The ‘New Economy’: increasing the digital divide?

Most of us have heard the term ‘new economy’ thrown about in discussions of ICT and development, often without having a concrete understanding of what this term means and what real effect it has on countries. The ‘new economy’ has also been described as: the ‘knowledge economy’, an ‘information-driven economy’, ‘networked economy’, and an ‘e-conomy’. These terms all express the fundamental point: that we now live in an knowledge-based global economy.

An International Monetary Fund article defines a ‘new economy’ as “one characterised by higher long-term growth that is due to a permanently higher growth rate in productivity stemming primarily from the production, adoption, and continued diffusion of ICT”.

The IMF article uses examples of industrial societies where the rapid adoption of ICT has been the driving force behind acceleration in labour productivity, such as in the United States during the 1990s. For instance, technological innovation resulted in sharp declines in computer prices of about 22 percent a year between 1995 and 2000. This meant industries could invest in information processing equipment and peripherals.

While it is all good and well to consider what the new economy has meant for the U.S. and European countries, there is far less discussion and consideration of developing countries and how they may (or may not) be benefiting. This is why Anthony P. D’Costa’s article is refreshing. He acknowledges that “knowledge-based economic activities are key to international competitiveness and productivity growth,” and that with industrialisation no longer the principal driver of economic growth, developing countries need to catch up in ICT development.

Whether or not developing countries can work effectively with the changing global regime, how they might utilise the open access to knowledge and information, and how they can adopt best practices (such as telemedicine, distance learning and e-government) are significant questions for development.

Developing countries are structurally disadvantaged in seeking the best from the global regime of ICT infrastructure, which is related to their lack of key ingredients such as human capital, physical infrastructure, and lack of venture capital to exploit ICTs. But D’Costa says this does not mean the doors are completely shut. Poor countries such as the Philippines, which have unwittingly created human capital, have shown they are able to interact with the global economy, adapt imported ideas and know-how and localise them.

D’Costa suggests that the old (non-ICT) economy and the traditional development concerns are equally important to secure the benefits of the new economy. Previously emphasised development needs, such as infrastructure investments and domestic market stimulation, are still relevant.

Gale T C Rigobert’s article continues in this same vein, examining the implications of the new economy for a country on the less-beneficial side of the digital divide: the Caribbean.

Rigobert says firms or national economies that fail to incorporate ICTs in their economic or productive structures are likely to be abandoned at the fringes of the global economy. The repercussions of this being: declining competitiveness, and negative or poor economic growth. This suggests that the ‘new economy’ threatens to increase the digital divide, with those countries already on top of ICT development maintaining an advantage over those countries still lacking in such developments.

Like D’Costa, Rigobert says for poor countries to benefit from ICTs, there are important social, institutional and cultural preconditions for entering the digital age and evolving into a knowledge society/ economy. The existence of an apparently daunting digital divide, however, raises significant doubt about the potential of ICTs to raise the living standards of the poor in the Caribbean.

So in this ‘new economy’, where knowledge has become a very important factor of production, countries like that of the Caribbean need to move toward fostering an innovation culture and environment to secure a place for itself among the technological leaders. Rigobert says this includes the need for a more vigorous attempt at resolving the technology access divide, skills divide, social capability divide, and the technology production divide.

It seems it is only then that “any significant strides can be made in narrowing the economic divide between the haves and the have-nots in the current techno-economic context”. If developing countries fail to make these necessary steps, they will continue to be left behind.