations - in fact, manufacturing that demands high skills continues healthy job growth - and rising living standards in developing countries will gradually erode their cost advantage. A 2006 study from the Association for Computing Machinery noted that the job losses attributable to offshoring - estimated to be between 2 to 3 percent of the U.S. IT work force - were dwarfed by the normal cycle of IT job creation and loss in the American economy.

Nevertheless, communities today are at an uncomfortable crossroads in both industrialized and developing nations. The sources of economic opportunity are changing faster than communities can naturally adapt. Manufacturing is following the pattern of farming, in which increasing productivity drastically erodes the number of people it employs. IT jobs are still on the growth track but will eventually follow the same pattern, only to be replaced by a new growth sector, such as biotechnology, sustainable energy or another candidate.

Communities must adapt continuously and at an ever-greater rate, or risk seeing cherished ways of life vanish because lack of opportunity bleeds them of the children who are their future. Succeeding in this new environment - which we call the "broadband economy" - takes conscious effort by government, business, institutions and individuals. It's not the product of the unfettered free market, nor of government policymakers alone, but of imaginative collaboration between the two.
The "how" and the "what" of creating an intelligent community make a long and complex story. But the "why?" That's simple.

It's all about the children.

 

The Broadband Economy

In his bestselling book The World Is Flat, Friedman reported on a conversation with Nanden Nilekani, CEO of India's Infosys. Nilekani had this to say on the topic of globalization:

"Outsourcing is just one dimension of a much more fundamental thing happening today in the world," Nilekani explained. "What happened over the last [few] years is that there was a massive investment in technology, especially in the bubble era when hundreds of millions of dollars were invested in putting broadband connectivity around the world, undersea cables, all those things."
At the same time, he added, computers became cheaper and dispersed worldwide, and there was an explosion of software - e-mail; search engines like Google; and proprietary software that can chop up any piece of work and send one part to Boston, one to Bangalore, and one part to Beijing - making it easy for anyone to do remote development. When all of these things suddenly came together around 2000, added Nilekani, they "created a platform where intellectual work, intellectual capital, could be delivered from anywhere. It could be disaggregated, delivered, distributed, produced and put back together again - and this gave a whole new degree of freedom to the way we do work, especially work of an intellectual nature ... And what you're seeing in Bangalore today is really the culmination of all these things coming together."

 

Beyond Globalization

At the Intelligent Community Forum, we don't feel that the term "globalization" does justice to the scope of this transformation, and to the way it's reshaping the economic lives of people around the planet. The broadband economy is an economy in which, for all intents and purposes, the hard-working people of Bangalore and Beijing live right next door to the hard-working people of Boston, Brussels and Buenos Aires.

As Nilekani explained, the broadband economy is the product of the build-out of low-cost, high-speed communications and information technology on both the global and local levels. It began in the 1970s, when the telecom carriers began linking the world's economic centers with fiber-optic networks. These made possible collaboration and cooperation across time zones and cultures, which opened markets, boosted productivity, created employment and improved living standards.

From 1870 to 1970, the number of people living on more than $1 per day (adjusted for inflation) grew by 157 million. At the same time, however, the number living on less than $1 a day also grew by 45 million. Still not bad: a net 112 million people moved out of abject poverty over a century. But compare that to the 10 years from 1990 to 2000. The number of people living on more than $1 a day grew by 890 million, while the number living on less shrank by 139 million. That's a net 1 billion people moving up in a single decade.

What made it happen? No single factor could account for such an enormous change. But in any comparison between the decade and the century, you would have to put the availability, from 1990 to 2000, of advanced digital communications at the top of a list.

Using the broadband infrastructure, companies began to look for opportunities to locate their facilities where they could gain the greatest advantage in costs, skills and access to markets. The deployment of global broadband also made capital investment highly mobile. Billions of U.S. dollars move daily around the globe in pursuit of a competitive return, and when trouble strikes a nation's economy, that mobile capital can also flee at devastating speed.

For communities, local economic success has come to depend on the global economy in ways never before imagined. But while global business may be mobile, communities are not. Communities everywhere have the same goal: to be a place where people can raise their children and give those young people enough economic opportunity to allow them to stay and raise children of their own. In the broadband economy, that task is more challenging than ever.

 

The Broadband Paradox

Geographic location and natural resources were once the key determiners of a community's economic potential. In one person's lifetime, they changed seldomly if at all. But in the broadband economy, it's increasingly the skills of the labor force and the ability of business and government to adapt and innovate, that power job creation. And these are assets that must be continually replenished.

