The technological advances over the past twenty years have been fundamental in structuring the world we reside in today. Despite this, many economies have been left behind and have only recently begun to experience the full potential of technology and the digital economy. This is predominantly because much of the initial progression was concentrated in established economies and so nations that were underdeveloped and more fixated on political stability did not receive the proportional benefits which they should have. These benefits range from raising productivity levels to taxing the informal economy and creating alternative food supplies. Nevertheless, the developing world often undermines its own potential with a lack of rigorous policy decisions coupled with insufficient outreach.
For any country to advance and challenge the OECD nations, the main focus must be to establish a culture that is conducive to innovation and increased productivity. A factor that is associated almost synonymously with productivity is the level of urbanisation. Higher levels of urbanisation raise the connectivity within the economy. This results in the vital formation of industry clusters which allow for specialisation. However, there can be no connectivity without adequate transport infrastructure. This is where technology has been a driving force in developing countries. In September 2020, Egypt struck a deal with Chinese contractors to build a high-speed rail link that will connect Cairo to other major cities and ports on the coast. The introduction of revolutionary infrastructure shows that developing nations can construct advanced primary transport links rather than having to replace the previous generation of infrastructure. Along with the dawn of the technological era, access to vast amounts of information is now facilitated by an internet connection allowing governments to cheaply and efficiently communicate with a population.
A factor that can disrupt the route to a strong economy is political instability and the lack of a competent government. The emergence of the digital economy and its E-infrastructure means that controlling governments can spread misinformation around their nation and maintain their grasp on the population effortlessly. Misinformation affects both developed and developing countries with the only difference being that developed nations usually provide alternative forms of media. In February, Tanzania’s health minister, Dorothy Gwajima, held a press conference where she showed how to make a smoothie that would help prevent COVID. Tanzania also adopted a very clear anti-vaccine policy which they have only recently revised and was an unnecessary delay to their recovery. The access to technology and the internet allowed this dangerous misinformation to spread far more quickly. China has explored an alternative direction in the form of censorship which restricts Chinese citizens’ access to unfavourable news sources and websites.
Technological advancements manifest themselves in a variety of ways, one of which is the development of new ways to harm others. Military advances cannot be portrayed in a good light for the world as a whole. Whilst some nations rarely threaten to involve their military, for a vast number, defence is an essential part of not just their foreign policy, but of their culture. The latest instance of these bullying military forces has been in Myanmar. Subsequent to their military coup, Commander Min Aung Hlaing and his army called in airstrikes on their own borders to control the number of fugitives. This represents how not all technological advances spur on economic growth if power is misplaced within the nation.
With respect to trust, corruption is often prevalent in developing countries and the increased notoriety of cryptocurrencies could have mixed effects. With 33% of those surveyed in Nigeria having used or owned bitcoins, their prominence in emerging economies is clear. In February 2021, the Central Bank of Nigeria (CBN) reiterated their 2017 ban on cryptocurrency transaction facilitation stating that, due to the anonymity surrounding cryptocurrencies, they are often used for money laundering. From this statement, it is evident that the rise of cryptocurrencies has provided a smooth route for corruption.
In order for developing nations to retain momentum, a strong stream of revenue, in the form of trade, must evolve. Education is the first step in this process because it allows children to develop skills that are marketable to local and foreign firms. In 2014, Mexico opened their first 100% solar-powered school in Chiapas which was a testament to how technology can bypass traditional infrastructure issues and have a positive impact on education. Another alternative provided by the internet is the provision of online courses which over 12 million Latin Americans enrolled in last year on one website alone. Once a population has acquired these skills, they must find a way of marketing them to local and foreign businesses. Ukraine is a nation that is still emerging but has a strong programmer base of 200,000 people who are readily employable in developed countries and often outcompete the software developers in those countries. This is the stage of the process where the digital economy is key with E-business infrastructures like telecom masts and their networks providing workers with a platform to market their product. However, increased access to global markets has also made labour markets more competitive and so salaries are often lower than they were previously for the same work. Nevertheless, an average Ukrainian programmer receives $30 per hour, far more than an average Ukrainian monthly salary of $450. However, getting paid for that work can be difficult as many banking systems are insufficiently scaled. One-fifth of adults in Sub-Saharan Africa have a mobile money account which allows them to send, receive and manage their money all from a mobile phone. These accounts represent both a stride in global outreach for underbanked communities and an opportunity for many governments to exploit their tax revenue potential.
The informal economy is a substantial component of any developing nation with a value equivalent to 34% of GDP in Latin America and Sub-Saharan Africa but only 13% in OECD nations. It is an often-untaxed sector that is responsible for 60% of the world’s employment. A study by the IMF concluded that Zimbabwe’s informal economy represented 60.6% of GDP in 2015 which illustrates how the ability to manage and tax this sector could induce economic progress. Zimbabwe introduced a presumptive tax in 2005 which aimed to go some way in taxing the informal economy but isn’t without its critics. One form that presumptive taxes take in Zimbabwe is a 10% tax on landlords’ rental income from informal traders which pushes their rents up. Although they have been partially successful in raising tax revenue, there are still many questions about how fair they are. Mobile money accounts are predominantly used by workers in the informal economy and, in October 2018, Zimbabwe changed their tax from 5 cents per transaction to a 2% tax. In the first six months of 2020, mobile money tax revenue accounted for $1 billion out of the government’s $11 billion in tax receipts and represents how technology can have a positive impact on a government’s economic goals.
As a country’s level of development increases, so too does the average life span. This exerts pressure on food services to avoid famines, but technology has eased the strain. Hydroponics was first developed in the 1940s and is a way of producing food without the need for soil, using only 17.5% of the water of land cultivation. This unique advantage provides opportunities to water-stressed countries like Uganda where only 38% of the population have access to clean water. In Kampala, the capital of Uganda, there are currently two hydroponics farms that are valuable to the residents but also symbolise the persistent issue of outreach and how the vast majority of the population do not have access to these facilities. Advances in technology resulting in improvements in living standards and productivity levels are often concentrated in the major cities of the developing world. This leads to unequal growth, the relatively productive becoming even more productive and those in rural areas being disregarded.
There are many examples of how technological advancements and the digital economy have been revolutionary in every developed country. However, the stubborn matter of outreach and distribution of these benefits is a point at which many economies have hit a roadblock and are continually trying to breach with the help of charities as well as foreign aid. Technology has addressed many of the economic flaws of the developed world but, in having a beneficial effect in concentrated areas, it can create inequality between major cities and more rural areas.
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Interesting article but you really can’t ignore the fact that developing countries exist within institutions created by developed countries which significantly affect their capabilities and actions. This is a huge topic but some suggested material as starters:
– an interview with a Kenyan academic based in the US which provides an overview of African economic development post Colonialism – https://www.themintmagazine.com/a-world-away; and
– a recent interview with an American academic on international financial systems – https://www.themintmagazine.com/the-biggest-issue