Fourth Industrial Revolution

Economic prosperity in the digital age

A man walks past buildings at the central business district of Singapore February 14, 2007. Singapore's trade-reliant economy expanded faster than expected in the fourth quarter on a pick up in domestic activity, data showed on Wednesday, prompting the government to lift its expectations for 2007.  REUTERS/Nicky Loh  (SINGAPORE) - RTR1MDL4

Digitisation has ramped up economic competitiveness in recent years. Image: REUTERS/Nicky Loh

John Chambers
Executive Chairman, Cisco
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Around the world, people are demanding change. Recent electoral outcomes – perhaps most notably, the Brexit vote in the United Kingdom and the presidential election in the United States – have highlighted rising economic uncertainty. In this environment, it is imperative that leaders articulate and deliver on a clear vision for inclusive economic growth, one that accounts not only for tax and trade policy – the focus of many of today’s debates – but also for digitization.

Representing $19 trillion in potential economic value over the next decade, digitization has the power to enable countries to kick-start GDP growth, job creation, and innovation. We’re already seeing the profound impact that digitization can have on countries that embrace it as a core driver of their economic strategies.

In India, for example, Prime Minister Narendra Modi is implementing a strategy that is transforming India into a technology powerhouse and setting the stage for a digital future. In France, the government has invested in an extensive national digital plan that is expected to create 1.1 million jobs over the next 3-5 years and contribute $101 billion to GDP over the next decade.

While other countries are embracing robust digital strategies, the US is falling behind. Despite having led the Internet race in the 1990s, the US is now the only major developed economy without a clear digitization plan. The consequences are already starting to show: according to the 2016 Bloomberg Innovation Index, the US is now the world’s eighth most innovative country, having fallen two spots since 2015.

The message is clear: when it comes to digitization, nobody is entitled to anything, and there is no time to waste. Even in Silicon Valley, we must constantly reinvent ourselves to stay competitive. The US economy must do the same, or risk losing its innovative edge. Only with a clear and effective digitization plan can the US ensure that it retains its status as a global economic leader in the Digital Age, while fulfilling its citizens’ demands for more economic opportunities.

I believe that connectivity has the power to transform economies and generate new opportunities. That is why America’s new digital agenda must rectify the fact that, despite living in one of the world’s wealthiest countries, one-third of the US population still lacks broadband access at home.

Existing Smart City initiatives promoting connectivity in Chicago and Washington, DC, are encouraging. But, to close the digital divide, a more comprehensive national digital strategy is needed, one that emphasizes digital infrastructure investment, rather than just physical infrastructure investment, as in the past. Only with broad access can technology continue to fulfill its potential as one of the great economic equalizers.

An effective US digitization plan must also support start-ups. Young companies represent the future of job creation – they are the primary source of new jobs in the US – and technological disruption. Yet start-ups are on the decline in the US. According to research by the Brookings Institution, the start-up rate (the number of new companies, as a percentage of all firms) has fallen by nearly half since 1978.

To boost innovation and job creation, we need to reverse this trend, injecting more fuel into the US economy’s start-up engine. This will require businesses and government to work together to create an environment that encourages entrepreneurs to bring their visions to life. A combination of legislation, such as tax benefits for early-stage companies, and corporate/venture capital investments that provide financial backing and mentorship opportunities to start-ups, will be vital to sustain this ecosystem.

More broadly, US leaders must create an environment that encourages all kinds of business growth and investment. Trump’s call to update US tax rules in 2017 could produce benefits on this front, assuming that the new rules promote domestic investment by encouraging companies to bring back their overseas earnings and by lowering the corporate tax rate, currently one of the highest among OECD countries. These steps could bring more than $1 trillion into the US economy, creating jobs and economic opportunities in the process.

Yet another critical element of an effective digitization plan is education and training. Businesses need to invest in the existing workforce, which largely lacks the skills necessary to compete in the Digital Age. At the same time, we must transform our education system, so that younger generations acquire the skills they need to secure the high-paying digital jobs of the future. To this end, we must move beyond emphasizing science, technology, engineering, and mathematics – the so-called STEM subjects – to think about how to apply technology and digitization to all fields.

Digitization could create $5.1 trillion in economic value for the US by 2025, while significantly lowering unemployment. But the US cannot realize this potential unless its leaders work effectively across party lines and with all industries to drive forward a digital agenda.

Technology is changing everything: the way we do business, the rules of capitalism, and entire economic ecosystems – all at tremendous speed. The US must change with it, acting now to do what it takes to reclaim its innovative edge and thrive in the Digital Age.

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Related topics:
Fourth Industrial RevolutionEconomic Growth
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