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4 Aug 2023

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Why Does the US Have a Mediocre Digital Readiness Score?

The United States ranks 45th among 147 nations in the inaugural IDCA EESG Digital Readiness of Nations Index. In North America, it trails Canada. It ranks 26th among the 37 developed nations covered by the Index.

The Index considers four broad categories: Economy, Environment,Social, and Governance. Its conception melds ESG measurements with the added Economy dimension. All of the dimensions are themselves composed of specific data points drawn from hundreds of publicly available sources.

The Index is not meant to be a competition, but rather a way of finding strengths, weaknesses, and opportunities within the economies of nations. There are leaders, laggards, bright stars, and diamonds in the rough throughout all the world's regions and income tiers. The Index provides a mechanism through which to identify them.

Yet it may seem shocking to see the US rank just below the top 30% of nations under the Index's purview. The country maintains, by far, the world's largest economy, still 40% larger than that of China. It remains the unquestioned global leader in technology innovation. Technology use in the US, through a military with funding higher than the next 10-largest countries combined and a space program with almost two-thirds of the entire world budget, drawfs that of all other nations.

Reasons Behind the Ranking
So why is the US not the leader, or even in the top 10, or any global technology rankings? The short answer is its mediocre commitment to sustainable energy, relatively slow Internet service given the nation's wealth, a weak social safety net relative to other developed nations, and concerns about rising income disparity and weakening democratic institutions.

The first of these issues – sustainability – is the most significant, accounting for almost 60% of the difference beetween the US's overall score and the overall score of the world's Top 10. But everything in societal development (and the IDCA Index) is interconnected, so if the US were to be able to improve its sustainability footprint by a vast amount, it would be driven largely by significant improvements in the economic, social, and governmental areas as well.

The US's overall and category scores break down as follows. The scores are presented in comparison with Canada (which ranks in the world's Top 10) and with the world averages:

United States 51
Canada 67
World 41

United States 73
Canada 77
World 67

United States 14
Canada 44
World 21

United States 57
Canada 70
World 48

United States 72
Canada 83
World 44

Eyebrows might raise a bit with the Economy scores. Canada often has higher inflation and unemployment, and higher relative budget deficits than the US. Its currency, expressed in Canadian dollars, is traditionally quite weak against the US dollar, making the country a bargain for American tourists and presenting difficulties for employers trying to match US compensation packages.

So why does Canada rate higher than the US in this category? The Index accounts for the amount and condition of Digital Infrastructure in each country – Internet access and speed, mobile connectivity, and servers – relative to a nation's income. The question is, how much has the nation accomplished relative to its income level? Canada's weak currency helps it here, in that the nation has developed overall Digital Infrastructure that is mostly comparable to that of the US with a smaller per-person income.

Only in its server infrastructure does Canada trail the US significantly. But even in this area Canada is still relatively robust, given that the US server infrastructure is skewed mightily by the ultra-dense data center fabric of Northern Virginia serving the US defense industry and other government functions.

Social and Political Factors
Growing income disparity in the US also drags its economic score down. Corruption is also a slight drag on the US score. The perception and presence of corruption is a significant factor in the economic performance of all nations, and is measured by a complex, multi-factor formula in the Index. Canada is rated the 11th least-corrupt nation in the world, while the US is rated 25th, on a par with France and Chile.

The nagging, ongoing social and political problems in the United States recently resulted in the Fitch rating agency lowering the country's bond rating from the absolute highest tier, where the nation has traditionally comfortably resided. This move should have no effect on interest rates or any other substantial economic measurement, and has been derided by many analysts, but it reflects an uneasiness about the stability of the world's largest economy in these times.

“Uneasiness” is not a factor at work in the Index, but several of the measures of data that go into it reflect the status of the US as not among the social or governance leaders of the world. Here is a look at where the US ranks among the 147 nations covered, in each of the EESG categories in the Index :

Economy 48th
Environment 84th
Social 57th
Governance 25th

This data shows that even though the US achieves its highest ranking in the Governance category, thereby pulling up its overall score considerably, even in this category it barely makes the world's Top 25. There are very high expectations for the United States, among its citizens, and among the 96% of the world's population that doesn't live there, to be a leader in all aspects. The United States is not meeting such expectations; addressing all of its issues is not something that can be done simply or quickly.

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