The Digital Challenge: politics and economics

The Big Picture is a PESTLE analysis for innovation based on trends shared by experts from our networks. Today we look at innovations talks for politics and economics. While governments in Europe start to build and invest in digitally driven initiatives to modernize democracy, economists question the potential opportunities and threats of the sharing economy, as well as our ability to analyze and fix the way our current economies develop.

Building digitally open governments

Governments in Europe have great expectations on the digital technologies. Yet they are still to best define the needs, the plans, and the solutions to address social and economic issues. In her article for Maddyness, Anaïs Richardin concludes: “Although France has initiated a vast international development plan through the French Tech initiative, the country keeps sending contradictory signs, including the witch hunting organized against AirBnB or the multiple court cases targeting Uber.”

The reality of the market may be tough, but still France shows a candid interest in digital public services. In below video, CNNum (French Digital National Committee) explains that the benefits would not only impact process and organizations, but also the way citizens interacts with the government.

Citizens, knowing they now can access new communication tools to get heard, are getting organized. Initiatives such as Eklezia expect to become a citizen social platform to gather all ideas and projects in one place. Whether they come from citizens or the government, digital developments show a growing appetite to communicate more and better to align public policies with citizens realities. 

It is only a starting point, but France, among other European countries, is getting ready for the digital era. As Sandrine Cassini reminds for Les Echos, “according to the French Prime Minister office, Axelle Lemaire’s proposal, under development for several months now, will be presented “in September”. It will be oriented towards “rights and freedoms on the Internet”. (…) Emmanuel Macron, for his part, will investigate laws concerning “innovation”.” With these new projects, France hopes to stimulate the economy by creating digitally driven employment and business growth.

Beyond the economic opportunity, digital technologies also enable countries to hope for more efficiency and cost savings. In France, Etalab describes the “Government-As-A-Platform” project called “State Platform and France Connect”. As the article explains, “By working on openness and interoperability between their own systems, administrations become a resource for other administrations and create an opportunity for new social and economic innovations.”

Obviously this is not a French only story. In the UK, plans to support a growing digital economy are also being rolled-out. As Bryan Glick explains for Computer Weekly, “The UK’s digital economy is vibrant and growing rapidly. To ensure that these benefits are felt throughout the whole economy the government will publish a Digital Transformation Plan by autumn 2015 that sets out concrete actions the government will take to support the adoption of digital technologies across the economy, and the ways in which the government will assist in tackling barriers to new businesses entering and creating new markets,” said a HM Treasury report, titled Fixing the foundations: Creating a more prosperous nation.”

In the midst of all these changes, experts are questioning the European policies and decisions. They ask for example : are politics in Europe really open to external views? This is what Ludovic Lamant wonders in his article for Mediapart. In his view: “Decision making bodies in Brussels are allergic to any expert criticism, as a result of a growing distance they take with universities“.

Yet, under the current economic situation and the system in place, politics are being forced to react. This is not just an economic choice. It definitely is a political one. As James A Robinson explains for the World Economic Forum, “Our framework suggests that when policies are chosen by politicians who want to win elections, the volatility of public income, a particular problem for poor countries reliant on natural resource wealth, has clear implications for the efficiency of policy. In particular, it can make both policy and the extraction path for natural resources less efficient.”

As a way to bring more openness, Europe is funding through the European Research Council a project called Oecumene, aiming at analyzing citizenship outside Europe. As Engin Insin explains in the article, “Our empirical research shows how people across the globe have been inventing creative ways to claim their democratic rights as citizens. After the Oecumene project, it becomes difficult to suggest that democratic citizenship is an exclusive European value”.

Innovation experts also question the end-goal of digital innovation and innovation labs for public policies. As Nesta asks, “Could small country government innovation labs lead to a special case of Mazzucato’s ‘entrepreneurial state’  – with positive spillover benefits not, as in the case of the US, through government investments in defence-related research (the US’s DARPA, the Internet and the i-phone) but in core public services like health and education?

An economic system looking for new breathe

Digital technologies impact the economy by developing new business models, and creating new promises of growth. Beyond the market potential, experts wonder if the sharing economy going to put an end to capitalism. Chris Martin has analyzed experts views and concludes for the World Economic Forum: “It’s hard to tell which path we’re currently on. I for one hope Mason is right, and that the sharing economy will bring an end to an unsustainable system. But I fear that it’s more likely to transform the world of work in a negative way, reducing quality of life for many within society. The people championing this path are those with great power within the capitalist economy.”

Because of the remote working enabled by communication tools, new forms of organizations and structures are developing. Talents are everywhere. And they are changing the game. As Brendon Schrader writes for Fast Company, “And of course, the rise of independent work isn’t just a boon to independent workers, either. It also allows businesses to find more targeted and better qualified talent to address their needs—typically at lower costs. Rather than bringing someone in full-time, with benefits and a salary, a company can hire a consultant who’s ideally suited to a particular project. And that consultant is likely to have more resources to tackle it than at any time before.”

Yet analysts remind  we can now draw lessons to anticipate future challenges and current limits of our own system before we start transforming it. A changing economy needs to be analyzed on the long term, countries like China offer a good example to determine the results of economic transformation. This is what Tomas Hirst intends to do in his article for the World Economic Forum. In his view, “The catch-up process that has delivered significant productivity growth in the country is also likely to slow as Chinese industry gets closer to the technological sophistication of its Western counterparts, while the initial gains of adding hundreds of millions of workers to the global labour supply are also quickly fading. Instead of allowing low-cost exports to drive growth, China will increasingly have to rely on expanding its own domestic demand to meet the government’s ambitious growth targets. Achieving this, however, will require further reforms to release Chinese consumers’ spending power and build the foundations of a more balanced economy.”

In this relentless race for growth, experts seek to re-assess the numbers and indicators that drive economic decisions. For instance, they wonder to what extent growth is actually back. In the U.S., Josh Boak explains for TIME how “Falling unemployment usually reduces the number of people available to hire, which then forces employers to boost wages. But many frustrated job seekers have stopped looking for work, perhaps only temporarily. This has made it hard to assess just how healthy the job market is and when pay might rise at a faster rate.”

As we start investigating potential new economic systems, experts question our ability to find the right answers to current economic problems, including with the learnings we could have drawn from distant and less distant past. As Mariana Mazzucato explains on her blog, “Today both debt forgiveness and an investment plan are lacking in the EU’s approach to Greece. A second form of hypocrisy, often lost in the media, is just how much international private banks were saved and ‘forgiven’, with little scandal amongst the finance ministers.

Finally, experts put a question mark on the economic tools we use. In a changing economic environment and ecosystem, it seems questionable to carry politics that were defined for long past stable economic patterns. As Paul Beaudry concludes his article for the World Economic Forum, “However, if the system is inherently unstable and exhibits forces that favour recurrent booms and busts of about seven to ten years intervals, then it is much less likely that monetary policy is the right tool for addressing macroeconomic fluctuations. Instead, in such a case we are likely to need policies aimed at changing the incentives that lead household to bunch their purchasing behaviour in the first place.”

By defining both the frameworks and tools provided by a now closer digital revolution, analysts and innovation experts bring essential discussion points we need to bear in mind with regards to politics and economics:

  1. We need to bridge the gap between politics and citizenship to better define the necessary social and economics scheme that will build our digital future.
  2. We need to clearly identify the impact of digital on work structure and society by looking beyond business and growth potential and assess social threats.
  3. We need to clearly understand and learn from current economic struggles to define policies that anticipate risks and changes from a growing unstable environment.

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