New Economy and Poverty Presentation by Pietro A. Vagliasindi “New Media” & “New Economy”:

1. New Economy and Poverty Presentation by Pietro A. Vagliasindi “New Media” & “New Economy”: Institutions, Regulations and Implications for Growth and Development MIUR Research

2. What is the new economy? • Market system facilitated by the interactions between: • technology (high-speed communications, powerful network of computers and the Internet, • globalisation reflecting also a deliberate policy to reduce barriers to the mobility of goods and capital. • It implies: • new rules of the game (new way of organising production and delivering value to consumers), • long term growth when markets are supported by appropriate regulatory frameworks.

3. Building Blocks and Issues • Building Blocks: Telecom Infrastructure + Internet Availability/Affordability + E-services Readiness; Connectivity (Access),Cash (Financing), Competition, Competencies (Human Resources), Creativity, Communities, Cooperation • Issues: • turbulence, instability, complexity, interdepend. • regulation but also openness and freedom • time is “accelerating”: convergence or inequality • knowledge is the essential driver of development • significant opportunities for new entrants

4. Globalisation (according to WB) Source: WB report

5. There are benefits and risks in joining, but not participating may imply greater losses: • Costs of being left out may be permanent: poverty and marginalisation may increase • The forces of globalization are making this one economy and oneworld • Probably there is no longer an alternative. • Opportunities: • Overcoming geographical barriers • Cutting transaction cost • Streamliningthe distribution chain

6. Promises and perils of the new economy Adopter Countries’ revolution USrevolution Info Infrastructure (scope and quality) Convergence Latecomer Countries Divergence Time

7. Digital Divide Access is Concentrated in a Few Countries Divide Between Divide Within Mainlines (inc. cellular) 70 62% 60 50 40 Mainlines per 100 Inhab. in 1998 High Income 30 20 16% 10 0 High Income UpperMid. Low Mid. LowIncome Income Income Population Urban Rest of the Country

8. Cross-Country Inequality: Urban/Rural Disparity Telephone Lines per 100 Population Rest of the Country Urban Teledensity High Income 49.5 60.2 47.8 Upper Middle Income 15.4 24.3 13.8 Low Middle Income 8.0 23.3 6.6 Low Income 1.4 5.7 1.0 World Average 10.3 25.0 9.1 Source: ITU, World Telecommunication Development Report, 1999

9. Internet developments 293 49 ITU (2000) Internet host (computer linked to the worldwide Internet network) per 1000 inhabitants

10. Internet Diffusion (fast, but quite uneven) Developed:312 host per 10’000 people Developing:6 host per 10’000 people Australia, Japan & New Zealand 7.0% Developing Canada & US Asia-Pacific Other 64.1% 2.9% 4.6% LAC* Europe 1.2% 24.3% Africa 0.5% Data Source: ITU 1999 “Challenges to the Network: Internet for Development”

11. Internet diffusion in EU accession countries Source: ITU(2001) Internet hosts per 1000 inhabitants

12. Housing access and Broadband Penetration in EU Source: EU report

13. Technologies and Poverty Reduction • Favour economic growth and develop enterprise. • - enhanced competitiveness • - increased business opportunities • - access to market for rural communities • - human resource policies are critical • - proactive approach to promote investment in poor areas • Improved public and social services • - improved responsiveness & efficient services • - better health/education/environmental services • - reducing vulnerability to natural disasters • Empower the poor and break marginalisation. - cut costs, speeds delivery of gov’t services - equal access to government for all - allowing the poor to better communicate their concerns

14. Make the population part of governance process, guaranteeing greater transparency. - improved efficiency on government procurement - reduced corruption - increased civil society participation Digital Public Service Quality Source: EU report

15. Implications for the Productive System • The US miracle can be in part credit to ICT and its impact on the rest of the economy. • It may represent a great opportunity for Italy, EU and other countries to accelerate development. • Enhanced telecoms facilitate participation in the information economy and international trade. • Internetadoption is strongly correlated toinnovation, foreign competitive pressure, export orientation and to better performance in terms of employment and sales growth.

16. How it works? Government • Tangible products • Intangible (digital) • Services B to G C to G B to G : public procurement trade procedures (Customs) Partners Consumers Enterprises B to C B to B (at home or abroad) C to C: eBay (auctions) B to B : Internet, Intranet, Extranet EDI-based transaction (tenders) B to C : Internet sales, interactive TV and telephone sales, etc...

