A Portrait of the Digital Economy as A Mature Trend

001Digital technologies have spread rapidly throughout the world. Digital dividends—the broader development benefits: growth, jobs, and services—have lagged behind, according to the latest World Development Report (WDR) from the World Bank.

Digital technologies promote innovation, boost efficiency, and increase inclusion as people get access to previously out-of-reach services. However, in spite of the many individual success stories, the effect of technology has so far been less than expected:

World Bank - Digital Pessimism

These trends persist, not because of digital technologies, but in spite of them. Why? The report finds two reasons:

  • Nearly 60 percent of the world’s people are still offline and can’t participate in the digital economy in any meaningful way.
  • Some of the perceived benefits of digital technologies are offset by emerging risks

Many advanced economies face increasingly polarized labour markets and rising inequality. Without accountable institutions, public sector investments in digital technologies amplify the voice of elites, which can result in policy capture. And because the economics of the internet favour natural monopolies, the absence of a competitive business environment can result in more concentrated markets, benefiting incumbent firms.

What should countries do? Making the internet universally accessible and affordable should be a global priority. However, although vital, connectivity is not enough to realize the full development benefits. Digital investments need the support of “analogue” complements:

  • Regulations, so that firms can leverage the internet to compete and innovate;
  • Improved skills, so that people can take full advantage of digital opportunities;
  • Accountable institutions, so that governments respond to citizens’ needs and demands.

Digital technologies will, in turn, augment and strengthen these complement, accelerating the pace of development. A harder task will be to ensure that the internet remains open and safe as users face cyber-crime, privacy violations, and online censorship.

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