Category Archives: Global

Time to Tame the Tech Titans?

Late last year, I wrote in these pages about technology as a double-edged sword for social progress. Yes, advances in technology continue to underpin sustained improvements in living standards. But, I also highlighted several downsides detrimental to the wellbeing of certain cohorts of the population. One question I posed was whether we need to use anti-trust competition regulation to break up the tech behemoths that have come to dominate the digital economy.

Some tech firms, like Amazon and Uber, have found a new way of doing business that undercuts traditional providers. Others, like Apple, have carved out a dominant market position through in-house product innovation and cultivating brand loyalty. Yet others, like Google and Facebook, operate in markets – internet search engines and social networks – that barely existed two decades ago.

But Big Tech increasingly faces the public wrath, and risks a regulatory backlash. By re-locating their intellectual property, they manage to pay minimal taxes. By putting bookshops and taxi drivers out of business, livelihoods are undermined. By harvesting their users’ data, and then selling it or using it to target online advertisements, they put peoples’ privacy at risk. Recent revelations that the personal data of tens of millions of Facebook users was compromised shows the risks people have been taking without even realizing it.

The question then is what, if anything, should be done about it. Continue reading

Technology: friend or foe to working people?

First, they came for the factory workers, but I did not speak out –

Because I was not a factory worker.

Later, they came for the bank tellers, but I did not speak out –

Because I was not a bank teller.

Soon, they’ll come for the taxi drivers, but I do not speak out –

Because I am not a taxi driver.

Are they coming for me?

***

This adaption of Martin Niemöller’s famous poem about the Nazis’ creeping reign of terror is supposed to illustrate the ambivalence of ordinary people to technological change.

We like the fact that TVs, computers, mobile phones and domestic appliances are better and cheaper than in the past. Progressive automation in manufacturing has been a key driver of the productivity gains that allowed this happen.

Continue reading

Globalisation for Slow Learners

The IMF recently published its updated outlook for the global economy. The good news is that recovery from the crisis seems to be finally picking up some momentum after a decade of sub-par growth. The bad news, as they see it, is that this momentum could be stopped in its tracks if the sword of Damocles that is the threat of protectionism – whether emanating from Trump’s White House, May’s Westminister or elsewhere – falls. This could throw the process of globalisation into reverse, they worry, and slow growth in the size of the economic pie.

Alongside their biannual economic forecasts, the IMF also publishes its latest thinking on various themes. In light of increased focus on the issue of inequality since the global financial crisis, to which the recent rise in political populism has been attributed, the IMF provides a timely chapter on “Understanding the downward trend in labour income shares”. It explores the reasons why the share of wages in GDP has declined markedly – in advanced, emerging and developing economies alike – in recent decades. Between the mid-1970s and its 2006 low, the labour share has declined from around 55% of GDP to around 50% in advanced economies, before recovering only slightly since the financial crisis, while income inequality has increased significantly over the same period.

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Beyond the tyranny of GDP

Economists are fixated with what they can easily measure, but sometimes this means they can’t see the wood from the trees and focus on what is really important.

There are very good reasons why Gross Domestic Product, the sum of all goods and services produced for sale in an economy in a given time period, is the most widely watched economic indicator across the world. With adjustments for changes in prices over time and across countries, it is relatively easily comparable. When measured on a per capita basis, it is a useful – if far from perfect – proxy for the standard of living.

However, the intense focus on GDP numbers can distort public debate and political incentives as hitting growth targets becomes a holy grail. All growth is treated equally, no matter how broadly shared its benefits or how environmentally sustainable. People-centered priorities like jobs and incomes become secondary. Continue reading

Study: Liberalizing Foreign Investment in Services Boosts Manufacturing in Indonesia

Here is a post on the World Bank’s ‘The Trade Post’ blog written by Gonzalo Varela, Sjamsu Rahardja and myself on our recent working paper.

Austerity and Equality

Recent research by the OECD is unequivocal, if hardly surprising: reducing the fiscal deficit by raising taxes makes society more equal, but doing so by reducing welfare spending makes society more unequal. This holds for all 29 OECD countries studied, although the magnitude varies by country, depending on how large and progressive are their respective tax and welfare systems. Continue reading

Economic Premise: Service Sector Reform and Manufacturing Productivity

On foot of a recently published Policy Research Working Paper, exploring the potential for reforms to Indonesian service sector FDI policy to drive productivity in downstream manufacturing sectors, my co-authors and I have prepared a – much more digestible! – Economic Premise note for the World Bank’s Poverty Reduction and Economic Management Network. Published today, and available here.