Published on Let's Talk Development

Development in the digital age

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I have spoken only once before at the UN. I was then just a professor and was invited to speak on my research on labor market regulation. I was told it would be a distinguished audience. However, as I got up to speak, almost all distinguished people seemed to leave the room. Only six hardy souls stayed behind to listen to me.

So I was relieved this time to address a much fuller room during the UN General Assembly in New York this week on our forthcoming World Development Report on the theme of “Digital Dividends”. The Report is being finalized over the next few weeks and will be formally launched in January.

The world is in the midst of a technological revolution, the influence of which is difficult to overestimate. I am referring to the innovations pertaining to the internet and digital technology. They are making it possible for us to collate and organize information and data in ways unthinkable in the past. They are creating new avenues of connectivity among people, changing our social and political landscape, leading to new ways of cooperation and also new avenues for dissent. They are making it possible to create and manage individual identities in novel ways.

Activities that did not even have a name till a few years ago, now overwhelm our lives. There are 4.2 billion Google searches each day. 6000 tweets go out every second. That is on average. The record is 143,199 tweets in a second on 3 August 2013, when the Japanese were excited about watching a new animation film and Tweeted about it. These are fun statistics but the underlying technologies can change our lives. That is what this World Development Report explores and we have reason to believe that it will be a very influential report.

Many countries have never managed to provide formal identification papers to its citizens and residents. As a consequence, many of the most disadvantaged individuals are not counted, do not receive benefits they are entitled to, and have few means to make their voices heard. Initiatives for digital and biometric identity are changing this. Under India’s National Aadhaar program, 900 million Indians are now biometrically identified.

Poor people do not now have to worry that, after they move to a new village or town, they will not be able to establish their identity and so be denied benefits they are supposed to receive. With biometric identification the scope for pilferage of benefits is also going down. All this has the potential to significantly raise the efficiency of government service delivery. India can save an estimated $11 billion per year by reducing leakages and raising efficiency in its direct transfer and subsidy programs.

Kenya’s M-Pesa and online banking services are enabling Kenya to achieve what was once the preserve of fully industrialized nations. For every 1000 adults there are close to 700 bank accounts in Kenya. Up from 103 in 2003.

Another striking example comes from its neighbor Tanzania. The Tanzanian government invested heavily in the ICT sector and also helped advance mobile finance. It is now one of the largest markets in the world for mobile finance. It is the first country to deliver mobile savings, loans and interest bearing products. These are examples out of Africa that all countries can learn from. 

The domestic retail trade is being rapidly digitized in China, cutting down the transactions costs of buying and selling for ordinary consumers, thereby improving well-being, saving time and enhancing productivity.

These changes are likely to expand global GDP greatly. The pie of all goods and services in the world will no doubt be larger because of the digital revolution. But, as this World Development Report reminds us, these innovations, left to themselves, without other enabling services and policies will not succeed in realizing the full potential, and succeed in drawing in the excluded and the marginalized.

One important conceptual contribution of the Report is to make us aware that these innovations are giving rise to what may be called “new necessities.” We typically think of innovations as creating higher-end goods and luxuries. What is often missed out is that, for some new goods, when lots of people begin to possess them, not having them becomes a handicap for decent living.

While using paper for filing taxes and medical prescriptions has virtually gone out of use in Estonia, nearly 1 billion adults do not have cell phones and 400 million people live in areas with no digital signal. These did not matter once upon a time. But now, they may prevent you from getting basic goods, medicines, even education and make life unbearable.

Before 4000 BC, not being able to read and write was not a handicap, since no one was literate. Literacy became a new necessity starting some 5,000 years ago. Likewise, digital connectivity is the new necessity of our times. If societies cannot provide this, inequality will rise; and so will poverty. This is why initiatives like Global Connect, introduced by the US government, is so relevant today.

This World Development Report celebrates the digital developments but reminds us that they need a whole host of ancillary services, policies and regulations for their benefits to reach the segment least able to help themselves. I am referring to the poor and marginalized peoples of the world. 

A large team worked relentlessly on it with two very talented economists leading the team. President Toomas Ilves took an intellectual interest in this, which is rare among political figures. 


Kaushik Basu

Former Chief Economist & Senior Vice President of the World Bank

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