This week, ministers from the club of industrialised countries – the OECD – gather in Mexico to discuss the state of the digital economy. The last such meeting was in 2008, on the brink of the global financial crisis. Eight years later, with economic recovery still sputtering, policymakers are putting a lot of their hopes in technology to drive inclusive growth.
Yet, since the initial internet-fuelled surge in productivity in the early 2000s, OECD productivity growth has been declining sharply – leading some to declare that the IT revolution is “over” in advanced economies.
The productivity slowdown is a complicated problem with many causes. But it is clear that stubborn digital inequalities, and a growing imbalance of power between consumers and firms, are a big part of the problem. Action to make the digital economy more equitable, open and fair is urgently necessary to get technology-fuelled growth back on track.
Spread the benefits of the digital revolution more widely.
A 10% increase in broadband penetration can add between 1 and 3% to GDP growth. Yet ten OECD countries still have penetration rates below 60% for mobile broadband, while fixed broadband is available to fewer than 30% of people across the OECD as a whole.
National aggregates also hide blatant inequalities. In the US, for example, families in poor areas are almost five times more likely not to have access to high-speed broadband than the most affluent households.In poorer states of Mexico, broadband penetration is less than 15% (compared to a national average of 46% according to OECD figures), and across the whole country significantly fewer women than men are online.
Meanwhile, in some OECD countries, as many as 1 in 4 adults have no experience with, or lack the basic skills needed to use ICTs for many everyday tasks. The gap is even wider in low income countries. This exacerbates a cycle of economic exclusion, since those lacking digital skills are more likely to come from poor households, and less likely to find good-paying jobs.
Finally, there are growing concerns that digital work is creating a “race to the bottom” for low-paid workers, denying many a living wage.
These inequalities are acting as an invisible brake on digital productivity and growth. To remove them, the OECD should
- Increase spending on quality public education, updated for the 21st century
- Accelerate investment in broadband connectivity in poor communities, particularly through public access and flexible, open access infrastructure
- Increase aid and concessional lending to lift internet access in developing countries. OECD aid to the ICT sector fell to only $56 million globally in 2014 – a ten-year low.
- Endorse the Alliance for Affordable Internet’s “1 for 2” target – 1 Gb of prepaid data for 2% of average monthly income or less – as a UN target for affordability in developing and emerging countries.
- Develop an action plan to achieve increased productivity and job quality across the digital economy.
Embrace an open and competitive Internet
The Internet has fundamentally changed the nature of the world economy. In many ways, it has created a more open and efficient system, but it has also created new challenges that threaten innovation and competitiveness, and can ultimately contribute to inequality.
The virtual nature of most Internet companies makes it easier for them to avoid paying tax in jurisdictions where they do business. The OECD’s head of tax policy criticised their tax planning strategies as “extremely aggressive, pushing the boundaries of what is legal”. Such strategies not only deprive governments of revenue to reinvest in building out infrastructure and skills, but may also give a large advantage to foreign firms over local start-ups.
Built-in economies of scale have led to the emergence of dominant platforms and service providers, stifling competition. Deals where network providers offer faster or cheaper access to certain applications and content can also harm competition.
The OECD can help governments to navigate these complex issues through
- Ensuring that new OECD guidance on tax transparency and profit-shifting is implemented effectively in the ICT sector.
- Developing guidance for national competition authorities on how to tackle the growing problems of market concentration and quasi-monopolies in the Internet sector.
- Endorsing clear net neutrality regulations to prevent discrimination by network providers against particular applications, devices, or content.
- Adopting the Open Data Charter. Opening up public sector data for everyone to re-use boosts innovation by SMEs and social entrepreneurs, and could add 1.1%-1.9% per annum to GDP in advanced economies. Best practice in open data can be advanced by OECD adoption of the Open Data Charter, following the lead already set by the UK, Chile, Mexico, South Korea, Italy, and France
Consumer trust in the internet is declining globally, a new survey by CIGI found earlier this year. Only three in ten (30%) respondents agreed that either their own government or private companies are doing enough to keep personal information secure and safe, and many are changing their behaviour as a result: for example, almost 1 in 4 report they are making less use of the internet for financial transactions.
Declining trust is a direct result of the huge imbalance of power between internet users on the one hand, and data collectors – who include state surveillance agencies as well as giant companies – on the other hand. The World Economic Forum says, “the basic data protection principles…do not work in today’s world…. In particular, notice and consent [are] not delivering real effective choice to individuals.”
But it’s not too late to reverse this trend. OECD governments must:
- Strengthen data protection laws. The recently updated OECD Privacy Guidelines recommend a number of essential steps that must be implemented in full, such as the creation of privacy enforcement authorities equipped with the mandate and resources to exercise their powers effectively. Laws can also be strengthened further by introducing a right to anonymity, a right to data portability and a right to know the logic used in processing data pertaining to oneself.
- End secret mass surveillance. Surveillance has a chilling effect on the Internet and how citizens use it, and data collection powers granted to security services and law enforcement agencies must be necessary and proportionate, and subjected to oversight institutions that guarantee transparency and accountability in the use of surveillance powers.
The challenge is large but it is not insurmountable. To truly drive inclusive, innovative economies in the 21st Century we need to make sure everyone can access the Web, and that we maintain strong systems to protect it as a free and open platform for everyone. We hope our practical suggestions for how this can be done will help OECD delegates work towards a digital future that ensures opportunity for everyone.
Sonia Jorge, A4AI’s Executive Director, and Renata Avila, Web We Want’s Global Campaign Manager will represent the Web Foundation at the Trade Union and Civil Society Stakeholder fora. Follow them on @soniaA4AI and @avilarenata for updates and views.