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The financial crisis andits impact on ICT  1. 1Introduction When dealing with ICT and its impact on theeconomy most views remain strictly optimistic. On the other hand, there areoften uncertainties regarding the legitimacy of claims that ICT is actuallysuch a determining factor in the recovery form the financial crisis. Thefollowing paper deals with the hypothesis that ICT and especially the mobiletelephony sector helped recover from the financial crisis. It also discussesseveral benefits of investments towards ICT and mobile telecommunication inparticular, finishing up with a conclusion. Firstly, the paper gives a brief insight intomethods of research considering the financial crisis.

Then it brieflyintroduces the financial crisis and how it impacted ICT. Secondly, the paper willdiscuss how and if ICT is a viable solution in aiding the recovery from thecrisis.  1. 2How research is done in the field The impact of the mobile phone industry onthe financial crisis and especially the recovery form it, is mostly describedthrough scientific research is done through induction done by empiricalobservations.

In this case empirical observations are gathered through fieldresearch aimed towards finding and enforcing hypothesis in macro theory. Thedata needed for the induction in this case is provided by countless entitiessuch as the World Bank, Analysts (Like Pyramid Research), entities in themobile industry (GSM Association and ITU International Telecommunication Union)and several others.  1. 3The economic crisis The financial crisis in 2008 has been the worst financial crisissince the Great Depression in the 1930s. The crisis cannot be traced to asingle event, it was a result of a number of events. The beginning of the crisiswas caused by the exorbitant lending of subprime mortgages in the US market (ITU, 2009). As consequence, investors lost confidence in the mortgage and loan markets. This developed into a global banking crisis with the bankruptcy of theinvestment bank Lehman Brothers.

Due to the close interaction of banks acrossthe world the crisis was followed by a decline of the international economy anda global liquidity crisis. A well representing, oftenused symbolism for the economic crisis is a growing soap bell which pops aftera while when it has grown too big. 1. 4The impact on ICT Due to the financial crisis, the industry hasexperienced decreasing demand, operational cutbacks and reduced investment (ITU, 2009). But in comparison to most other industries, the area of mobilecommunications has been proving to be more flexible. In the financial crisis of2008 the ICT sector has had a role as both villain and hero (ITU, 2009). On theone hand, it was acting as a leading indicator of decline while on the otherhand also proving to be an important power assisting the recovery of theeconomy.

In 2009 the typical American wireless userinteracts with wireless technology via a cellular telephone and about 90% ofU. S. citizens use a mobile device actively (ITU, 2009). In contrast to this, Greeceis experiencing a mobile penetration rate of larger than 200% (ITU, 2009). Thismeans that on average every Greek inhabitant has two devices connected to amobile network. These statistics show how explosive the expenditure of themobile phone market is.  1. 5Impact on DemandThe financial crisis had a huge impact on most industries all overthe worlds.

In contrast to that, the mobile market in developing countriesremained growing. For example, the two largest developing countries China andIndia. China mobile, the world’s largest mobile operator added 74 millionadditional mobile users in the year through October 2008 (ITU, 2009). In India, the world’s second largest market 10. 4 million additionalmobile subscriber were listed in October 2008 (ITU, 2009).

In Brazil, the number ofsubscribers rose by 4 million in October 2008 which is more than twice as muchas in October 2007(ITU, 2009). As these data show the mobile growth ofdeveloping countries has been weakly influenced by the financial crisis andeven further increased after the crisis. On the other hand, the generaldemand in most industries decreased because of less income per head. Lessexpensive purchases were done in mobile phones and operators. This was alsopartly due to the fact that people did not want to freeze expensive monthlydeals for 2 years.

This indirectly stimulated the economic crisis as it is adown warding spiral.  1. 6Impact on supply The Supply of the mobile industry is mainly influenced by theexpenditure and investments in telecommunication networks. Due to the financialcrisis, the capital expenditures decreased.

