Modern telephone box (Deutsche Telekom, Germany) with public internet access, Nordhornerll, 31 March 3024, CC 3.0
Technology and Economy
In this article, we are going to examine the relationship between technology and economy as it relates to international relations. Given the rise of globalization, and questions about the relationship between globalization and technology, it is imperative that we discuss how technology is related to domestic and international economic issues. In this article, we are going to discuss the international economy, and the relationship between issues such as technology and economic development.
The rise of technology is affecting the way that the we live. However, not all of this is for the positive. In fact, and this goes into a greater discussion about the pros and cons of globalization, one can recognize the powerful and positive effects of technology and economic development, while also pinpointing problems and rights abuses that arise with an increase in technology. So, what is the relationship between technology and economy?
How does technology affect the economy?
In our understandings about technology and economy, one question that many individuals are asking is: how does technology affect the economy? It is clear that a change in technology does have strong domestic and global economic effects. Scholars argue that there are many ways in which technology might affect the economy. Scholars argue that there are many ways that technology can help shape the economy, and in turn, help the world. For example, Elena Kvockho (2013) of the World Economic Forum listed five key positive effects of technology as it related to economic development. They argue that an increase in technology leads to:
- Direct Job Creation: They argue that there will continue to be a rise in the types of technology jobs that are being created. We are already seeing this. For example, “In the US alone, computer and information technology jobs are expected to grow by 22% up to 2020, creating 758,800 new jobs. In Australia, building and running the new super-fast National Broadband Network will support 25,000 jobs annually. Naturally, the growth in different segments is uneven. In the US, for each job in the high-tech industry, five additional jobs, on average, are created in other sectors. In 2013, the global tech market will grow by 8%, creating jobs, salaries and a widening range of services and products.”
- Contribution to GDP growth: It has been argued that technological developments can also better improve GDP growth for a country. One aspect of technology growth is the Internet. It has been found that “a 10% increase in broadband penetration is associated with a 1.4% increase in GDP growth in emerging markets. In China, this number can reach 2.5%. The doubling of mobile data use caused by the increase in 3G connections boosts GDP per capita growth rate by 0.5% globally. The Internet accounts for 3.4% of overall GDP in some economies. Most of this effect is driven by e-commerce – people advertising and selling goods online.” Others, such as “Accenture and Oxford calculate a 10-point improvement in digital density (on a 100-point scale) over five years would lift GDP growth rates in advanced economies by 0.25 percentage points, and by 0.5 percentage point in emerging economies. The United States alone would see a GDP uplift of at least $365 billion in 2020. Emerging economies, such as Brazil, India and China could see rises of between $97 billion and $418 billion” (McKendrick, 2015).
- Emergence of new services and industries: With an increase in technology can also come new services and industries. The mobile phone along offers great access to these services. With smartphones, people can download apps which offers them a variety of new (and often very easy) services that they can use. And while many of these are pay-to-download, there do exist many free apps as well.
- Workforce transformation: Thanks to technology, the way that people are working is changing as well. There is a shift towards work that can be broken down and then contracted out. For example, “In 2012, oDesk alone had over 3 million registered contractors who performed 1.5 million tasks. This trend had spillover effects on other industries, such as online payment systems. ICT has also contributed to the rise of entrepreneurship, making it much easier for self-starters to access best practices, legal and regulatory information, marketing and investment resources” (Kvochko, 2013). There are many other sites such as Fiverr that allow people to advertise their services (whether it is creating digital content, offering translation services, written content, or website development).
- Business innovation: Lastly, businesses themselves are moving more and more to having an online platform. In fact, “In OECD countries, more than 95% of businesses have an online presence. The Internet provides them with new ways of reaching out to customers and competing for market shares. Over the past few years, social media has established itself as a powerful marketing tool. ICT tools employed within companies help to streamline business processes and improve efficiency. The unprecedented explosion of connected devices throughout the world has created new ways for businesses to serve their customers” (Kvochko, 2013).
