Which Wheels to Grease? Reducing Friction in the Internet Economy

Which Wheels to Grease? Reducing Friction in the Internet Economy

          
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Which Wheels to Grease? Reducing Friction in the Internet Economy

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  • May 2015
    The BCG e-Friction Index
    Where is digital trade best positioned to flourish? Where is it inhibited the most? See how 65 economies stack up.

    Digital trade, like all trade, enriches nations. We estimate that the extent of this enrichment will amount to $4.2 trillion, or more than 5 percent of GDP, for the G-20 countries in 2016.

    But not all nations engage equally in the exchange of goods, services, ideas, and information—either online or in the physical world—and the economic and social benefits of digital trade are far from evenly distributed. In the most advanced and productive Internet economies, consumers and businesses face few restrictions or constraints on digital activity—what we refer to as “e-friction.” A single set of technical rules and protocols enables anyone who can get online to trade goods, services, ideas, and information with anyone else—anywhere. Few tariffs, taxes, or technology controls (other than limits to access) slow things down. We put the difference between countries with large digital economies and those with low online economic activity at about 2.5 percent of GDP—a material figure for any nation.

    Tweet thisDigital trade will amount to $4.2 trillion, or more than 5 percent of GDP, for the G-20 countries in 2016.

    To make it easier for those with an interest in the health and growth of their online economies to “grease the wheels” by reducing the friction that holds back the development of the Internet economy, this report looks at the major causes of e-friction and at how countries can learn from those that faced similar challenges but have managed to address the most significant impediments. (See “About This Report.”)

    About This Report

    In our January 2014 report, The Connected World: Greasing the Wheels of the Internet Economy, which was commissioned by the Internet Corporation for Assigned Names and Numbers (ICANN) as was this update, we identified 55 indicators of “e-friction” that inhibit online activity by consumers, businesses, and governments. The BCG e-Friction Index used those indicators to rank 65 economies that are home to more than 80 percent of the world’s population and more than 90 percent of the world’s economic activity. This report updates the index and expands on that analysis, showing economies how they can move up the e-friction ladder.

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