The technology revolution is radically transforming the business world. Individuals, business communities and states that control access to information in the form of technological innovation and knowledge-intensive products gain a clear competitive advantage in the world market, and dominate political and economic processes (Balamm & Dillman, 2015).
The digital economy has accelerated significantly due to the Covid-19 pandemic. Digital measures are also urgently needed to address the effects of the pandemic crisis. Digital measures are also needed in order to reduce the problems in the future and to support the development efforts of institutions and companies.
All countries are experiencing how important the digital economy is, and both developed and developing countries are starting to switch to digital, some of them slow or others fast. Digital technology is also a critical tool in determining the effects of disease spread. However, not everyone can equally benefit from this tool.
Increasing inequality is more of a concern than an economic phenomenon, it is one of the main threats to societies. Unequal societies tend to be more violent. There are more people in prisons, higher mental health and obesity levels, whereas life expectancy and confidence levels are lower. High inequality leads to high social unrest (Schwab, 2016).
The question we have to ask is how can we take advantage of digital technology, and reduce digital gaps with inclusive and sustainable development? How should national and international policies, tools and institutional reforms be constructed in order to create a world based on equal opportunities? We have to focus on these questions now.
Pioneering technologies – artificial intelligence, robotics, biotechnology and nanotechnology – have a market of 350 billion dollars and are estimated to reach 3.2 trillion by 2025 (UNCTAD, 2021). The role of digitalization in the business world of the future is increasing.
New technologies are spreading but also increasing inequalities. There is a lot of literature on this. However, this time it develops differently. The increase in inequalities is occurring faster and more effectively than previous revolutions (Schwab, 2016). The lives of poor individuals are changing unpredictably. Developments in agriculture, health, education, energy and other fields are changing the lives and lifestyles of many people. One of the main reasons for this is the mobility of pioneering technologies. Leading technologies lead to job / workforce loss and the combination of skills and capital to improve against skills. How can this risk be reduced? For this we have to think.
The number of people benefiting from products, social services and public goods is gradually decreasing. The rich regions of the north are the first to take advantage of technology, and Asian countries gradually join them with technological developments.
There is a significant increase in wealth with the last wave of development. Individuals are starting to live longer and healthier. Rapid growth in emerging economies is creating the global middle class. However, poverty and inequality are increasing. Inequality of income and opportunity is increasing, and so is inequality in education and health standards. In particular, the distinction between low and middle earners and high-middle and high income earners becomes clear. All these imbalances hinder economic growth and human development. Although income inequalities have decreased in the last 10-15 years – with the development of Asia and China – there is an increase in inequality within the country. This is especially true in the USA and Europe, China and India. Inequality between countries is decreasing, increasing within the country (UNCTAD, 2021)
Technological change is also reducing poverty, a similar situation can be observed in China and India and again in Africa. The impact of smartphones in these countries is quite clear.
In other words, some countries take advantage of new technologies. These technologies are used to increase efficiency and increase the living standards. Finance companies are starting to use this technology in making loan decisions, developing risk management techniques, and automation of banking to prevent fraud. For example, the headquarters of US technology providers are hosting cloud computing platforms. China hosts 5G, drones and solar PV. These two countries provide 30% and 70% of their patents and publications (UNCTAD, 2021).
However, technological changes are affecting jobs, wages and profits, inequalities between professions, firms and sectors, and inequalities between wage workers and capital owners are increasing. Income inequalities depend on many factors and affect economic, social or labor policies. The digital divide is increasing. New technology zones are connected to fast fixed internet lines, but half of the world’s population is still offline. Some regions have insufficient digital infrastructure and internet costs are also high.
Automation displaces workers, and the use of artificial intelligence and robots reduces employment. The industrial revolution was expected to destroy workers, it did not create new jobs, but new technologies are coming fast and the capacity of societies / developing countries to respond to this is very low. For example, it is estimated that 30-50% of jobs will be automated in Europe and the USA in the next 20 years (UNCTAD, 2021). Some will disappear completely, some will be newly formed.
