The “Digital Revolution” of Wellbeing

A. Michael Spence

By A. Michael Spence

More broadly, today’s technological advances have created a macroeconomic conundrum, insofar as growth and productivity trends appear to be heading in the wrong direction.

By A. Michael Spence

Western attitudes toward digital technology have soured in recent years, as once-celebrated innovations have begun to reveal their downsides. But, like all technological revolutions, the digital one is a double-edged sword, offering substantial benefits alongside daunting challenges – and certainly not only in the West.

For example, studies show that e-commerce and digital finance in China have contributed to both the rate and inclusiveness of economic growth. Very small businesses (with an average of three employees) that could not access conventional sources of credit can now get financing. They also can tap into expanded markets through various online platforms, many of which provide tools and data to boost productivity, improve product quality, and benefit from business training.

In general, e-commerce platforms enhance financial and economic inclusion if they are open and geared toward broadening access to digital markets, rather than competing with their own users’ product lines. By contrast, digitally driven automation, artificial intelligence (AI), and machine learning have non-inclusive effects – owing to major labor-market disruptions – that must be countered.

Read the full Project Syndicate article.

A. Michael Spence is a William R. Berkley Professor in Economics & Business.