Does technology determine a country’s economic success?

Linking technology to a country’s economic success isn’t an easy task. However, it seems that there are more and more reports being published that point to this relationship.

Recently, the World Economic Forum (WEF) published its Global Competitiveness Report for 2011-2012. The annual report looks at economic trends and emerging issues that will have an impact on the global economy. As the title of the report suggests, it also evaluates the “competitiveness” of countries, ranking them according to certain economic criteria. This year, 142 economies were evaluated by the WEF report.

According to the WEF, there are 12 “pillars” that determine a country’s economic competiveness. WEF defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country, including those that predict a country’s future growth potential.

Listed in the top 10, technological readiness is called out as a core pillar that determines economic competitiveness. In fact, its influence on economic competitiveness is ranked right next to pillars such as a well-functioning financial sector and the actual size of a country. I believe this illustrates the growing importance of technology and how closely it is now tied with a country’s economic competitiveness.

This in itself may not come as a surprise. That’s why we decided to take it a step further by testing the correlation ourselves. Below is a graph that we created, which compares a country’s economic competitiveness on the WEF report with its investment in technology per public employee.

The data we used comes from the actual WEF report, as well as our internal data on 12 Western European countries (dividing their investments in packaged software by total public employees). As you can see below, the data shows a strong correlation between a country’s investment in packaged software and its rank on the WEF report.

While this is an informal analysis and there are certainly many factors that impact a country’s economic competitiveness, the findings are very interesting. We believe that it communicates what many countries have known for a long time: That technology is critical to their ongoing ability to compete and prosper in today’s increasingly globalized economy. As technologies continue to evolve and new technology paradigms like cloud computing gain popularity, I predict this relationship will only continue to deepen.

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Elias Ramos
Western Europe Government Director