Digital Technology and a Healthy Global Economy

Boston University School of Management - IT

A substantial contribution to the overall growth of the global economy could come from the increased use of digital technologies. The greatest impact would be realized by emerging markets, but the growth would have a reach across many countries, with a $1.36 trillion output to be realized by 2020.

According to a recent study conducted by Accenture and Oxford Economics, digital is defined through an array of strategies, which include the volume of transactions conducted online, the use of cloud or other technologies to streamline processes, the pervasiveness of technology skills in a company, or an economy’s acceptance of new digitally driven business models. Organizations who transition to fully digital platforms, essentially decide to implement “digital at the heart of their strategy and enterprise to transform every part of their operations, including R&D, supply chains, and the use of cloud, analytics and CRM technologies.”

While digital technology is extremely vital to the growth that could be realized in the next three to five years, it shouldn’t be seen as the only opportunity for growth. This is evident in the estimated numbers, as the growth realized in dollars is less than two percent of the global gross world product. This doesn’t diminish the amount of growth, it merely means there is an enormous amount of room for other driving factors. Innovation is extremely vital. It’s in the DNA of any effort towards growth. But with it comes the demand of education, new skills and training. This is oftentimes the contrast to growth, regardless of the platform. Simply put, it’s out with the old and in with the new and unfortunately this type of change isn’t easily implemented nor embraced.

Source: Accenture

Source: Accenture

Digital technology is a part of our everyday lives. When you break it down between personal and business, it’s easy to see how much of an impact it already makes and how this impact draws a clear line to what the future could hold. It’s a part of what we read and how we choose to access this information. It’s in where and how we shop and the processes in place to pay for those purchases. For businesses, it’s in the collaboration opportunities and knowledge sharing. It’s in market penetration, trend analysis, process improvements and overall cost savings. There is truly no end to how digital technology could continue to improve the economy.

The growth behind the digital technologies movement isn’t merely about automating processes. Of course this method would have impact on productivity, as well as overall performance and efficiency. But with the evolution of digital and the undeniable role it plays across various facets of business, organizations will essentially have to transform their overall operations. They will have to embrace digital in every aspect of their business, in order to remain a viable competitor within their key markets. This is why it’s important to note, when it comes to theorizing the impact of digital technology on global economy, that the perspective centers around one keyword – could.

The Creation of the “World Bank Rival”

China’s new financial organization, Asian Infrastructure Investment Bank (A.I.I.B.) has simultaneously sparked tension and gained momentum and support. The opposition seems to hail primarily from the United States, citing concerns that the AIIB could undermine the World Bank, and possibly spur poor oversight and minimally governed financial practices. Just last month, the largest economies in Europe- France, Germany and Italy, announced their desire to become founding members of AIIB. This decision followed closely behind the United Kingdom, whose decision to join drew public admonishment from the White House, which is not recognized as common behavior. More than 50 countries have now signed on to join the AIIB initiative.

Launched in October 2014, the AIIB has the potential to trigger economic growth for China. Xi Jinping, China’s president and Communist Party Chief, initially proposed funding to poor Asian countries for infrastructure projects. And though this is a part of what the ADB and World Bank already provide, there is an enormous infrastructure gap. According to a 2010 report published by The Asian Development Bank Institute (ADB), Asia will need to invest as much as $8 trillion into its infrastructure in order to see a continuation in economic development over the next ten years. For China, this would mean much needed investments towards improving their environment, which impacts the country’s health conditions, as well as increasing macroeconomic stability and trade expansion. Resources available within the confines of existing international financial institutions simply aren’t enough to help bridge the gap.

World Bank president, Jim Yong Kim has welcomed the chance to collaborate with AIIB, stating, “The decisions we make this year, and the alliances we form in the years ahead, will help determine whether we have a chance to reach our goal of ending extreme poverty in just 15 years.” Kim sees great potential to be forces in economic development for emerging markets, through co-funding projects and working together towards the same financial goals for the global economy. There are also talks of a development institution, amongst the BRICS developing nations (Brazil, Russia, India, China and South Africa), however there is a struggle to reach a decision about how fund it and subsequently manage it.

Jim Yong Kim, the World Bank president, suggested the bank and the AIIB could co-finance infrastructure projects or work on regional integration. Photograph: Nicholas Kamm/AFP/Getty

Jim Yong Kim, the World Bank president, suggested the bank and the AIIB could co-finance infrastructure projects or work on regional integration. Photograph: Nicholas Kamm/AFP/Getty

The unwavering lobbying by the United States, against the AIIB could prove to be ineffective and even have a negative long-term impact on trade. What is becoming clear to many is that the multilateral system at work to fight against poverty, while perpetuating sustainable global economic growth is of great benefit to all nations. And while the United States, along with few others, raise questions of concern and even reason for cautious acceptance, they are losing credibility and possibly turning the eyes upon themselves.

The question still remains, is it genuine concern over safeguarding, meeting standards and regulation or is it more about the loss of power, governance and leadership?