Information society: The ICT challenge

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Information technologies offer great potential for the world economy and society. But several challenges and risks must be overcome on the way.

When Marshall McLuhan suggested that electronic interdependence was recreating the world in the image of a global village, he was writing in the early 1960s, long before the advent of the Internet and today’s networked world. Indeed, in this first decade of the 21st century, our world has become much smaller and communities more closely knit. Above all, we live in an information society, with information and communications technologies (ICTs), rather than just electronics, at its heart.

The information society may not be a new concept, but it is one that is constantly evolving. It is still in its youth, and as such, its dynamics are changing every day. We know much about the potential, though we are still learning as the information age unfolds. What seems clear is that the ongoing development of ICTs in all its forms and applications is driving radical change in our lives, with the constant creation of new products and services, new ways of conducting business, new markets and investment opportunities, new social and cultural expressions and new channels for citizens and government to interact.

There are risks and challenges with any new age, as witness the great social shifts during the industrial revolution. Today, ICTs are starting to have a deeper impact on workplace organisation, for instance. Even if there is much we can never predict, everyone must be ready for this and other emerging challenges if we are to maximise the potential benefits of ICT. In particular, balancing issues like network security, data protection and privacy with openness, access and trade is not easy, yet it is key to ensuring that the information society goes from strength to strength.

The technological innovations, particularly in the area of ICT, that have underpinned the birth of the information society were sparked in OECD countries, so it is little wonder that we have been giving the subject much thought and attention. Here are some themes and challenges that we see as priorities for the proper development of the information society.

ICTs enable economic growth

This is not a new message, and indeed the OECD has been promoting it for quite a few years. Still, the message needs repeating, particularly because of the confusion between “new economy” in terms of stock values and the underlying pervasive impacts of new technology. Though the financial bubble may have burst, there is clear evidence of continuing strong growth in demand for ICTs, in business and among households. But ICT is not just about adding to capital stock, but improving output in firms, since combining skilled labour and capital can raise total or multi-factor productivity (MFP). Indeed, investment in ICT by firms in sectors such as electronics manufacturing, media, wholesale and retail trade, finance and insurance, and business services contributed over 1% to Australia’s productivity growth from 1996-2001, as much as 1.3% in the US and 0.73% in Ireland.

So this is not a call for investment to pump up technology sectors, but a common sense realisation that ICT can help make markets more efficient by improving economic management and distribution. It is worth investing in it because the economy will grow and resource use will become more economical.

ICT adds value by allowing users to operate within faster, larger and more interactive networks. These lower transaction costs and speed up innovation because people and markets are better connected, whether in sharing knowledge or trading goods. Scientists have benefited from such network effects through international collaboration, both among themselves and with business. Firms use ICTs to improve efficiency and reduce costs. And households are better informed about different options, quality and prices, so that, even if they do not always buy online, they reap the benefits of having access to ICT.

Simply adding ICT to the recipe for growth is of course not enough, since sound economic frameworks and policies to foster ICT use, as well as smooth market conditions to encourage competition among suppliers and users, are also needed. Indeed, more competition is needed to boost take-up of broadband, for instance.

Still, improving ICT access and the quality of use is an important challenge. Computers may be spreading, but not all homes, schools, or businesses have taken them up or are using them as they might. Data shows that email is by far the leading use of Internet, followed by information search, with purchase of goods and services and other online transactions and other advanced forms of management, lagging well behind.

Small businesses in particular, including start-up companies, should be encouraged to see ICTs as a tool for reducing costs and gaining access to wider markets. Many OECD governments are taking action, by opening the way for infrastructure investment, encouraging competition in provision of services, and providing information and support services to SMEs that invest in ICTs and e-business.

Over the last decade the use and management of ICTs have become integrated in schools in most OECD countries, with most pupils now having access to computers and the Internet. Universities and colleges have been doing this for a while already. Yet, building capacity in education remains a policy challenge. Even where the technology has been introduced, lack of sufficient human skills (teachers, support staff, etc.) can prevent institutions from taking full advantage.