These expenditure cuts mainlyinfluenced developed countries that triggered the crisis. In contrast todeveloped countriesthe developing counties, also called “ the homeof the next billion subscribers” (ITU, 2009), have the potential of untapped demand. Therefore, it is very unlikely that investors will cut investments in marketswith such high future potential (ITU, 2009). The impact of ICT on theeconomy  2. 1Returns on investment in ICT The ITU emphasizes the power of investing inICT and the importance of ongoing investments form the government and theprivate sector. With the rising demand on internet access via mobile devicesthe industry relies oninvestments to stay ahead with spare capacity concerning internet use. Theincreasing importance of the internet as a prerequisite for the ability toparticipate in the current information economy has led to a widespreadacknowledgementof the power of ICT investments.

The provided graph in Figure 1 shows howeconomic growth can be stimulated through different ways of telecommunicationpenetration (ITU, 2009). One further mean of return is the so called multipliereffect. In this case it depicts how initial government investment leads to repeatedrounds of income spending. According to Statistic Networks Group secondaryinvestments resulting from broadband investments are ten times the initialamount while the contribution towards GDP could be fifteen times as high. Generally, investments towards any sector in ICT bears high returns as well as greatpossible benefits to society like robust and durable economic growth, theability to create more skilled personnel for the future and greaterproductivity gains (ITU 2009).  2. 2Economic growth through ICT ICT is considered to be one of the mainforces driving economic growth (Pohjola M, 2002). ICT has the answer on almost every question asked.

The mobile phone industry as a part of ICThas continued to show steady growth despite the financial crisis unlike manyother ICT industries that lack demand during times of financial constraints. The positive impact of mobile telecommunication on economic and productivitygrowth was proved by several studies, one in particular beingby Gruber and Koutroumpis (Gruber H, KoutroumpisP, 2010). Extensive research looking at real GDP per capita and ICT useindex have shown that an improved ICT use leads most likely to an increase ineconomic growth (Farhadi M, Ismail R, Fooladi M, 2012).  This becomes increasingly apparent whenlooking at equipment sales which have been hit by the financial crisis.

In contrast, the provided services of the mobile industry are doing much better. The amountof mobile cellular subscriptions reached 67 percent of inhabitants globally atthe end of 2009 (ITU, 2010) and only asmall number of countries are seeing reductions in their number ofsubscriptions. Especially the developing countries for example Latin Americaare predicted to have a fast-growing smartphone market where the sale of mobilephones is expected to rise from 7 million smartphones in 2009, or 5. 4 percentof total handset sales, to 48 million in 2014, or 30 per cent of the total(ITU, 2009). Additionally, the growth in the mobile phone industry is driven bylarge emerging markets like India and China and the overall consumerwillingness to spend parts of their income on mobile services despite times offinancial constraints.

During the development of the ICT sector, maximum growth of theeconomy is trying to be reached. However, this process gets decelerated byenvironmental consequences and restrictions. As some decisions may seem to be agood idea for the company or organisation itself, it turns out to beunprofitable for society and environment. Due to these restrictions, onlypartial economic growth can be achieved (R. Evenson, 2015).

2. 3 Theimpact mobile money transfers. But this growth potential is not restrictedsolely to developed countries. The World Bank mentions for example that in a typicaldeveloping country an extra ten phones per 100 people would be able to grow GDPby 0. 8 percent. In these countries, mobile phones offer economic empowermentthrough its compensation for poor infrastructures. In general, mobile phonesenable a faster and freer flow of information resulting in more efficientmarkets. An explicit example for this is the emergence of mobile-money servicesin Africa.

In one case Kenyan households where able to increase incomes by5-30% solely through the use of mobile banking (a service called M-PESA) (Tavneet Suri, 2016) 2. 4 Conclusion Considering the observed evidence, weconclude that mobile telecommunication plays a vital role in the ICT industry. Investments towards this technology should be supported by governments indeveloping as well as developed countries since it seems safe to say that theylead to economic growth and increased efficiency. Also, ICT and especiallymobile technology enable individuals in the economy to keep on participating inglobal trade and compensate for lacking infrastructure.

Especially the ICTsectors of developing countries remained stable after the crisis in comparisonto the developed countries. The demand kept stable after the crisis and it waspossible to also keep the supply stable because the developing countries buildan attractive market to invest in due to the potential of the untapped demand.