Thursday 24 Jan 2019 | 05:41 | SYDNEY
Thursday 24 Jan 2019 | 05:41 | SYDNEY

World Bank: Digital revolution has brought less economic benefit than expected



15 January 2016 10:55

A very interesting new report from the World Bank on the economic effects of digital technologies was released earlier this week. 

Digital technologies – such as the internet, mobile phones and 'all the other tools to collect, store, analyse, and share information digitally' – have since the 1990s been generally considered to be the great economically empowering tools of the digital age. This has been more or less one of the shared philosophies of Silicon Valley. That's what makes the World Bank’s conclusion surprising:

Although there are many individual success stories, the effect of technology on global productivity, expansion of opportunity for the poor and the middle class, and the spread of accountable governance has so far been less than expected.

As the Bank points out, not only are digital technologies not increasing productivity across much of the world, they may be causing greater inequality:

Many advanced economies face increasingly polarized labor markets and rising inequality—in part because technology augments higher skills while replacing routine jobs, forcing many workers to compete for low-paying jobs. Public sector investments in digital technologies, in the absence of accountable institutions, amplify the voice of elites, which can result in policy capture and greater state control. And because the economics of the internet favor natural monopolies, the absence of a competitive business environment can result in more concentrated markets, benefiting incumbent firms. Not surprisingly, the better educated, well connected, and more capable have received most of the benefits—circumscribing the gains from the digital revolution.

The report suggests that universal internet access is crucial to spreading the positive effects of digital technologies: 'Worldwide, some 4 billion people do not have any internet access, nearly 2 billion do not use a mobile phone, and almost half a billion live outside areas with a mobile signal.' But importantly, this must be followed by 'analog' improvements from national governments:

Access to the internet is critical, but not sufficient. The digital economy also requires a strong analog foundation, consisting of regulations that create a vibrant business climate and let firms leverage digital technologies to compete and innovate; skills that allow workers, entrepreneurs, and public servants to seize opportunities in the digital world; and accountable institutions that use the internet to empower citizens. The long-term development impact is by no means definitive, being continuously shaped by the evolution of technology (connectivity) and the country’s choice of economic, social, and governance arrangements (complements). Countries that are able to swiftly adjust to this evolving digital economy will reap the greatest digital dividends, while the rest are likely to fall behind.

Maybe recognising the fact that technological advances can simultaneously lead to human empowerment and the spreading of inequality is the first step in reordering how we see digital revolution.

Photo courtesy of Flickr user Internews Europe.

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