Why has this change occurred? As economic centers are connected, it becomes possible to manage distant facilities as though they were across the street. That means, in the broadband economy, every worker is exposed to wage and skill competition from every other worker in similar industries around the world. This has shifted demand for low-skilled labor - the kind used in extracting resources from the Earth and basic manufacturing - to low-cost countries in the developing world. When you visit those booming countries, however, the business press is full of worry about lack of skills and innovation. Even countries in the early stages of industrial growth are feeling the same competitive pressures that have become acute in industrialized nations.

Intelligent communities have come to understand the enormous challenges of the broadband economy, and have taken conscious steps to create an economy capable of prospering in it.

exports from 20 percent to nearly 35 percent. China is the overwhelming leader: Filter out China from the numbers, and the global share of manufactured exports from developing nations actually fell from 28.0 percent in 2000 to 27.4 percent in 2003.

In the last decade of the 20th century and first decade of the 21st, it began to seem that the industrialized world's once unshakeable grip on high-technology employment would go the same way as agriculture and manufacturing. Offshoring began to move call center, data entry, and programming and systems jobs to developing nations. Headlines blared about X-rays being transmitted overseas to be read by Indian doctors, and U.S. and European multinationals opening development centers in India, China, Vietnam and Malaysia.

It's easy to make too much of this. Manufacturing will not vanish from industrialized nations - in fact, manufacturing that demands high skills continues healthy job growth - and rising living standards in developing countries will gradually erode their cost advantage. A 2006 study from the Association for Computing Machinery noted that the job losses attributable to offshoring - estimated to be between 2 to 3 percent of the U.S. IT work force - were dwarfed by the normal cycle of IT job creation and loss in the American economy.

Nevertheless, communities today are at an uncomfortable crossroads in both industrialized and developing nations. The sources of economic opportunity are changing faster than communities can naturally adapt. Manufacturing is following the pattern of farming, in which increasing productivity drastically erodes the number of people it employs. IT jobs are still on the growth track but will eventually follow the same pattern, only to be replaced by a new growth sector, such as biotechnology, sustainable energy or another candidate.

Communities must adapt continuously and at an ever-greater rate, or risk seeing cherished ways of life vanish because lack of opportunity bleeds them of the children who are their future. Succeeding in this new environment - which we call the "broadband economy" - takes conscious effort by government, business, institutions and individuals. It's not the product of the unfettered free market, nor of government policymakers alone, but of imaginative collaboration between the two.
The "how" and the "what" of creating an intelligent community make a long and complex story. But the "why?" That's simple.

It's all about the children.

 

The Broadband Economy

In his bestselling book The World Is Flat, Friedman reported on a conversation with Nanden Nilekani, CEO of India's Infosys. Nilekani had this to say on the topic of globalization:

"Outsourcing is just one dimension of a much more fundamental thing happening today in the world," Nilekani explained. "What happened over the last [few] years is that there was a massive investment in technology, especially in the bubble era when hundreds of millions of dollars were invested in putting broadband connectivity around the world, undersea cables, all those things."
At the same time, he added, computers became cheaper and dispersed worldwide, and there was an explosion of software - e-mail; search engines like Google; and proprietary software that can chop up any piece of work and send one part to Boston, one to Bangalore, and one part to Beijing - making it easy for anyone to do remote development. When all of these things suddenly came together around 2000, added Nilekani, they "created a platform where intellectual work, intellectual capital, could be delivered from anywhere. It could be disaggregated, delivered, distributed, produced and put back together again - and this gave a whole new degree of freedom to the way we do work, especially work of an intellectual nature ... And what you're seeing in Bangalore today is really the culmination of all these things coming together."

 

Beyond Globalization

At the Intelligent Community Forum, we don't feel that the term "globalization" does justice to the scope of this transformation, and to the way it's reshaping the economic lives of people around the planet. The broadband economy is an economy in which, for all intents and purposes, the hard-working people of Bangalore and Beijing live right next door to the hard-working people of Boston, Brussels and Buenos Aires.

As Nilekani explained, the broadband economy is the product of the build-out of low-cost, high-speed communications and information technology on both the global and local levels. It began in the 1970s, when the telecom carriers began linking the world's economic centers with fiber-optic networks. These made possible collaboration and cooperation across time zones and cultures, which opened markets, boosted productivity, created employment and improved living standards.

