Inside the Information Society: What the World Bank thinks about Digital Dividends

David Souter comments each week on an important issue for APC members and others concerned about the Information Society. This week’s blog looks at questions raised by the World Bank’s recent World Development Report about the Digital Dividends derived from ICTs.

The World Development Report (WDR) is the World Bank’s flagship annual report. Each year it focuses on a different theme which the Bank considers central to development (and its own goals).

Surprisingly, given how much the Bank has invested over the years in digital infrastructure, this year’s is the first for almost twenty years to look with any depth at what we now call the Information Society. It sets out what the Bank thinks about the Digital Dividends that can be achieved from ICTs and the Internet – and what has happened in practice over recent years.

What makes this World Development Report important?
I’ve called this WDR one of the most important reports on ICT4D since WSIS. That’s not because I necessarily agree with all it says. What makes it important is that it pays more serious, more detailed attention to what’s been happening on the ground since WSIS than do most reports from international agencies.

And it’s important too because what the Bank says influences the rest of the development community. Agree or disagree with it, the overview of this year’s WDR, at least, is a ‘must read’ for anyone who’s talking about ICT4D.
So what does it say?

Here’s the central message, juxtaposing positives and negatives, in the Bank’s own words:
“Digital technologies have spread rapidly in much of the world. Digital dividends — that is, the broader development benefits from using these technologies — have lagged behind.
“In many instances, digital technologies have boosted growth, expanded opportunities, and improved service delivery. Yet their aggregate impact has fallen short and is unevenly distributed. For digital technologies to benefit everyone everywhere requires closing the remaining digital divide, especially in internet access.
“But greater digital adoption will not be enough. To get the most out of the digital revolution, countries also need to work on the “analog complements” — by strengthening regulations that ensure competition among businesses, by adapting workers’ skills to the demands of the new economy, and by ensuring that institutions are accountable.”
Worth quoting at length, because it shifts the ground on which ICT4D advocates have previously pitched their tents. It’s less certain that ICTs will deliver developmental gains, more insistent that policy interventions are needed to make that happen.

The Bank’s approach

Make no mistake. The Bank is an enthusiast for ICTs. It believes they have the power to transform economies/societies. “Inclusion, efficiency, innovation,” it says: “these are the main mechanisms for digital technologies to promote development.”

The Bank is market-oriented and so is its perspective here. There’s an emphasis on economic growth as the primary enabler of development, including thereby social welfare. An assumption that digitalisation is progressive, that it will engender growth, and that governments should therefore actively promote it. A welcome for the creative disruption of the new economy. An intrinsic belief in liberalisation and deregulation as the policy vehicles required. There’s nothing unexpected here. All this echoes World Bank thinking overall.

As in many international reports on ICT4D, the Bank is keen to accentuate the positive. Anecdotal success stories are, to my mind, insufficiently balanced by tales of failure (though high levels of failure in e-government are mentioned). More attention should be given to losers as well as winners in digital transitions; and to the long-term impact of digitalisation on economic structures such as labour markets. Developing countries need to plan ahead for changes such as these if their impact is going to be anything like as radical as is increasingly expected.

Failures in ‘analogue complements’ to digital development
But the emphasis of this report is on policy interventions that are required in order to leverage ‘digital dividends’. Although there are success stories, the Bank argues, ‘the effect of technology on global productivity, expansion of opportunity for the poor and middle class, and the spread of accountable governance has been far less than expected.’ ‘Firms are more connected than ever before,’ it says, ‘but global productivity growth has slowed.’

It attributes this failure of digital investment to deliver the level of economic gains that was expected to two things: the continued digital divide; and failures in what it calls ‘analogue complements’ – human factors that enable or inhibit the achievement of digital potential. The three that it identifies are ‘a favourable business climate, strong human capital and good governance.’ Or in other words: regulation, skills and institutions.

The Bank also cites three ‘emerging risks’:

  • the concentration of market power resulting from economies of scale online;
  • inequality resulting from lack of skills within the labour market;
  • and (as it sees it) unaccountable and inappropriate government intervention.

The Bank’s prescription

What remedies are needed? Well, obviously, the Bank urges governments to address the deficits that it’s identified in these ‘analogue complements’. If they do so, it says, then those missing digital dividends will come their way. If not, they risk falling behind.

There’s nothing new or unexpected in the Bank’s prescription here. Policy interventions like these are consistent with what the Bank has said about telecoms for thirty years. Its strategy for unleashing the developmental power it sees in ICTs is liberating markets. It assumes that competition will lead to economic growth, and that economic growth will lead to social welfare. The task of governments, in its eyes, is to create the space in which that happens.

So why, if this is nothing new, is this WDR important?

First, because it gathers evidence from different sources which has not previously been so comprehensively brought together by an intergovernmental agency. Those who are interested in ICT4D should spend time with this evidence, not just the policy conclusions.

Second, because it challenges two orthodoxies in ICT4D: the extent to which ICTs have led to economic growth in practice; and the relationship between ICTs and equality/inequality.

And third, because what the Bank says matters. Its prescription for policy interventions to stimulate ICT markets will influence other development agencies and developing country governments – just as its support for telecoms liberalisation influenced agencies and governments twenty years ago.

And reservations?

I’d like to see a more holistic context for the Bank’s approach. Not everything in ICT4D comes down to market competition. More attention should be paid to non-economic aspects of the relationship between ICTs and sustainable development, like changes in social relationships, and to social welfare. Environmental and rights aspects of the Information Society are also understated.

The Bank itself would say, with justification, that economics is its forte. But APC, its partners and the rest of us can take a wider view. If the Bank report is going to be influential, we should.

Next week’s blog will look at the impact of ICTs on empowerment, equality and inequality.

Image by Kevin Dooley used under Creative Commons license.

David Souter is a longstanding associate of APC, and has worked for more than twenty years on the relationship between ICTs and public policy, particularly development, environment, governance (including Internet governance) and rights. David writes a weekly blog for APC, looking at different aspects of the Information Society, development and rights. David’s blog takes a fresh look at many of the issues that concern APC and its members, with the aim of provoking discussion and debate. It comments on current topics and international meetings, draw attention to new reports and publications, critique their assumptions and suggest alternative perspectives. The views are his own, not APC’s. We hope that they will stimulate discussion, and that others will contribute their ideas in complementary blogs in future. More about David Souter. Follow him on Twitter.
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