In addition, one could also argue that there is a great rise in the access to information and knowledge that can be used to increase economies as a whole. But this does often require the willingness of society to accept that technology. However, as Archibugi & Pietrobelli (2002) argue:
Once this notion of technology is accepted, it is much easier to understand that the globalisation processes have distinctive features in the technology domain, and that there is no reason to assume that globalisation will provide benefits to all regions and agents. In particular, it emerges that globalisation changed the transmission of know-how in the following ways:
- The codified component of knowledge can be transferred at low or negligible costs from one part to another part of the world. This is, however, not necessarily good news for developing countries since in order to benefit from codified knowledge, the receiving agent should already know the code and have the capabilities to use it effectively. And codes are increasing in complexity along with the increase in importance of codified knowledge.
- The tacit component of knowledge continues to be less mobile and transferable, since it still requires important face-to-face interactions. There is abundant evidence that, in spite of globalisation, the generation of knowledge in specific fields tend to concentrate in ‘‘hubs’’ where competencies agglomerate [14,15].
The core of innovating firms is moving from trading embodied innovations to disembodied innovation. As shown by Naomi Klein [16], large corporations with managerial, financial and technological advantages tend to profit from their ideas, trademarks, expertise and technological innovations, while contracting out the production. This has substantial implications for the generation and transmission of know-how, which tends to become much more dependent on intellectual property rights (IPR). In turn, it is creating a new international division of labour where ‘‘wet-ware’’ and ‘‘soft-ware’’ are generated in the North, and ‘‘hard-ware’’ is localised in the South (864-865).
So, as we see, technology and economy issues are interrelated. Not only is there an increase in information, but it is also said that “The increased use of digital technologies could add $1.36 trillion to total global economic output in 2020, according to a recent study by Accenture and Oxford Economics. This may be only a fraction of a percent of the total global gross world product (currently sized at about $87 trillion), but it’s a substantial contribution to growth” (McKendrick, 2015). It is important to follow what the relationship between technology and economic development looks like, while also discussing the negatives of globalization and technologies on economies and societies (such as globalization and human rights abuses).
Problems with Technology and Economy
While there are many positive developments as it relates to the questions of technology and economic development, there are also negative issues that arise. For example, Archibugi & Pietrobelli (2003) argue that one outcome of technological innovation is that firms who have this technology may find ways to exploit others for it. For example, they argue that “Firms may opt for a variety of strategies in order to obtain economic returns from their innovations in foreign markets. The oldest form which firms have used to profit from their innovations in overseas markets is to trade products with a technology-based competitive advantage. New products and processes have often been exempted from trade restrictions since the importing countries were not able to generate competitive domestic alternatives, or to device timely restrictions to trade. It is however well known that exporting technology-intensive products provides an advantage to the exporting countries (for example, in terms of more stable prices, higher rents and profit margins, and positive and dynamic externalities), and that in turn the importing countries increase their know-how dependence unless they are able to bridge the gap in competencies” (865-866).
However, this is not all. New technology can also be exploited in other ways. Namely, there have been cases where firms are looking to sell patents or licensing. The issue that arises with this is that “This form of technology transfer would however require that the host country firms already have the capital equipment and the capabilities to exploit new ideas and devices into production. It is likely that in the long run the importing country will be able to move upstream in the value-added chain, and to become able to generate autonomously at least part of the know-how relevant for production” (866).
Thus, we have to understand that there are also problems that arise through behavior related to technology and economy. Plus, while technology might help the economic growth some countries, scholars have found that “developing countries have a marginal participation in the generation and diffusion of technology. They participate to a minimal extent to the globalisation of technology, and differently from what occurs in trade and finance. Globalisation is offering new technological opportunities, but these are not seized by developing countries” (Archibugi & Pietrobelli, 2003: 875). Thus, it is important to set up relationships that not only might offer foreign direct investment, but that will also provide learning opportunities for the Global South, which in turn can help then in their technological development (Archibugi & Pietrobelli, 2003).
References
Archibugi, D. & Pietrobelli, C. (2003). The globalization of technology and its implications for developing countries: Windows of opportunity or further burden? Technological Forecasting and Social Change, Number 70, pages 861-883.
Kvochko, E. (2013). Five ways technology can help the economy. World Economic Forum. Available Online: http://www.weforum.org/agenda/2013/04/five-ways-technology-can-help-the-economy
McKendrick, J. (2015). Digital Technologies Will Soon Add $1 Trillion-Plus to Global Economy. Forbes. March 17, 2015. Available Online: http://www.forbes.com/sites/joemckendrick/2015/03/17/digital-technologies-will-soon-add-1-trillion-plus-to-global-economy/#3cf2d966c6ff