From 1870 to 1970, the number of people living on more than $1 per day (adjusted for inflation) grew by 157 million. At the same time, however, the number living on less than $1 a day also grew by 45 million. Still not bad: a net 112 million people moved out of abject poverty over a century. But compare that to the 10 years from 1990 to 2000. The number of people living on more than $1 a day grew by 890 million, while the number living on less shrank by 139 million. That's a net 1 billion people moving up in a single decade.

What made it happen? No single factor could account for such an enormous change. But in any comparison between the decade and the century, you would have to put the availability, from 1990 to 2000, of advanced digital communications at the top of a list.

Using the broadband infrastructure, companies began to look for opportunities to locate their facilities where they could gain the greatest advantage in costs, skills and access to markets. The deployment of global broadband also made capital investment highly mobile. Billions of U.S. dollars move daily around the globe in pursuit of a competitive return, and when trouble strikes a nation's economy, that mobile capital can also flee at devastating speed.

For communities, local economic success has come to depend on the global economy in ways never before imagined. But while global business may be mobile, communities are not. Communities everywhere have the same goal: to be a place where people can raise their children and give those young people enough economic opportunity to allow them to stay and raise children of their own. In the broadband economy, that task is more challenging than ever.

 

The Broadband Paradox

Geographic location and natural resources were once the key determiners of a community's economic potential. In one person's lifetime, they changed seldomly if at all. But in the broadband economy, it's increasingly the skills of the labor force and the ability of business and government to adapt and innovate, that power job creation. And these are assets that must be continually replenished.

Why has this change occurred? As economic centers are connected, it becomes possible to manage distant facilities as though they were across the street. That means, in the broadband economy, every worker is exposed to wage and skill competition from every other worker in similar industries around the world. This has shifted demand for low-skilled labor - the kind used in extracting resources from the Earth and basic manufacturing - to low-cost countries in the developing world. When you visit those booming countries, however, the business press is full of worry about lack of skills and innovation. Even countries in the early stages of industrial growth are feeling the same competitive pressures that have become acute in industrialized nations.

Intelligent communities have come to understand the enormous challenges of the broadband economy, and have taken conscious steps to create an economy capable of prospering in it.

Employment insecurity has risen and will continue to increase worldwide as businesses face global competition and go global in search of talent. The only jobs that are immune to the pressures of the broadband economy - local retailing and services like plumbing and real estate - don't bring new money into a community; they merely move it around from pocket to pocket within the community. A sustainable community must have inputs and outputs, which means external markets for the skills, services and products it provides.

Intelligent communities - whether through crisis or foresight - have come to understand the challenges of the broadband economy and are taking conscious steps to create an economy capable of prospering in it. They are not necessarily big cities or famous technology hubs. They are located in developing nations and industrialized ones, suburbs and cities, the hinterland and coast.

The good news is that, while the broadband economy presents an epic challenge to communities, it also hands them a powerful new competitive tool. Beginning in the 1990s, carriers deployed the local networks that most of us think of as "broadband" - DSL, cable, satellite and wireless - within neighborhoods, towns and cities. At the same time, the costs of computer software and hardware - especially data storage - plummeted in obedience to Gordon Moore's famous law that microchip storage capacity doubles every 18 months. Through local broadband, individuals, small businesses, institutions and local governments have gained access to worldwide information resources and a broad range of tools to connect both globally and locally. In the 1970s, these were the exclusive province of multinational corporations and major institutions. Today they are as close as the computer on your desk or the mobile device in your pocket.

Today broadband offers every community the opportunity to move from the periphery to the center in economic terms. It creates new kinds of companies like Yahoo and Google - even whole new industries. It enables local companies to be global exporters - including the export of skills and knowledge that were never before transportable across time zones or national borders.

It can ensure schools in remote regions and inner cities have access to the latest information tools and reference sources. It can link local health-care providers to leading medical centers and local law enforcement to national information grids. Individuals and businesses can go global in search of low-cost, quality vendors, and Web-based tools can increase community involvement.
By boosting the economic and social well-being of communities, broadband can reduce the incentives for young people to move away in search of opportunity and a better quality of life. Paradoxically it can play a key role in giving communities a sustainable future in our evermore connected world.

But broadband is no magic bullet. Technology alone will not create a prosperous and inclusive economy, which is the foundation for everything else that makes a community healthy and vital. Intelligent communities work long and hard, in many different ways, to adapt to the challenges of the broadband economy. Some are recovering from economic crisis and have more plans and hopes than tangible results to show. Others are well on the way toward ambitious goals and have a record of achievement to display. And some far-sighted communities never let crisis overtake them in the first place, and made the right choices and investments in time to benefit from the emergence of the broadband economy.