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Alejandro Morán | Global Head of Public Sector & Healthcare | everis Argentina

Government performance in the face of new digital scenario rules

Many governments are still not fully aware of the need for urgent and in-depth reflection on the impact of disruptive technologies on several areas, i.e. from the provision of basic public services and social security networks to economic development and the labor market.

The digital scenario will continue to drive wealth generation and economic expansion. However, while it may benefit most people, that potential growth also causes both deep changes in the skills needed to get or remain employed and structural changes to the economy.

This phenomenon is occurring globally and on a large scale. It shows, e.g., in Barack Obama’s testimony, when the Executive Office of the White House published a report that contained the following conclusions:

The Administration must be very attentive to the development of public policies that allow us to take advantage of the benefits provided by disruptive technologies, ensuring their distribution among all. Responding to the economic effects of the widespread adoption of disruptive technologies will become a major challenge of future administrations. These technologies have already started to transform the workplace, to change available jobs and to reshape the skills that workers need to thrive. All Americans must be given the opportunity to face these challenges, whether as students, workers, managers, technical experts or as ordinary citizens.

However, this dystopian future is also dismissed by some who classify it as a possibility that is closer to fiction than to reality. Nothing could be further from the truth. In fact, the economic effects of this massive adoption have been clearly felt in the last three decades.

MIT economists Erik Brynjolfsson and Andrew McAfee invented the term “great decoupling”, which defines an economic circumstance that has been taking place since the 1990s and has intensified throughout the 2000s. Despite the massive adoption of technology by production processes and consumption, the economy and productivity have not increased in a significantly different way (at least according to traditional metrics) and, above all, the number of jobs created and the average income have either stagnated or decreased.

This means that technological development has major implications for the economy already. Most important of all, although digital progress has had a positive impact on growth, it could substantially worsen the situation of some (or even many) people. It seems unlikely that the digital tide will be able to lift all boats.

The argument that explains that fact is simple: digital technologies have been able to perform routine tasks for a long time. This allowed replacing less skilled workers, putting great pressure on the average wage. As artificial intelligence and robotics become increasingly skillful and accessible, this phenomenon extends so employers prefer to buy more technology than to hire more workers. In other words, they favor profit over work, which affects both wages and the quantity of jobs. This situation is going to accelerate, as robots and algorithms learn to master new tasks every day.

Given that scenario, strong, urgent and sustained political performance in the medium term is imperative. Of course, it should not just focus on fiscal or restrictive measures to avoid investments so that innovation and qualified employment get redirected to other latitudes.

One of its goals should be supporting those who are not able to adapt to change by themselves, as well as ensuring that the benefits provided by that technological revolution are developed and made available to everyone. It should be assumed that a — perhaps transitory — situation implying a high risk of technological unemployment (or more accurately, technological transformation of work) is emerging, mainly due to the fact that the application of disruptive technologies to perform tasks that were once carried out by people, such as driving trucks or operating supermarket checkouts, may destroy jobs at a faster rate than other uses for work may be discovered.

A second goal should include protecting the competitiveness and economic position of our economy in the context of productive activity which together define world markets, global value chains, digital economy and the fourth industrial revolution. In other words, deciding to face the digital transformation of the economy. We must not lose sight of the estimates that by 2025 the digital economy will account for approximately 25 percent of the world’s GDP. Given the potential transformative impact of disruptive technologies on current competitive advantages, the risk of slow or inadequate adoption by our companies needs to be avoided, as it may be detrimental to our economy.

To conclude, the new digital scenario generates a high level of economic and social uncertainty. Remaining anchored to the paradigms of the past, clinging to the status quo is not an option. The only way is to approach the transition to a digital economy in a decisive way, face the risks involved and make sure that this path empowers us and includes everyone.

How can government performance help shape the near digital future, maximizing its benefits and minimizing the risk of exclusion for those who cannot take advantage of the opportunities presented? I cannot imagine a government that does not ask itself that question, that does not deeply reflect on its role in the face of the growing social and economic impact caused by accelerated digitalization and exponential technological evolution.

Governments need to assume loud and clear their leadership responsibility in the digital transformation of regions and countries. They need to anticipate, not react, to the economic and social changes that are taking place. They should do so based on an appropriate institutional framework, paired with strong leadership and a transversal vision. It is time for digital policies to cease being a chapter of programs and agendas and become a central element of government performance.

In my view, we are at an important crossroads. This dilemma can only be successfully resolved if political leadership urgently embraces the challenges presented by the digital scenario.

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