Research claims ICT underinvestment lies at the heart of Europe's lagging productivity growth. The European Union has underinvested in information and communications technology, and could boost economic growth significantly if it were to catch up with the U.S. According to a report by Oxford Economics that was commissioned by telecommunications company AT&T, the U.S. increased its accumulated stock of ICT investment relative to the size of its economy to 30% in 2010 from 9% in 1991.
Over the same period, the EU boosted ICT investment relative to gross domestic product by just 20% from roughly the same base. Oxford Economics said that if it were to close that gap by 2020, EU economies would be on average 5% larger. In cases where ICT investment has been particularly low--such as Spain and Italy--economic size would be boosted by 7%.
Oxford Economics said underinvestment in ICT was a key reason behind Europe's slow productivity growth since the early 1990s.
"Had Europe matched the U.S. in its productivity growth since the mid-1990s, the gap in living standards would today be 25% smaller, equivalent to an improvement in Europe's GDP per head of just under EUR3,400," Oxford Economics said.
And the report warned that if the EU fails to boost investment in ICT, it could be overtaken by developing economies.
"The share of firms in the emerging economies planning to increase their investments in productivity-linked technologies by more than 20% over the next 5 years is twice as high as in Europe," the report said.
Facing the biggest economic crisis in its history, the EU is desperately searching for ways to grow its way out of its fiscal problems. Boosting investment in ICT may be one way of boosting growth.
"European governments should put ICT at the heart of their economic and growth plans," the report said.
