A new report from McKinsey Global Institute (MGI) shows that cross-border digital data flows, practically non-existent 15 years ago, now exert a larger impact on global GDP growth than trade in goods.
The report, entitled 'Digital Globalization: The New Era of Global Flows', shows that the world is more connected than ever, but the nature of its connections has changed in a fundamental way.
As shown in the Infographic below, the amount of cross-border bandwidth used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intra-company traffic continue to surge.
In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.
The new digital form of globalization has opened the door to developing countries, to small companies and start-ups, and to billions of individuals. Even the smallest firm can now compete with the largest multinational. Individuals can use global digital platforms to learn, find work, showcase their talent, and build personal networks. Digital platforms for both traditional employment and freelance assignments are beginning to create a more global labour market.
MGI’s analysis finds that over a decade, all types of flows acting together have raised world GDP by 10.1 percent over what would have resulted in a world without any cross-border flows. This value amounted to some $7.8 trillion in 2014 alone, and data flows account for $2.8 trillion of this impact. Both inflows and outflows matter for growth, as they expose economies to ideas, research, technologies, talent, and best practices from around the world.
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