Boosting Economic Growth with “Digitization”

June 18th, 2012

One of the key reasons for the establishment of UTOPIA was providing next-gen tech infrastructure to give Utah a competitive advantage in attracting new businesses. It doesn’t hurt in attracting tech-savvy residents, either. Whether you work in tech or not, it’s incredibly hard to get away from it these days. Even people who don’t have a traditional “desk job” are very likely to have a cell phone—for all intents and purposes a computer in itself—and to be “on the grid.”

UTOPIA has seen how the right infrastructure can prompt growth. FLSmidth, an international engineering company, selected Midvale as the location for its Global Minerals Technology Research Center specifically because of the fiber network. The infrastructure has saved the company plenty of money in travel costs; instead of flying to the corporate HQ in Denmark twice a month, local executives can now take advantage of cutting-edge, high-quality video teleconferencing.

How else can UTOPIA and the right infrastructure impact economic development in Utah? Let’s consider a recent article from The Economist, which begins with the question “Do digital economies grow faster than analogue ones?”

The author (Economist articles have no bylines) writes, “‘Digitisation’ [sic] involves adopting technologies like wireless phones and internet access to generate, process and share information. It seems to make sense that replacing slow technologies with faster ones might speed up sluggish economies. Investments in computers, broadband and the like—things that help spread ideas quickly and cheaply—should generate growth.”

The findings support this: “Digitisation and growth are…highly correlated. The 15-year period between 1995 and 2010 was one of strong economic growth and of a global boom in digitisation.” So yes, there’s a link, but does the investment cause growth?

A “2011 paper” from the University of Munich says yes. “The findings are striking: a ten-percentage-point increase in broadband penetration results in an increase in annual per-head growth of 0.9-1.5 percentage points. At an aggregate level, digitisation boosts growth rates” [emphasis added].

Exhibit A might be the city of Chattanooga, Tenn. Like UTOPIA, Chattanooga’s “Gig City” initiative is part of the US Ignite public/private partnership to promote U.S. leadership in developing applications and services for ultra-fast broadband and software-defined networks.

Since becoming the first city in the Western Hemisphere to offer 1 Gigabit-per-second fiber internet service to all of its residents and businesses, Chattanooga has, according to U.S. Ignite information, “attracted companies like Volkswagen, Alstom, and Amazon, resulting in 7,000 new jobs and billions of dollars in capital investment for the area. Chattanooga’s advanced network serves as the backbone for the Nation’s most automated smart electric grid, which is already demonstrating substantial improvements in the reliability of the power distribution system.”