We are living in a period of rapid technological advancement. Automated systems promise a brighter future for everyone. However, in order to actualize that promise, smarter policies are required. As technology reshapes markets, authorities will need to be more sensitive to change in order to capture potential gains in productivity and economic growth, as well as to address rising inequality. And, in the aftermath of the COVID-19 epidemic, change will only accelerate as artificial intelligence and other new advancements propel digital transformation forward.
As market dynamics change as a result of technological advancements, policymakers must ensure that markets remain inclusive and that enterprises and people have access to new opportunities. In sectors such as competition policy, the innovation ecosystem, digital infrastructure development, worker upskilling and reskilling, and social protection regimes, new thinking and policy changes are required. Stronger and more inclusive economic growth can be achieved through encouraging greater adoption of new technologies among businesses and developing complementing workforce capabilities.
Politically, major economic reform is unavoidably difficult. The difficulties are compounded by today’s deepening political tensions. However, political support appears to be emerging in certain critical reform areas, such as confronting tech companies’ market dominance and establishing an acceptable data regulation framework. Crises have the potential to change the political landscape in favor of reform. The COVID-19 pandemic has uncovered fault lines that can help galvanize action to address growing economic inequities. All too frequently, clichéd discussions about the trade-offs between enhancing economic growth and decreasing inequality impede reform. However, research findings that reveal this to be a false dichotomy are increasingly informing policy. The growth and inclusion agendas are inextricably linked in achieving the potential of great new technology.
Given the related dynamics between the recent rise in inequality and the productivity slowdown, much of the reform agenda to obtain more egalitarian outcomes from technological development is also an agenda to achieve higher economic outcomes. Of course, specific policy requirements and priorities change among economic groups, particularly between established and emerging economies. In general, there are five areas where national policymakers should pay more attention.
First, competition policy should be updated for the digital age to ensure that markets remain free and competitive. The digital economy has created new regulatory concerns that need to be addressed. Regulatory responses to private data aggregation, competition difficulties with digital platforms that have emerged as gatekeepers in the digital world, and market concentration caused by tech giants that resemble natural or quasi-natural monopolies are just a few examples. The regulation of data, which is the lifeblood of the digital economy, is a major concern. Data management issues, such as use, access, portability, and openness while maintaining privacy and security, are becoming increasingly important for competition.
Second, in an increasingly knowledge-driven economy, the innovation ecosystem should be strengthened so that it not only promotes new knowledge and technology advancements, but also their widespread dissemination. Patent systems should be modified with the goal of modifying overly broad and harsh protections, resolving patent thickets and trolls, aligning regulations with today’s realities, and allowing competition, which is ultimately the primary driver of technical innovation and dissemination, more freedom. Government spending in research and development (R&D), that has been dropping in many countries, should be boosted since it provides the critical public good of basic research that generates broad knowledge.
Third, to extend access to new prospects, digital infrastructure must be enhanced. To boost digital access, greater governmental investment is needed, as well as frameworks to promote more private investment. Broadband is becoming as essential in this century as electricity was in the previous one. However, the digital divide continues to exist inside economies, a fact that has been highlighted by the COVID-19 dilemma. The majority of the US economy is less than 15% as digitalized as the leading sectors, and there are significant access gaps between major urban/industrial hubs and outlying places.
Fourth, education and training programs must be redesigned to prioritize the acquisition of skills that are compatible with modern technology. This will necessitate new kinds of public-private collaborations, as well as innovation in the content, delivery, and financing of these initiatives. The availability and quality of continuing education should be considerably expanded to meet the rapidly changing demand for skills and the expanding need for upskilling, reskilling, and lifelong learning. The initiative should include both general education and vocational education institutions. Expanded cooperation with employers should be included, as well as the possibility of a larger role for apprenticeship arrangements. One strategy for improving workers’ access to retraining is to create Lifelong Learning, which allow workers to amass training rights that are transferable between employments.
Fifth, social protection systems need to be enhanced, if not completely redesigned, in order to keep up with the changing economy and nature of labor. These systems’ flaws have been shown by the pandemic. Workers should be better supported in adjusting to change, retraining, and transferring to new jobs through unemployment insurance systems. They should be constructed in such a way that they give enough coverage while also encouraging reemployment. Worker benefits systems, which have generally been focused on formal long-term employer-employee ties for benefits such as pensions and health care, will need to adapt to a job market with more frequent job transitions and a wider choice of work arrangements. This means more portability and versatility to meet the needs of more independent workers. The gig economy is becoming more prevalent.
The national level, particularly in the main sectors described above, is where the majority of the policy agenda for making technology function better for everyone resides. On a global scale, however, there is a complementary agenda. Protectionist attitude has risen in response to the emergence of nationalist populism. The epidemic could inflame the anti-globalization sentiment even further. Supply chain reshoring may be sparked by concerns about the security of essential commodities. Past accomplishments in developing a rules-based global economic system will need to be protected from these headwinds, which will need international collaboration.