17. US$1.27 US$0.27 US$0.01 $150 $69 $10 How and why do it electronically ? Cost of banking transactions E-com enabled site Digital delivery Web presence Ingredients: E-payment 1.4 1.2 1 Cost of trading transactions 0.8 0.6 160 140 0.4 120 0.2 100 0 80 Branch ATM Internet 60 40 Source: Andersen Consulting 20 0 service broker broker Full- Full- Discount Discount Online Online

18. Firm's use of Interntet and ITC Export Source: EU report

19. Advantages • for sellers: • lower barriers to entry and transaction costs • world-wide access to buyers • faster adjustment to changing market conditions • more information on transactions and customers • for buyers: • More information on available goods and services • Lower prices and more choices • Time saving and convenience and 24 / 7 access

20. Problems and Issues • Access to hardware, software, Internet • Taxation, government licensing & regulation • Speed of Internet connections • Skills needed to use new systems • Privacy, consumer protection • Security, payment mechanisms, authentication • Spamming and other advertising issues • Adjustment to constant, rapid change

21. The Development Process • Development is characterized by choices and influenced by institutional diversity. • Multi-dimensional and path-dependent. • Technological and institutional changes. • Learning process and imitation. • Social transformation and power of ideas. • Mechanisms linking growth and poverty are time-dependent and context-specific. • Public and private sectors critical to growth and poverty.

22. General Policy Objectives • Shared prosperity and a fair economic system. • Broader participation in shaping socio-economic future. • New policies and institutions for workers, families and communities in the new economy. • Trough policy, legislation and regulatory reforms. • Spreading knowledge and new technologies. • Incentivating research, education, training and foreign investment.

23. Economic Growth “The size of the pie” Total output Per capita (average) income New Economy: Growth and Poverty Redistributive Issues • “Who gets the biggest and smallest slices” • Decent standard of living for all? • Shared prosperity and a sound economy

24. Growth and Poverty Poverty Worldwide Poverty in the US by Gender Source: WB report Worldwide Perspective Source: US report

25. ICT and Health • Assist in info gathering and dissemination • Many health problems (cf. HIVpandemic) are related to prevention and access to info • Help controlling epidemics and contagious diseases, improving health care for the poor and remote population. • Telemedicine can bring medical expertise to local communities by direct diagnosis, X-Ray reading, etc.

26. ICTs and Education • Economic develop. and poverty reduction are strongly correlate with education • Applications to teacher training and updating in remote areas • Overcome problems of empty libraries and inadequate staff in higher education • Can reach areas and individuals where traditional Universities do not • Information and feedback are key to adaptation and learning.

27. Lectures via Internet • On-Line • Library • Full-text journals • Abstracts with index Textbooks Course notes Journals Live Sessions / E-mail Interaction Distant learning model WWW Site Content Providers Local Support Students

28. Diversity & Earnings Gaps Who is lagging behind? • Education: do income rise with higher degrees? • Gender: is gender gap still relevant? • Older: are pensioners’ conditions worsening? • Geography: do we have large north-south gaps? • Union: do union members earn more? • Ethnicity: do whites earn more?

29. Education Levels and Unemployment Rates Source: EU report

30. Working in the New Economy • Greater participation in the labor market • more women in the labor market • Increasing part-time work in low-wage industries and occupations? • 1 out of every X workers lives in poverty • almost 1 out of Y children lives in poverty • poverty in the South is significantly higher • Unemployment remains high • significantly higher in the South and Island • especially for young and women

31. How much time left ? • to: bridge the digital divide and knowledge gap with EU and US increasing access and education by: • providing a proper legal and regulatory environment • improving infrastructure, infostructure and trust • enhancing human resources and know-how through education and training • reforming social security, labour market and taxes

32. Thank you very much for your time and attention

33. Issues for the round-table

34. New Economy, Growth and Poverty • How is the structures of our economy changing? • Using ICT to increase pro-poor quality of growth? • Do the socio-economic systems and families meet the challenges of the new economy? • Are benefits of economic growth widely shared? • Which ‘indicators’ adequately describe the development and poverty trends? • Are we investing enough in poverty and self-sufficiency?

35. Challenges • Can we keep up with the changing nature of trade and competition? • In this more globally competitive world, is economic growth widening inequality? • Is the digital divide growing or shrinking? • Revolution in knowledge: are gaps widening? • Transformation of jobs and lives: working and living longer in the new economy ? • Which consequences on poverty and exclusion? • Which implications for public policies?

36. New socio-economic policies? • ICT can be used to organise knowledge, information and education to reduce poverty. • Reforming institutions supporting socio-economic security and career develop. • Investing in education, health care, child care, housing, transportation