Why Apple's New Phones Won't Change the World but Nokia's WillBy
Apple’s new iPhone hits stores today and it looks likely the new models will be another financial success for the company. It won’t, however, do much to boost the U.S. economy. In the U.S., where almost everyone has long had access to a telephone and to other information-based services like banking, a smartphone with a few more applications and gadgets is hardly likely to drive gross domestic product growth. But in poorer countries, the story is different: There, the ongoing rollout of mobile phone service is nothing short of revolutionary, and applications such as mobile payments are multiplying that impact.
According to World Bank data, sub-Saharan Africa sees 65 mobile subscribers per 100 people, up from about 1 subscriber per 100 in 1998. Given there is only about 1 fixed-line phone per 100 people, the vast majority of those subscribers went from having no access to a phone at all to having their own phone over the last 15 years.
That massive expansion of the telecom sector had a dramatic and direct impact on macroeconomic indicators. Earlier this year, official estimates of the size of Nigeria’s economy doubled thanks to a “rebasing” of GDP statistics. The recalculation took account of changes in the shape of the country’s economy over the past two decades—and the largest single change was the size of the telecom sector. Under old measures of the economy, telecommunications accounted for less than 1 percent of GDP. Under the rebased measure, it accounted for 10 percent. Telecom played a similar role in hiking GDP statistics in Ghana after its rebasing a couple of years ago.
One reason mobile phones have a considerably greater impact in poor countries is because other information-based services are so weak. Only about one-quarter of people in sub-Saharan Africa have an account at a financial institution—let alone a Visa or American Express card. Mobile payments have leapfrogged the rollout of plastic payment systems across the region. As many as 60 percent of Kenyans use their mobile phone for financial transactions, and almost three times as many people in the country use mobile banking than have a debit or credit card.
There are limits to the mobile revolution, even in Africa. A phone can’t make up for electricity networks that cover a fraction of the population, schools that frequently graduate the illiterate, or legal systems that are corrupt or incompetent. And though mobile technology may have raised incomes in Africa by a few percentage points, GDP per capita in the U.S. is still only about 1,600 percent of the average in the sub-Saharan region. Even so, it’s worth remembering that while elegant styling and fancy tablets have made Apple successful, it’s the cheap Nokias and the text-based mobile money systems that have really changed the world.