Policy can help, as witness efforts in innercity or rural areas, for instance, to provide more IT capability in small schools, while distance learning is becoming more widespread too. Teaching methods have had to change in many cases, as have education technologies, and indeed the educational “market” itself has become more globalised, making resources more widely available. Without ICT, this might not have happened.

One area demanding greater policy effort is in encouraging learning among unskilled working-age adults, including the elderly and disabled. People without skills risk being left out of the benefits of ICT, both in terms of earnings but also basic job prospects (see article by Andrea Bassinini). ICT offers great potential in terms of bringing non-employed groups back into the workforce.

Trust and confidence

For the information society to take hold, one very serious battle to win is to enhance trust and confidence in ICT and networked systems. There are a number of threats to ICT use. Spam, virus attacks, worms, hacking, cracking, network outages; all affect operations, whether in businesses, homes, hospitals or critical infrastructures as a whole. Part of the answer is better technology that can meet public requirements. But as for any market, nurturing trust and confidence among all users is essential. The OECD has launched the “culture of security” concept as the vehicle to improve the reliability of information systems and networks.

The culture of security is based on a joint way of thinking about, assessing and acting towards increasing security. Trust is driven by a clear rationale. Consumers will vote with their feet: if the digital economy works and their rights are sufficiently covered and risks lowered, they will use the Internet more and more. But they must become accustomed to it too. And businesses, including the SMEs, will gain more confidence in ICT with experience, as predictability rises with transparency and availability of practical tools to meet various legal, tax and other demands.


In building trust, governments should lead by example. ICT has already started to transform government’s ability to strengthen its relations with citizens. Consultation and dialogue with households and businesses are fast becoming routine. ICT also allows government experts to tap new sources of policy-relevant ideas and information, and so improve their performance.

Some governments have made e-government a formality. Most governments (including those outside the OECD) have interactive web sites, and it is now possible to file tax returns on many of them.

But e-government is more about government than about “e”. Its impact goes beyond public relationships to improve government management and delivery, productivity, and so on. It has the potential to contribute to improving policy coherence within government, thanks to better internal communications. Governments are a formidable consumer of ICT, and, as with businesses, this gives them a golden opportunity to improve their operations.

Trade, investment and development are also key. ICT now forms part of the infrastructure needed for global commerce, which is promising for development. Treating global development last in this discussion does not reflect any order of importance, but by first understanding how ICT helps growth, learning and governance, it becomes easier to see how ICT can play a vital role in combating exclusion and poverty. Access to markets, education and information: all are vital for poverty reduction. Attaining the Millennium Development Goals (MDGs), from mortality reduction to improving the environment, depends in no small part on improving information and education.

Trade and investment are vital instruments in making technology and skills available and in helping global integration. It would not make much sense for the development of the information society if goods and services were not available. Private investment in turn is the largest provider of sustainable technology use.

Many multilateral and bilateral donors have been active in the ICT-for-development field in recent years, by encouraging technology transfers for instance, as well as helping with pilot projects in sectors like health, education, agriculture and the environment. But the challenge is more than about technology, it’s about communication and knowledge as tools of development. For this reason, it is vital that ICTs be integrated into national development and poverty-reduction strategies – what policymakers call “mainstreaming” – to enhance the effectiveness of Official Development Assistance (ODA), and not as a separate item on the balance sheet. So, if the aim is to build a hospital, school or road, governments must ask how ICTs can help them achieve their goals.

Governments need to think in this coherent way. Co-ordination and knowledge sharing between governments need to be more intensive, and bringing civil society and business into this process is essential. Fostering ICT will help them achieve this goal.


•OECD (2001), The New Economy: Beyond the Hype, Paris.

•OECD (2003), Seizing the Benefits of ICTs in a Digital Economy, available at

•OECD-APEC (2003) Global Forum: Policy Frameworks for the Digital Economy, Summary Report, January, USA.

•OECD (2003), Communications Outlook

•OECD (2002), Information Technology Outlook

© OECD Observer No. 240/241, December 2003

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