The Internet Adds a New Component to the United States Economy

Vinton Cerf and Robert Kahn first created the Internet in 1974.  The Internet that we know today however, was not created until the 1990's.  In 2010 the Boston Consulting Group (BCG) released a report on the impact that the Internet has on economies around the world.  The report finds that in 2010 the Internet economy in the United States made up 4.7 percent of the country's Gross Domestic Product (GDP).  GDP is the market value of all final goods and services produced within a country during a particular period of time.  GDP is a very popular tool used in economics to measure the wealth and production of a country.  The U.S. GDP was about $14.5 trillion in 2010 so the Internet economy accounted for about $68.2 billion.  According to the BCG this number is only going to grow in the near future, as more of the world's population will be exposed to the Internet.  Some experts actually believe that the Internet could negatively affect the economy.  However, one thing that all experts can agree on  is that Internet economies do not just affect the U.S. economy but also developed and undeveloped countries around the world.

The Internet economy will continue to grow in the future.  
The BCG projects that in 2016 the Internet will account for about 5.4 percent of the total U.S. GDP.  This does not sound like a major increase as it is less then 1 percent, however, that 1 percent is over $30 million.  Professor Joseph P. Bailey, who is an expert in both Internet economics and electronic commerce, says,

It is safe to say that the percentage of national GDP comprised of the Internet economy will reach at least 5.4 percent by 2016.  It is also safe to say that the Internet will only continue to grow and become an even bigger part of economies around the world in the future.  According to data collected by Nielsen, over 274.2 million Americans were connected to the Internet in 2011.  Mobile devices such as smart phones, laptops, and tablets also help speed up the process of Internet growth.  In 2011, 117.6 million people visited the Internet using a mobile device.

Currently the Internet economy is so large, that according to BCG senior partner David Dean says, "If [the Internet] were a national economy, it would rank in the world's top five, behind only the U.S., China, India, and Japan, and ahead of Germany."  To put the affect of the Internet on total U.S. GDP into some perspective, we can see that it contributes more of a percentage to America's GDP than many traditional industry sectors.  These sectors include information and technical services, construction, education, agriculture, and many more.  According to CNN, the Internet is a bigger contributor to the U.S. economy than the entire federal government. 

The U.S. may have already lived through any negative affects that the emergence and of the Internet economy may have caused.
One of the key factors has been the development in information systems.  These developments have really allowed productivity of workers to increase.  However, because corporations are now able to do more with less resources (workers), we have seen the recent unemployment numbers decline much slower than they might have in the past.  Professor Bailey says,

The U.S. Internet economy's share of GDP is not the largest in the world.  
Instead, the United Kingdom is the country where the Internet comprises the biggest percentage of its national GDP.  The U.K. Internet economy makes up about 8.3 percent of the whole economy.  This is a staggering number, as it is almost twice the amount that the U.S. Internet contributes.  Other nations whose Internet contributes bigger shares to its total economy are South Korea (7.3%), China (5.5%), and Japan (4.7%).

One of the most surprising things is how dependent people have become on the Internet in such a short time.  The BCG collected data to determine just how important the Internet was to people around the world.  According to The Times of India, India has an Internet economy growth rate of 23 percent, which is second only to Argentina (24.3%).  36 percent of Indian Internet consumers told the BCG they would give up showering for a year in order to keep Internet access.  Some indication of what Americans may give up in order to keep Internet access can be found in the graphic.


Developing countries are still way behind countries such as the U.S. or U.K. when it comes to Internet economies.  
While this might seem obvious, it is a problem that can create an even bigger difference in economic power between countries than what already exists.  Of course many countries are not able to compete technological or in almost any other way with the U.S., America is helping these countries by being one of the biggest exporters of information technologies around the globe.  When it comes to the Internet in developing countries Professor Bailey says,

The Internet is a growing part of the world as the BCG shows in their report.  It affects everyday life and has a large affect on worldwide economies.  This affect is only expected to grow, especially in the U.S.  Developing countries have a long way to go when it comes to their access to the Internet, but it is quickly becoming a vital part of peoples' lives around the world.