Another problem is that MNCs will be able to keep production in the country by taking advantage of new technologies. This will slow the transition of traditional industries from advanced to developing countries. The global value chain will change. But due to the growing population, new production can also be retained in developing countries. We will see in time.
The loss of jobs will be accompanied by the polarization of the job. There will be growth in high and low wage jobs, and shrinkage in medium wage jobs. Its impact on very low-skilled jobs is small, but routine jobs will be affected (Schwab, 2016). Trade and international competition will be affected. Production and medium-skilled jobs will decrease in the advanced, and services and high-skilled jobs will increase. On the other hand, in middle-income countries, medium-skilled jobs in production / manufacturing will become common.
New technologies are promoting gig economies. Although the gig economy provides employment, it creates a precarious class and on-demand jobs / workers bound by contracts. The impact of the gig economy on workers will vary depending on whether those employed in these jobs are poor or not. Inequality will occur if these jobs change with higher paying jobs. In addition, these jobs will increase gender inequality.
New digital platforms are taking advantage of the network effect and the market is gathering in the hands of a few big players. This will reduce the motivation for falling prices as well as increase the inequality between capital holders and wage holders.
Inequalities between countries will also depend on data entry. The importance of big data emerges here. Artificial intelligence uses data created by users. The US and China will be the economies that will benefit the most. Data collected by the Internet of Things will bring benefits to other economies (UNCTAD, 2021).
Pioneering technologies in developed countries reduce competition based on cheap labor in today’s developing countries, for example in Asia and Africa. This increases the technological gap between the developed and the developing ones. It will be difficult for these economies to diversify their economies and create jobs. China, Mexico, some Asian countries are able to shift labor and capital from low-productivity agriculture to high-efficiency production and services, now the traditional development process will now be more difficult.
What are the risks for developing countries? The real impact will vary according to the sectors, the country’s capacity, and technology adaptation strategies. The problems that the developers have to accomplish can be listed as follows: The fact that the young population will increase the labor supply and it will create pressure on wages. They will have a hard time taking advantage of the new technology due to its low technology and innovation capacity. Developing countries have less variety of products and services. This process is faster in industrial countries and lower in less developed countries. This will have a negative impact on the economy. Developing countries having insufficient financial mechanisms will slow the transition to technology. For example; although most developing countries increase their R&D spending, they are still at low levels. In Sub-Saharan African countries, this rate is around 0.38% (UNCTAD, 2021).
What can be done? The technological process is necessary for sustainable development. But inequalities persist, or new ones are being created, technology users can have limited and undesirable consequences, the task for governments should be to maximize potential benefit by minimizing harmful consequences. Countries should encourage the adaptation of the use of leading technologies in all processes of development. An important requirement should be effective national governance, vision, and plans to create and transform the market. These plans are essential for inclusive and sustainable innovation. Human and physical resources should be invested. International cooperation should be increased, countries should be supported in all processes of technological development by drawing an international institutional framework. Programs should be supported by social movements / non-governmental organizations by establishing a relationship between technological innovation and social responsibility. National plans should be considered together with industrial policies.
New alternative models can be important in financing: crowdfunding, venture capital, innovation and technology funds. To take advantage of these technologies, workers need to be proficient in science, technology, engineering and mathematics, otherwise they will lose their jobs. In this respect, strong policies are needed to protect workers’ rights.
In summary, new technology opens up huge opportunities, but some regions are not yet ready for it. They have a hard time adapting technology. This shows that they may face obstacles in achieving sustainable development goals. Every society should apply its policies in line with its development goals, taking into account the economic, social and environmental conditions. This is also necessary to improve digital qualities and reduce the digital divide. Social protection measures should be strengthened, taking into account the consequences on the labor market.
References
Balamm, D and B. Dillman (2015). Introduction to International Political Economy.Pearson
Schwab, K. (2016). Fourth Industrial Revolution, World Economic Forum
UNCTAD, (2021). Technology and Inovation Report. UN.