Literacy is traditionally defined as ability to read, write and do arithmetic (+, -, <, >, multiplication and division).
It costs anywhere between $1000 - $5000 to make a person literate in a developing country. In developed countries, the costs are probably between $5000 - $50,000. For simplicity, lets assume the minimal cost of USD 1000. Worldwide, there are about 775 million illiterate. Consider a developing country like India, there are more than 300 million illiterate people. By 2050, the world will add another 2.5 billion people, India will add another half a billion people.
Cost of literacy at $1000/person
India World
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Now 300 billion 775 billion
2050 800 billion 3.3 trillion
What seems to be a simple thing costs staggering amounts of money if we consider the scale at which this needs to be done. Literacy is a problem of developing countries, not the developed countries. Regardless, why not solve the problem of literacy once and for all? This is a necessary cost of being human, billions more are going to be born in the next several centuries. Needless to say, the third world does not have that kind of deep pockets.
Let us examine the process of literacy a bit deeper.
Why do we write? We write to store information and to communicate. This was a critical skill when the highest form of technology available was a paper, it was the only means to efficiently store and communicate. Writing is a skill that requires the ability to faithfully reproduce characters on paper. This requires developing fine motor control of fingers, about the same effort required to make someone a decent golf player or musician. Paper as a technology is on its way out. There is no need to write. Touch based devices make this entirely unnecessary. Any person who can recognize characters can type using a touch based device. Our communication methods are slowly but definitely moving towards completely electronic: email, web, messaging. Why teach a skill that is not going to be of any use in a decade or so? We have touch, we have typing devices, we have voice-to-text synthesizers; all these cover all the use cases of writing. Calligraphy is an arts class, not a required skill.
We can remove writing from the definition of literacy. It is not needed. A person who can recognize characters has multiple means at his disposal either to store or communicate.
Reading is an essential skill. Reading starts by engaging the visual-cognitive apparatus to recognize characters, leading to words and finally sentences. This is highly involved process; parents, teachers, tutors spend several years teaching this skill. Technological advances give us many tools to tackle this. We have same language subtitling, which coupled with a large number of entertaining videos would take a lions share of this work.
Let us examine a different route. The developmental milestones of a child are universally acknowledged: babbling upto one year, upto 50 words by two years and probably be able to talk in complete sentences between three and four years of age. This trajectory closely resembles that of the reading skill: alphabet, word and then sentence. I believe we can figure out a way to enable reading while the child develops talking. A child figures out how to talk out of its own curiosity and the necessity to interact with the environment. This process is entirely driven by the child and costs close to nothing. A child already figured out words, sentences and how to speak. It can't be that difficult to add character recognition (reading) to the skill the child is developing. We can leverage speech-to-text engines, games and apps to enable reading while the child naturally learns a language. This is significantly faster, a child would be able to read at a reasonably high level at age three or four.
That leaves us with arithmetic. Kids love playing games. Give them a PS3 or PS4, they will figure out how to play a game and win. It can't be that difficult to come up with games which require arithmetic skills to level up and are fun to play. Games and apps are a one time cost for humanity that will take away a significant chunk of costs associated with literacy. A great many number of games can be invented, for eg, someone came up with a game to learn text editor vi: http://vim-adventures.com/
Testing Literacy: Of course, it is a fully automated test with feedback to address specific deficiencies!
If we can intelligently leverage a few million dollars in apps, games, videos with same language subtitles, speech to text engines, and fine tune the process for several years, we can take a shot at (1) saving trillions of dollars in costs (2) solve literacy forever (3) make it significantly faster, shave off 4 - 5 years of time to learn these skills. (4) Make it fun!