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The Economic Impact of Internet Shutdowns: A Global Perspective

Internet shutdowns, where governments intentionally disrupt internet access, are becoming increasingly common around the world. These shutdowns can have major economic consequences, both locally and globally. 

The Rising Frequency of Shutdowns

Internet shutdowns are often implemented during times of unrest or around elections in an attempt to control flows of information.

According to digital rights organisation Access Now, there were at least 196 internet shutdowns in 2018 alone, affecting millions of people. Shutdowns can last from hours to months, depriving businesses and individuals of vital connectivity.

The regions with the most frequent shutdowns are Asia and Africa. India implemented over 470 shutdowns in 2023, Myanmar and Ethiopia 444, and Iran 442.

Other countries with major shutdowns include Russia, Tanzania, Senegal, Cameroon, and Azerbaijan. Government justifications range from stopping the spread of disinformation to maintaining public safety. However, critics argue many shutdowns limit free speech and access to information.

Activist groups like Access Now have called on governments and businesses to respect digital rights and avoid unjustified shutdowns. But the trend continues, with ever more populations finding themselves cut off digitally.

Local Economic Impacts

When the internet is disrupted in a region, today’s highly digital economies grind to a halt. A report from TopVPN found that the Indian government restricted access to the internet for 1,157 hours in 2021, which included bandwidth throttling and full blackouts. This cost the Indian economy $582 million, which did irreparable economic damage.

Shutdowns have many economic ripple effects:

  • Lost productivity and wages. Many businesses rely on network reliability to operate, and are forced to halt operations when they lose access to the internet. Employees in both white-collar and informal sectors can’t work remotely. This results in major productivity declines.
  • Supply chain interruptions. Inventory systems, logistics services, and delivery coordination depend on internet connectivity. Disruptions lead to delays, shortages, and cascading breakdowns across sectors.
  • Reduced sales. Retailers, financial services, tourism and other businesses experience drops in sales and customers when populations lose internet access. Many businesses operate online these days, and when they can’t access their sites and customers can’t get in touch, it is very damaging. The loss of internet connectivity shrinks revenues dramatically.
  • Less tax revenue. With lower economic output across the board, governments collect fewer sales, income, and other taxes, reducing budgets. This can curtail vital public services such as health and transport.
  • Increased uncertainty. Investors become wary of markets prone to shutdowns, dampening future growth. Entrepreneurs postpone expansion plans.

Studies show that regions with more frequent, longer shutdowns have markedly slower GDP growth compared to global averages. The economic uncertainty deters foreign investment as well.

Impacts on Vulnerable Groups

Internet shutdowns disproportionately affect vulnerable groups who rely on connectivity for essential services:

  • Small businesses have fewer resources to weather shutdowns compared to large firms. Many informal workers lose income flows entirely when offline. Freelancers who rely on the internet for work are disproportionately impacted, as they have no income when work is unavailable.
  • Students and educators are unable to access remote learning materials and classes, widening education gaps.
  • Health services like telemedicine are interrupted, reducing access to care.
  • Cashless individuals face hardships as mobile banking apps and ATMs go offline.

The economic blows to these groups make it even harder to escape poverty during shutdowns.

Global Impacts

While local economies bear the brunt of shutdowns, global networks are also affected. Internet outages implemented by governments cost the economies in their respective countries billions, with the TopVPN report estimating more than 30,000 working hours were lost, costing the global economy $5.45 billion.

Internet outages typically impact:

  • Tech company earnings. Multinational internet platforms lose significant advertising and other revenue when populations are cut offline. Facebook reported its slowest-ever revenue growth during India’s 2019 shutdown.
  • Supply chain disruptions. Manufacturers relying on cross-border information flows and digital inventory systems have to halt production. This can have ripple effects on companies worldwide.
  • Global financial markets. Modern finance depends on real-time flows of data worldwide. When major markets lose connections, it introduces uncertainty and volatility more broadly.
  • Innovation and development. Startups and developers thrive on open access to information. Shutdowns deprive them of opportunities, slowing innovation over the long term.

Overall, internet shutdowns disrupt business operations, sales, and workforce productivity across sectors. As the global economy becomes more digitally interconnected, the economic impacts of shutdowns are increasingly felt worldwide.

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