By Amol Kulkarni
Over the last three decades, globalisation has reduced the barriers obstructing free movement of people, capital, and goods and services. One of the biggest gifts of globalisation has been mobile phones and the internet.
Moving away from globalisation: A challenging era beckons
These gifts have been used to design disruptive business models. These models aim at linking service providers to the users, and building advanced manufacturing and business processes, such as 3D printing and automation.
Developments like these have reduced the need for physical movement of labour and businesses across borders. Economist Kaushik Basu calls these as labour linking and labour saving innovations. While the former has led people to work for employers in different countries without having to migrate, the latter has led to manufacturing hubs in emerging economies.
The World Bank notes that the emerging economies are at a risk of losing substantial jobs to automation. Economist Dani Rodrik refers to this trend as ‘premature de-industrialisation’. A reduced need to move across borders to stay connected is one of the reasons for the de-globalisation agenda resulting in political victories.
Leveraging internal markets: Direction of policy formulation needs to change
For the advanced economies, emerging Asian and African countries have traditionally been a source of cheap labour and conventional energy . De-globalisation appears to be reversing this trend.
[su_pullquote align=”right”]De-globalisation must force the countries to look within, and improve interaction between the domestic markets.[/su_pullquote]
All is not lost for the emerging economies. Globalisation forced them to open borders and introduce outward-focused economic reforms. De-globalisation must force the countries to look within, and improve interaction between the domestic markets. Emerging economies, including India, are home to some of the world’s poorest. Such communities have not been able to benefit from, or contribute to, globalisation. This is an untapped potential which must be capitalised through inward-focused economic reforms.
Internet is reducing the cost of delivering benefits to those deprived. Mobile payments in Kenya reduced poverty by 2%. Availability of user data is enabling service providers to offer customised products and services to rural consumers. Innovative models of credit scoring are resulting in the expansion of the target audience for formal financial services.
The poor are also being provided an opportunity to earn interest on their low value savings. Financing modes, integrated with mobile technology, are making it affordable for them to use renewable energy. It is now up to the respective governments to institute structural policies and regulatory reforms. Only then will these economies be able to benefit from these gifts of globalisation, and deal with de-globalisation.
[su_pullquote]The poor are also being provided an opportunity to earn interest on their low value savings. [/su_pullquote]
It is important to ensure that the poor are able to effectively compete with their richer counterparts for jobs. Therefore, the government will need to ensure availability of quality education and health services through private sector participation. The cost of access to such services could be reimbursed through direct transfers of basic income to unique ID-linked bank accounts. Targeted basic income should replace inefficient subsidies. Additionally, this will also help the disadvantaged deal with employment-related uncertainties.
Another round of reforms: Effective regulation is the key
Governments will need to dismantle the barriers to free movement of resources within the internal markets. There are multiple rules at state and municipal levels; relating to the acquisition of land, obtaining approvals pertaining to electricity and environment, and sourcing raw material and labour from other states. Taxation and multiple inspections for movement of goods across states imposes avoidable costs. The cost of doing business for micro, small and medium enterprises (MSMEs) needs to be reduced as well. An agile, digitally equipped private sector will be able to reach out to far-flung areas that have been excluded in the past.
Politicians will have to do away with their obsession with public sector entities and promote competition and a level playing field.
Building infrastructure important, employment will follow
Reforms in regulatory norms and competition will make the industry realise its potential, and in the process, create jobs.
For instance, a conducive regulatory environment will enable MSMEs to leverage the potential of e-commerce and mobile internet, thereby creating jobs in areas like assembling, packaging, delivery, logistics, installation, and repair and maintenance. As more merchants and users board the digital bandwagon, the demand for designing mobile applications in local languages to address unique problems across sectors will emerge. A bottom-up approach to development will create jobs. These might be in coding and designing of applications, artificial intelligence, outreach for market survey, or data collection and analysis. Similarly, the need for assisted usage of digital devices is expected to create jobs in awareness generation, capacity building, and hand-holding.
Acknowledging the risks: Digital economy will be testing
The digital economy will bring with it risks related to data protection, privacy and storage, digital fraud, misuse of customer data exhaust, unfair customer profiling, and incorrect credit scoring. The institutional capacity of regulatory agencies will need an upgradation for efficient monitoring and supervision, thus, creating more jobs. Therefore, the regulatory architecture will also need update to deal with risks of digital economy.
The use of mechanisation and technology in traditional areas like agriculture is already creating jobs in the form of custom-hiring centres and seed grading. This will need to be promoted and upscaled. Mass usage of renewable energy also provides an opportunity to tap the immense potential for job creation in this sector.
Market players will create jobs during the course of their businesses. While individuals will have to invest in ‘lifelong learning’ of new skills and expertise. The digital economy is already making education and skill development affordable and accessible like never before.
Consequently, embarking upon a journey to reform the internal markets will be essential for the emerging nations to benefit from a digital economy. In other words, salvation lies within for the emerging economies.
Amol Kulkarni is a senior policy analyst at CUTS International, Jaipur
Featured image courtesy: Pixabay
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