Countries Need Smart Policies to Benefit from Technology's Full Potential
IMF News, October 6, 2016
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- Published: October 6, 2016
Overview
- Publication: IMF NEWS
- Date: October 6, 2016
- Context: Seminar at the IMF-World Bank Annual Meetings in Washington, D.C., titled “Technology, Innovation, and Inclusive Growth.”
- Core message: Technological change has the potential to transform lives and deliver significant global economic growth, but policy, education, and institutional reforms are required to ensure inclusive benefits and avoid widening the digital divide.
Economic impact and projections
- Projected incremental global economic growth over the next decade: $19 trillion.
- Projected GDP impact per country: one to three percent growth in GDP for every country in the world.
- Potential income effects: This growth could raise average incomes across the board—conditional on countries “getting the formula right.”
Distributional concerns and inclusion
- Risk of growing digital divide if policies are not well designed.
- Evidence of contrasting outcomes:
- Massive gains for many.
- Economic stagnation in lower-income segments leading to unrest.
- Business model example addressing inclusion:
- Sama (Leila Janah): hires workers living under the poverty line in developing countries to perform segmented tasks for high-technology firms at local computer centers, enabling employment with relatively little training.
- Technology drivers of inclusion highlighted:
- Low-cost, high-speed Internet access described as “one of the most powerful forces for transformation.”
- Mobile technology as a “game changer” for access to finance in Africa (example: mobile lending innovations described by Hilda Moraa, founder of Weza Tele).
Disruption risks and firm dynamics
- Competitive risk: “Either you disrupt or get disrupted.”
- Firm survival risk over the next decade: 40 percent of the companies in America, Asia, and Europe could disappear.
- Labor market implication: Jobs will inevitably be cut as part of technological transition.
Education and labor market policy
- Consensus: Education is key to adaptation.
- Assessment of current education model: “We need a new model of education—the current one is broken.”
- Urgency: “We must move fast on education, and not in the old model of linear thinking.”
- Labor-market adaptation proposals:
- Creative education models to enable reskilling and adaptability.
- Consideration of a universal basic income for those who lose their jobs and have difficulty transitioning to new ones (proposed by Leila Janah).
- Call to action: Invest in young people to drive the economy in coming generations.
Policy, institutional, and cultural challenges
- Primary implementation challenge: Adapting public policy and incentives to fast-moving technological change.
- Quote on comparative difficulty: “The technology is the easy part. What will be difficult is getting companies and countries to change the culture, the organization, and the reward mechanisms.”
- Suggested IMF action: Pair with technology experts to deepen understanding of technological impacts on economies; initiate dialogue with global thought leaders (seminar as a step in that direction).
Key recommendations and takeaways
- Pair IMF analysis with technology expertise to assess economic impact.
- Reform education systems with urgency and creativity to prepare workers for technological change.
- Invest in young people as drivers of the new economy.
- Consider social safety innovations, including exploring universal basic income, to support transitions for displaced workers.
- Promote policies that expand low-cost, high-speed Internet access and mobile-finance solutions to enhance inclusion.
IMF News — October 6, 2016. https://www.imf.org/en/news/articles/2016/10/06/am16-na100616-countries-need-smart-policies-to-benefit-from-technologys-full-potential