Decoding the digital economy

by Mary Louise Malig

Read the publication in full here

Scope of the Digital Economy
The Platform Economy
The Value of Data
The Technology of the Digital World
Preliminary conclusions and Afterthoughts


Have you ever taken a ride in an Uber or Lyft? Do you have a room or apartment that you have registered as a place to rent out on AirBnB? Have you ever bought and downloaded a digital book to read on a device such as a computer or tablet? Do you have a subscription to watch movies online from providers such as Netflix, Disney Plus or Amazon Prime? Have you posted an advertisement about a service you can provide for a fee on Facebook or Instagram? If you’ve answered yes to any of these, then you have, even in a small way, participated in the digital economy.

But, what is the digital economy, what does it include, how much of the population participates or contributes to it? What are the technologies that have made this possible? What is data and why is it so valuable in this new economy? What is a platform economy and who are the main drivers of this? And why are there warnings on the dangers of what comes with the rise of the digital economy, the new technologies that have come with it and the pitfalls of a digital, online, data using world?

While there is no one universally agreed definition or scope of the digital economy, there is at least a general consensus on the basic elements of a digital economy.

There are several components, but there are at least three that are generally seen as the main tenets: infrastructure that enables provision and access to the internet, digital trade or e-commerce, and economic activities including commercial and professional business and services done online and made possible by information and communications technologies.

Several components of the digital economy such as digital trade or e-commerce, for example, have been around for many years. And so has the internet, several digital technologies and digital communications. The digital economy had been on the rise in recent years with the growth and expansion of the platform economy led by big technology companies or Big Tech such as Apple, Microsoft, Amazon and Google to name a few.

The digital economy, digital technologies and other components, however, received an inadvertent boost due to the COVID-19 pandemic. The global measures implemented to urgently slow the spread of the virus included lockdowns that spanned almost all aspects of the economy and society. Businesses that had the means, adapted by sending employees to work from home, schools kept students at home by setting up distance learning and many food establishments closed physical spaces and shifted to deliveries. These measures were all made possible by digital technologies, particularly information and communications technologies, internet access and the shift of many economic activities to digital versions or equivalents.

Not all businesses though had the means to stay open, afloat or even shift to a digital option, which left countless people suddenly unemployed or without the means to afford housing, food or basic needs. Some have then turned to taking short term jobs, or what are called gigs, an informal economy enabled by the digital economy. And as will be discussed later in this publication, some of these jobs, as in the informal economy in the traditional free market non-digital economy, may have offered some relief in terms of cash to afford basic needs, they were precarious, at times exploitative and many times have not offered reliable income nor security.

The new reality of a digital based economy and society had also accelerated the development of new software, digital applications, and digital technologies. Some technologies had already been in development such as blockchain technologies, the internet of things, cloud computing, automation and robotics and artificial intelligence, data analytics, surveillance based algorithms, data driven advertising to name a few.

These new technologies however have raised many questions and concerns as some of these new technologies have just run in leaps and bounds, leaving behind regulators, policies, security, protection of privacy and much more. Digital tools that have been developed or that have been taken further have also affected society’s relationship with digital technologies. In some cases, the lack of regulations combined with the ostensible right to free speech has introduced or increased the rise of fake news, disinformation, and the misuse and manipulation of people’s data, information and privacy. The surge forward with the use of many digital technologies include tools whose impacts are not yet completely understood nor regulated.

The lag of policies and regulation and even understanding of the true value of data on which this digital economy is reliant on are issues that need to be addressed urgently. Already, estimates show that global internet traffic in 2022 is expected to be more than all internet traffic all the way up to 2016 [1].

The ability to use data determines how far one can advance in the global data value chain of the digital economy. Raw data being the least valuable in the chain and data analytics being much higher up. Given that data is a very valuable resource for digital trade and the digital economy and more importantly, that data itself has inherent value to the people they come from, whether it be their rights, privacy and security, it is paramount that the misuse, abuse and manipulation by many possible actors from governments to the private sector to any group or persons capable of taking this data and misusing it, is prevented by regulations and policies.

Additionally, the technological requirements needed to make all that happen has made the digital divide even more stark if it was not already recognized. The United Nations Conference on Trade and Development (UNCTAD) knew this divide existed even before the pandemic. In their 2019 report, the bleak numbers were: half of the world remains offline and in Least Developed Countries, only 1 in 5 people are online. [2]

Even in the richer countries, there were inequities, “With some Internet providers reporting increases in traffic of 60% since the start of the pandemic, as people adapt to living and working online, the Organisation for Economic Co-operation and Development (OECD)’s latest Digital Economy Outlook reveals the gaps between and within countries in access to fast and reliable Internet. For example, the share of fibre in fixed broadband subscriptions in OECD countries ranges from 82% in Korea and 79% in Japan to below 5% in Austria, Belgium, Germany, Greece, Israel and the United Kingdom, with high-speed connections often sparse in rural areas. OECD countries count roughly twice the level of high-speed mobile Internet subscriptions per inhabitant and three times the level of fixed broadband subscriptions as non-OECD countries.” [3]

As vaccines reach more and more populations, some countries have already lifted pandemic restrictions albeit not completely and allowing for restrictions to be shifted as new variants of the COVID-19 virus appear, allowing people, some in a limited manner, to return to work or school or even just outdoors. However, the jumpstart that the pandemic gave the digital economy has changed the landscape and have raised questions of creating a new normal with a higher bar for transition to digital technologies and recognizing and finding ways to bridge the digital divide. This gap is a serious concern as a digital economy with only half the population of the world cannot possibly be the way forward.