A few months ago I attended the 12th annual Brookings Blum Roundtable on Global Poverty, a meeting that brought together around 50-60 policy and technical experts from government, academia, business, investors and NGOs. This year’s event was focused on the impact of digital technologies on economic development in emerging and developing countries. It was organized around six different sessions, each of which explored the links between technology and development through a different lens.
Prior to the event, the Brookings Institution commissioned a policy brief for each session to help set the stage for the ensuing discussions. I wrote one of the briefs, - Will the Digital Revolution Deliver for the World’s Poor. I would now like to discuss another brief which I found quite interesting, - Will the Spread of Digital Technologies Spell the End of the Knowledge Divide?, by Deepak Mishra, lead economist at the World Bank. Dr. Mishra is also co-director of the World Development Report 2016: Internet for Development, which will shortly be released by the World Bank.
As discussed in my policy brief, Internet access and mobile phones are being rapidly transformed from a luxury to a necessity that more and more people can now afford. Advances in technology keep expanding the benefits of the digital revolution across the planet. Over the coming decade, a 2013 McKinsey study estimates that up to 3 billion additional people will connect to the Internet through their mobile devices, enabling them to become part of the global digital economy.
Our digital revolution is accelerating three important trends that should significantly improve the quality of life of the world’s poor: businesses are developing offerings specifically aimed at lower-income customers; governments are improving access to public and social services including education and health care; and mobile money accounts and digital payments are increasing financial inclusion.
In addition, notes Mishra, the digital revolution is significantly expanding the availability of knowledge, thus leading to an increasingly global knowledge-based society. But this evolution comes with some very important caveats:
“Evidence suggests that digital technologies are in fact helping to expand knowledge, but are not succeeding in democratizing it. That is, digital technologies are helping to bridge the digital divide (narrowly defined), but are insufficient to close the knowledge divide. Democratizing knowledge is more than a matter of connectivity and access to digital devices. It requires strengthening the analog foundations of the digital revolution - competition, education (skills), and institutions - that directly affect the ability of businesses, people, and governments to take full advantage of their digital investments.”
Let’s look a little closer at what’s entailed in these three “analog foundations of the digital revolution.”
- Regulations that promote competition: Lowering the cost of starting firms, avoiding monopolies, removing barriers to adoption of digital technologies, ensuring the efficient use of technology by businesses, enforcement of existing regulations, …
- Education and skill development: Basic IT and digital literacy, helping workers adapt to the demands of the digital economy, preparing students, managers and government officials for an increasingly digital world, facilitate life-long learning, …
- Institutions that are capable and accountable: Empowering citizens through digital platforms and information, e-government services, digital citizen engagements, increased incentives for good governance both in public sector and private firms, …
Digital technologies are necessary but not sufficient. Countries must also strengthen these analog foundations to realize the benefits of their technology investments as well as narrow their knowledge divide.
Mishra’s observations bring to mind similar discussions around the impact of technology on business and economic productivity. In their 2009 book, Wired for Innovation: How Information Technology is Reshaping the Economy, Erik Brynjolfsson and Adam Saunders wrote about the impact of technology-based innovation on business productivity:
“The companies with the highest returns on their technology investments did more than just buy technology; they invested in organizational capital to become digital organizations. Productivity studies at both the firm level and the establishment (or plant) level during the period 1995-2008 reveal that the firms that saw high returns on their technology investments were the same firms that adopted certain productivity-enhancing business practices. The literature points to incentive systems, training and decentralized decision making as some of the practices most complementary to technology.”
Organizational capital is a very important concept, critical to enable companies to take full advantage of their technology investments. Similarly, at a country level, nations must strengthen their analog foundations to realize the full benefits from their digital investments.
Digital technologies have been diffusing around the world at an unprecedented rate. “The average diffusion lag is 17 years for personal computers, 13 years for mobile phones, and five years for the Internet, and is steadily falling for newer technologies.” The world is more connected than ever before.
But, Mishra reminds us that “nearly 6 billion people do not have broadband, 4 billion do not have Internet access, nearly 2 billion do not use a mobile phone, and half a billion live outside areas with a mobile signal.” According to Mary Meeker’s 2015 Internet Trends Report, Internet access and smartphone subscriptions continue to grow rapidly around the world, adding around 200 million per year and 370 million per year respectively. Much progress is being made in closing the digital divide, but much remains to be done.
Beyond building out digital infrastructures and increasing the number of people with smartphones and Internet access, Mishra discusses three important enablers of an increasingly knowledge-based society.
Social Media: “Social networks are fundamental to human society,… They have been credited with facilitating economically beneficial interactions, channeling users’ behavior in ways that are consistent with development, providing a platform for information and dissemination during natural disasters and emergencies, and encouraging political mobilization and social change.”
The data revolution: “The world’s technological capacity to compute and store information has grown at an exponential rate. In harnessing this data explosion for development, attention focuses on two overlapping innovations: ‘Big Data’ and ‘Open Data’… Yet sustained, impactful, scaled-up examples of Big Data and Open Data in developing countries are still relatively rare. Most Big Data are in private hands - large telecom and Internet companies - which are reluctant to share it for fear of jeopardizing customer privacy or corporate competitiveness. Public agencies, too, are reluctant to share data, even when they have large public benefits.”
Digital platforms. The most visible manifestation of digital technologies is the emergence of a platform economy - loosely defined as a digital medium that lets others connect to it - with far-reaching consequences. This is affecting a growing number of industries including retail, banking, transport, energy, and public service delivery… Like all great opportunities, digital platforms also come with risks. What makes online systems easy to use for customers also makes them susceptible to cybercrime. In the financial sector, the entry of nontraditional players poses new challenges for policy, regulation, and supervision.”
In the end, democratizing knowledge requires a significantly increased access to digital technologies, as well as the foundational capabilities to ensure that they benefit everyone. “The right combination of technology and complements is needed to make the development process more efficient and inclusive,” writes Mishra in conclusion. “As technology rapidly spreads, the gap between technology and regulations, skills, and institutions will continue to widen. Closing this gap is an imperative to further expand and democratize global knowledge.”