Jan 13, 2016
Digital revolution needs offline help to realize its potential
By Donna Barne
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More people around the world have access to mobile phones today than to electricity or water. Does this mean the digital revolution has truly dawned?
The answer to that question is no, not yet, says the World Bank’s 2016 World Development Report on the Internet, “Digital Dividends.”
The spread of digital technologies over the last two decades has been rapid and generated a lot of excitement about the possibilities of the digital age. But the hoped-for benefits — greater productivity, more opportunity for the poor and middle class, more accountable governments and companies — have not spread as far and wide as anticipated, says the report.
“Clearly, the potential is massive,” says Deepak Mishra, a World Bank economist and one of the co-directors of the report, a flagship publication of the World Bank.
“We share the optimism of Silicon Valley when it comes to the transformative potential of digital technologies. But not the expedient view that the benefits are both assured and automatic,” Mishra said. “We think translating digital investments into dividends is much more difficult than many experts have reported before.”
Digital Dividends, a survey of the latest research, data, and literature on the digital economy, says greater efforts must be made to connect more people to the Internet and to create an environment that unleashes the benefits of digital technologies for everyone.
While Internet users have tripled in a decade to an estimated 3.2 billion, nearly 60% of people globally — some 4 billion people — are still offline, says the report.
And despite the rapid adoption of mobile phones, nearly 2 billion people do not use one. Almost half a billion people live outside areas with a mobile signal.
People without access to digital technology and the education and skills to adapt will be increasingly left behind as the rest of the world advances, warns the report.
“Connecting everyone is a priority,” says Uwe Deichmann, the other Digital Dividends co-director.
Digital technologies, however, are not a shortcut to development, though they can accelerate it if used in the right way, Deichmann adds.
“We see a lot of disappointment and wasted investments. It’s actually quite shocking how many e-government projects fail,” says Deichmann.
“While technology can be extremely helpful in many ways, it’s not going to help us circumvent the failures of development over the last couple of decades. You still have to get the basics right: education, business climate, and accountability in government.”
“We must ensure that the benefits of new technologies are shared widely, particularly for the poor.”
Jim Yong Kim, World Bank Group President
The report covers the Internet’s role in promoting development, including growth, jobs, and delivering services. It also examines the risks of the digital age — the growing concentration of the industry, increasing inequality as some types of jobs get automated and disappear, and the threat that the Internet will be used to control information instead of sharing it.
A key message is that “analog,” or non-digital, factors such as policies and regulations are needed to ensure the digital market is competitive and the Internet expands access to information, lowers the cost of information, and promotes more inclusive, efficient, and innovative societies.
Digital technologies amplify the impact of good and bad policies, so any failure to reform means falling farther behind those who do reform, says the report.
“If regulations don’t promote competition, markets will become concentrated, and you’ll have digital monopolies, and divergence of fortunes across countries,” says Mishra.
Likewise, “If people have the right skills, digital technology will help them become more efficient and productive, but if the right skills are lacking, you’ll end up with a polarized labor market and more inequality.”
In developed countries and several large middle-income countries, technology is automating routine jobs, such as factory work, and some white-collar jobs. While some workers benefit, “a large share” of workers get pushed down to lower-paying jobs that cannot be automated, says Deichmann.
“What we’re seeing is not so much a destruction of jobs but a reshuffling of jobs, what economists have been calling a hollowing out of the labor market. You see the share of mid-level jobs shrinking and lower-end jobs increasing,” he said.
Improving and rethinking education will be critical to prepare people for future job markets, says the report.
The report says it is important to keep in mind that job displacement from technological change is part of economic progress and that fears of “technological unemployment” go back to the industrial revolution.
While the information and communication technology sector is still a fairly modest part of the global economy (about 7% of GDP in the United States, home to eight of the world’s 14 largest technology companies by revenue, but much less in developing countries), it has produced some extraordinary benefits in the rest of the economy.
Access to digital technologies has provided opportunities that were previously out of reach to the poor. Some 8 million entrepreneurs in China use e-commerce to sell goods, one-third of whom are women. Digital identification in India has reduced corruption and increased access to services. And simple SMS messages remind people living with HIV in Africa to take their medications.
“The world’s greatest digital revolution is transforming businesses and governments, but the benefits are neither automatic nor assured,” said World Bank Group President Jim Yong Kim. “We must ensure that the benefits of new technologies are shared widely, particularly for the poor. Evidence suggests that we can do this by improving competition among businesses, investing in people — starting with pregnant mothers, to ensure that all children have the cognitive ability to later connect to the digital revolution.”
Read more World Bank stories.
