Nova workboard

a blog from young economists at Nova SBE

Digital divide -new technologies contribution to poverty reduction

 

Skjermbilde 2016-05-03 kl. 23.28.46The latest years the world have experienced a technological revolution. Today most people own smart phones, and technology have spread rapidly all over the world. Among the poorest 20 percent of households, nearly 7 out of 10 have a mobile phone, but fewer have stable access to internet. Prices on phones have decreased sharply and international competition between telecommunication companies have contributed to affordable internet for poor households. Is increased access to digital technology a good tool for people to overcome poverty and increase development?

Digital technologies as contribution to developmentSkjermbilde 2016-05-03 kl. 23.33.44

Earlier this year, the World Bank launched its annual World Development Report, this year about digital technologies contribution to development. The report highlights several positive contributions from new technology which potentially could lead to increased inclusiveness, effectively and innovation among poor people. The report is highly optimistic about technology and illustrates this with several success stories:

  • More than 40% in the Eastern part of Africa are now paying water and electricity bills with their smart phones.
  • India has introduced digital id-cards for almost half a million people the last five years to improve access to public services (which has decreased corruption in the same sector).
  • In China 8 million entrepreneurs (1/3 of them women), are using the internet to sell goods and services to a bigger market.
  • Local banks are using people’s ability to pay their phone bills, as credit worthiness for providing them small loans for small-scale investment projects.
  • Increased productivity in agriculture, as farmers get cheap and relevant advice and information like weather forecast and market prices. Market transparency and stabilization of prices also seem to be a positive effect for small-scale farmers and fishers.

4 billions without internet

With all these success stories presented there are no doubt of what we should do to improve poor people’s life; secure smart phones and internet access for all! People will become more productive, innovative and have better information and control over their private economy. If the causality is really so strong between technology and poverty as these stories wants to tell, this might increase their welfare and income. It sounds great, but what about the 4 billions that does not have access to internet? The World Bank stress this concern that the technological development may create an even bigger divide and inequality between middle-income and poor households. Jim Young Kim, the president of the World Bank has a solution on how to tackle this. He is talking about a global effort to close the dividends by making the internet universal, affordable, open, and safe; and strengthening regulations that ensure competition among businesses.” With this I understand that the main priority among governments should be to facilitate free market access to telecom companies in developing countries to make sure no one is left behind.

Would free market solve the problem?

The World Bank report has interesting perspectives on digital technologies contribution to development and opportunities for the worlds poor, but it might seem that they are forgetting the many basic needs that must be fulfilled before providing internet access to all. Several countries in Africa are still struggling with unreliable electricity services and bad infrastructure which may be more important for poor people to achieve than access to smart phones and internet? And before starting to educate IT specialists, it is important to secure a good quality primary education for all.

No doubt developing countries and poor people have a huge potential to technology use over time, but it should not be the main priority in development policy as the World Bank frame it. If the new “hype” among governments, investors and donors of foreign aid flows are directed toward internet access rather than basic human needs this could be highly problematic. I do not think we are there yet that internet have become a global public resource like water. We are not sure the market actually would decrease the digital divide if they get free access and full competition providing these technologies. I do believe government regulation and intervention in health, education and of course infrastructure, still are more important drivers for poor people’s lives that full internet access. I agree that international companies play an important role with their money flows and investments toward developing countries which can benefit the poor population, but I think a better approach from the World Bank would be to promote responsible businesses and emphasize their businesses responsibility in developing countries rather than encouraging governments to increase market competition, as the most important effort to development.

 

Student 2712

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Author: studentnovasbe

Master student in Nova Sbe

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