From left: Hilda Moraa, Ray Kurzweil, Christine Lagarde, Leila Janah, and John Chambers (photo: IMF)

Countries Need Smart Policies to Benefit from Technology's Full Potential

October 6, 2016

  • Technology could bring significant growth to global economy in next decade
  • New education model needed to help workers adapt
  • Cultural, organizational changes have to keep pace with technological change

Technological change has the potential to transform the lives of people around the world for the better, but it will be important to get the policies right or the digital divide will grow, panelists said at a seminar at the IMF-World Bank Annual Meetings in Washington, D.C.

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“Whether we’re talking about big data, the Internet of Things, digitization, or 3D printing, the technological revolution is reaching deep into every sector of our economies,” IMF Managing Director Christine Lagarde said in introductory remarks at “Technology, Innovation, and Inclusive Growth.”

“It will have profound implications for the way we live, the way we learn, the way we earn, and the way we consume,” Lagarde said.

The IMF needs to pair with technology experts to gain a deeper understanding of the impact of technological change on economies around the world, she added. The seminar, which featured a debate with global thought leaders on technology, was a key step in initiating this dialogue.

Positive transformation

The new digital era will transform everyone’s lives, said John Chambers, Executive Chairman of Cisco Systems.

Over the next decade, he said, the world could see about $19 trillion in incremental economic growth, or one to three percent growth in GDP for every country in the world. This growth could also raise average incomes across the board—provided that countries get the formula right, he added.

But while many people are seeing massive gains, panelist Leila Janah, Founder and CEO of the nonprofit Sama cautioned that there is also economic stagnation in the lower-income segments of society that has led to unrest. “If we don’t do our job to understand what challenges these people face, there could be a high price to pay,” she said.

Janah’s Silicon Valley company hires workers living under the poverty line in developing countries to work for high-technology firms at local computer centers. By breaking big projects into small units of work, the firm can employ people with relatively little training.

According to Janah, one of the most powerful forces for transformation is low-cost, high-speed Internet access.

For panelist Hilda Moraa, founder of the Kenyan startup Weza Tele, mobile technology has been a “game changer.” The mobile phone has revolutionized lending in Africa, she said, enabling access to finance on a scale that had previously been unthinkable.

Disrupt or get disrupted

But if technology has been a force for economic progress, there is also a bleak side for those who get left behind, speakers observed.

The coming digital era “will be a period where either you disrupt or get disrupted,” Chambers said, cautioning that 40 percent of the companies in America, Asia, and Europe could disappear in the next decade.

Because jobs will inevitably be cut, Lagarde asked, what should people be doing to adapt?

Education is key, speakers agreed. “We need a new model of education—the current one is broken,” said panelist Ray Kurzweil, an inventor, author, and futurist. Creative ideas in this area are vital, Chambers warned, and there’s no time to waste: “We must move fast on education, and not in the old model of linear thinking.”

The easy part

One of the most challenging aspects of the digital era will be adapting the policies and incentives governments currently have in place. While technology is changing lives at an ever-accelerating speed, public policy can be slow to react.

“The technology is the easy part,” Chamber said. “What will be difficult is getting companies and countries to change the culture, the organization, and the reward mechanisms.”

The new economy will require a policy rethink on many levels, Janah said. “Because computers are doing so much more work, we will have, for the first time, massive numbers of people who can sustain themselves without having to work.” That’s a positive thing, she said, but government should consider instituting a universal basic income for those who lose their jobs and have difficulty transitioning to a new one.

Panelists offered their advice to the IMF as the seminar concluded, with Moraa getting the last word: “Invest in young people to be part of your vision. Young people need to drive this economy for generations to come.”