International Journal of March, 2022

Strategic Research in Education, Technology and Humanities IJSRETH

p-ISSN: 2465-731X | e-ISSN: 2467-818X Vol. 10, No. 1

Technology and the Future of Growth: Challenges of

Change
Zia Qureshi Abstract
Global Economy and

E
Development conomic growth has been lackluster for more than a
Oxford University decade now. This has occurred at a time when
economies have faced much unfolding change.
What are the forces of change, how are they affecting the
Article DOI: growth dynamics, and what are the implications for
10.48028/iiprds/ijsreth.v10.i1.12 policy? This review captures some of the dynamics,
challenges, and prospects of technology and the future of
growth.

Keywords:
Technology, Future,
Growth

Corresponding Author:
Zia Qureshi

First Published by:

https://www.brookings.edu/blog/up-
front/2020/02/25/technology-and-the-future-of-
growth-challenges-of-change/

http://internationalpolicybrief.org/journals/international-scientic-research-consortium-journals/intl-jrnl-of-strategic-research-in-edu-tech-humanities-vol-10-no-1-march-2022

IJSRETH | p. 122
Background to the Study
Three basic ingredients drive economic growth—productivity, capital, and labor. All
three are facing new challenges in a changing context. Foremost among the drivers of
change has been technology, spearheaded by digital transformation.

Slowdown in productivity and Investment

Productivity is the main long-term propeller of economic growth. Technology-enabled
innovation is the major spur of productivity growth. Yet, paradoxically, productivity
growth has slowed as digital technologies have boomed. Among advanced economies
over the past 15 years or so, it has averaged less than half of the pace of the previous 15
years. Firms at the technological frontier have reaped major productivity gains, but the
impact on productivity more widely across rms has been weak. The new technologies
have tended to produce winners-take-most outcomes. Dominant rms have acquired
more market power, market structures have become less competitive, and business
dynamism has declined.

Investment also has been weak in most major economies. The persistent weakness of
investment despite historically low-interest rates has prompted concerns about the risk of
“secular stagnation.” Weak productivity growth and investment have reinforced each
other and are linked by similar shifts in market structures and dynamics. Technology is
having profound effects on labor markets. Automation and digital advances are shifting
labor demand away from routine low- to middle-level skills to higher-level and more
sophisticated analytical, technical, and managerial skills. On the supply side, however,
equipping workers with skills that complement the new technologies has lagged,
hindering the broader diffusion of innovation within economies. Education and training
have been losing the race with technology.

Most major economies face the challenge of aging populations. Many of them are also
seeing a leveling off of gains in labor force participation rates and basic education
attainments of the population. These trends put an even greater focus on
productivity—and technological innovations that drive it—to deliver economic growth.

Rising Inequality
Growth has also become less inclusive. Income inequality has been rising in most major
economies, and the increase has been particularly pronounced in some of them, such as
the United States. The new technologies favoring capital and higher-level skills have
contributed to a decline in labor's share of income and increased wage inequality. They
have also been associated with more concentrated industry structures and high economic
rents enjoyed by dominant rms. Income has shifted from labor to capital and the
distribution of both labor and capital income has become more unequal.

Rising inequality and mounting anxiety about jobs have contributed to increased social
tensions and political divisiveness. Populism has surged in many countries. Nationalist
and protectionist sentiment has been on the rise, with a backlash against international
trade that, alongside technological change, is seen to have increased inequality with job
losses and wage stagnation for low-skilled workers.

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Changing Growth Pathways
While income inequality has been rising within many countries, inequality between
countries has been falling as faster-growing emerging economies narrow the income gap
with advanced economies. Technology poses new challenges for this economic
convergence. Manufacturing-led growth in emerging economies has been the dominant
driver of convergence, fueled by their comparative advantage in labor-intensive
production based on their large pools of low-skill, low-wage workers. Such comparative
advantage is eroding with the automation of low-skill work, creating the need to develop
alternative pathways to growth aligned with technological change.

Ai, robotics, and the fourth industrial revolution: Technological change reshaping
growth will only intensify as articial intelligence, advanced robotics, and cyber-physical
systems take the digital revolution to another level. We may be on the cusp of what has
been termed the “Fourth Industrial Revolution (4IR).” And globalization is going
increasingly digital, a transformation that, analogous to 4IR, has been termed. The
technological change recently has not delivered its full potential in boosting productivity
and economic growth. It has pushed income inequality higher and generated fears about
a “robocalypse”—massive job losses from automation. This should not cause despair,
however.

Advances in digital technologies hold considerable potential to lift the trajectory of

productivity and economic growth and to create new and better jobs to replace old ones.
As much as two-thirds of potential productivity growth in major economies over the next
decade could be related to the new digital technologies. But technological change is
inherently disruptive and entails difcult transitions. It also inevitably creates winners
and losers—as does globalization. Policies have a crucial role to play. Unfortunately, they
have been slow to adapt to the challenges of change. With improved and more responsive
policies, better outcomes are possible.

An agenda to harness the potential of new technology

The core of the forward policy agenda is to better harness the potential of the new
technologies. Reforms must seek to improve the enabling environment for rms and
workers—to broaden access to opportunities that come from technological change and
enhance capabilities to adjust to the new challenges.
1. Policies and institutions governing markets must keep pace as technological
change transforms the world of business. Competition policies should be
revamped for the digital age to ensure that markets continue to provide an open
and level playing eld for rms, keep competition strong, and check the growth of
monopolistic structures. New regulatory issues revolving around data, the
lifeblood of the digital economy, must be addressed. Flexibility in markets will be
key to facilitating adjustments to disruptions and structural shifts from digital
transformation.
2. The innovation ecosystem should keep pushing the technological frontier but
also foster wider economic impacts from the new advances. With the intangible
asset of knowledge becoming an increasingly important driver of economic

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 success, research and development systems and patent regimes should be
improved to promote broader diffusion of technologies embodying new
knowledge.
3. The foundation of digital infrastructure and digital literacy must be
strengthened. The digital divide is narrowing but wide gaps remain.
4. Investment in education and training must be boosted and reoriented to
emphasize the skills for the jobs of the future. With the old career path of “learn-
work-retire” giving way to one of continuous learning, programs for worker
upskilling and reskilling and lifelong learning must the scaled up. The key to
winning the race with technology is not to compete against machines but to
compete with machines.
5. Labor market policies should become more forward-looking, shifting the focus
from seeking to protect existing jobs to improving workers' ability to change jobs.
Social protection systems, traditionally based on formal long-term employer-
employee relationships, should be adapted to a more dynamic job market. Social
contracts need to realign with the changing nature of work.
6. Tax systems should be reviewed in light of the new tax challenges of the digital
economy, including the implications of the transformations occurring in business
and work and the new income distribution dynamics. The potential tax reform
agenda spans taxes on labor, capital, and wealth.

Conclusion
Reforms are needed at the international level as well, although the dominant part of the
agenda to make technology—and globalization—work better and for all rests with
policies at the national level. Not only must past gains in establishing a rules-based
international trading system be shielded from protectionist headwinds but new
disciplines be devised for the next phase of globalization led by digital ows to ensure
open access and fair competition. Sensible policies on migration can complement
national policies, such as pension reform and lifelong learning, in mitigating the effects of
population aging. The era of smart machines holds much promise. With smart policies,
the future could be one of stronger and more inclusive growth.

Reference
Zia, Q. (2020). Technology and the future of growth: challenges of change.
https://www.brookings.edu/blog/up-front/2020/02/25/technology-and-
the-future-of-growth-challenges-of-change.

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