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How technology is reshaping the global economy

Author: ICAEW Insights

Published: 26 Sep 2022

The mood is shifting when it comes to technological innovation. What are the economic benefits and implications?

Recent pessimism around the pace of innovation has begun to turn into growing optimism – although some concern still exists. This change in mood is predominantly driven by the speed of innovation that the pandemic spawned. Scientists invented COVID-19 vaccines at breakneck speed, workers of the world shifted to digital technologies to do their jobs and swathes of people adopted digital payments, among other technological advances made over the past few years.

Admittedly, some entire professions may disappear with increased automation, but that could pave the way for new, better paid, more valuable jobs. Moreover, unlike in previous industrial revolutions, we have hindsight, mountains of research, knowledge and experience to ensure that the fourth industrial revolution (4IR) can be an equitable, sustainable one.

The digitally-enabled 4IR is already the fastest period of innovation ever. Rapid advances in technologies including artificial intelligence, robotics, the internet of things, nanotechnology and biotechnology are the bedrock of this wave of innovation.

To further ease concerns among workers of the world, the private and public sectors need to work in close collaboration on skills investment to upskill staff and employ these new technological tools.

Esther Mallowah, Head Of Tech Policy, ICAEW, says: “The public and private sectors need to make sure that we’ve got the right skills to take advantage of these technologies. In terms of the economy, employment and productivity, I think there's a bit of concern as to how technologies will affect jobs.

“On the plus side for employers, technology provides access to a wider skills pool because remote working makes geographical barriers less of a restriction. And even for employees, new technologies provide an opportunity to grow and develop their skill-sets.”

In its report Enabling A Sustainable Fourth Industrial Revolution, PwC identified 10 emerging 4IR technologies including synthetic biology, advanced materials, robots, 3D printing and artificial intelligence, among others, that the firm thinks could individually and collectively have the greatest impact on jobs, livelihoods and environments as well as aligning with the UN’s 17 Sustainable Development Goals.

PwC points to some examples of emerging applications for use in different industries, such as for energy. One of the core 4IR innovation challenges is for technology breakthroughs “to enable a next-generation clean distributed grid with virtual power plants aggregating millions and soon billions of emerging renewables sources, all optimised by AI and machine learning, with blockchain and IoT-enabled peer-to-peer trading”.

Or for example, in finance. The report says: “Fintech, including AI, blockchain and IoT, enable increased access and decentralisation of the financial system to serve the unbanked and underbanked, improve market integrity and could perhaps provide early warning signals of systemic financial strains.”

Robert Harwood, Chief Operating Officer at Slingshot Simulations, says: “The digitalisation of all industry sectors continues at a staggering pace, and it is a pace that is accelerating as organisations around the globe realise its benefits – from reduced operational costs, faster innovation and market share capture to the delivery of improved solutions to customers and more.” 

These developments are already emerging in developed and developing economies around the world. Since COVID-19 struck, the adoption of digital payments, for example, has accelerated, and digital finance is already becoming a force for inclusion in countries such as Singapore, Kenya and Brazil.

The Africa Digital Financial Inclusion Facility (ADFI), backed by the Bill and Melinda Gates Foundation, accelerates financial inclusion by investing in the expansion of digital financial services across Africa. By 2030, ADFI aims to deliver $400m in grants and loans with the goal of ensuring 332m more Africans, of which 60% are women, have access to finance.

Mallowah says new technology also provides the opportunity to improve quality of life for people, with communication coming at no or little cost. 

She says: “Social media and applications like WhatsApp mean people can connect to their families around the world at no cost. Social media is also moving on from being purely focused on social aspects to being used for business. A lot of small businesses in Kenya are using WhatsApp to communicate with customers.”

According to research from the International Finance Corporation, Africa is now home to more digital financial services arrangements than any other region in the world, with almost half of the nearly 700m individual users worldwide, lifting millions of households out of extreme poverty and helping small businesses grow.

Harwood says: “In these transitions, in some cases, developing nations can have an advantage over developed countries through an ability to leapfrog. Consider, for example, the speed with which African nations embraced mobile phone technology and the solutions it enables as they were not burdened by the slow transition from landline technology that was so dominant in the developed world. However, these tend to remain the exceptions rather than the rules.”

In time, IoT will enable better data monitoring in supply chains, for example, which can lead to the use of smart contracts, Mallowah says. It will also mean consumers have better access to data and can hold companies to account.

Technology has changed not only how we produce and connect, but also allows more humans to create and test new objects and ideas, reducing the costs and risks of innovation, and product development, also in developing countries.

The success of the digital age will depend on close collaboration between the public and private sectors. Governments and regulators will have to ensure that regulation keeps pace with innovation to avoid monopolies and protect citizens. It is hoped fears over future jobs will subside as we adopt more and more new technologies into our lives and enjoy the benefits of these. We are firmly on the cusp of widespread change, making the future feel more hopeful.

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