While the evolution of the pandemic and its prolongation over time are still unknown, doubts about its strong economic and structural impacts are fading. The two main central banks - the Federal Reserve in the United States and ECB in Europe - have even admitted that full economic recovery on both sides of the Atlantic will still take time to arrive. A question that arises more and more is not so much if this crisis will pass quickly, but what impacts and lasting changes it will bring to our lives in the future, given that, historically, crises tend to force structural changes.
One of the aspects that will certainly accelerate with the pandemic is the process of digitizing the economy. The situation of quarantine and social detachment, forced by the pandemic, posed challenges to the continuation of economic activities and to the ease of meeting our most basic needs. The great solution that emerged and that allowed us all to keep our living standards prior to the epidemic minimally was, without a doubt, the use of digital channels.
Many of us started working or studying exclusively from home. We started to make more purchases online and to make greater use of digital banking services. Video calls and conference calls have become part of our new daily life. The presence and activity on social media has exploded. All of this triggered a change in trajectory and an intensification of our relationship with technology, which made us realize its importance in our life and how it can help us to improve it. However, despite bringing benefits, the digitization process is not without risks. It challenges the current state of affairs, but it also offers opportunities. Basically, like any major structural change, it appeals to our capacities for adaptation, innovation and resilience.
Indeed, the digital revolution can bring about significant changes and challenges for both companies, workers and governments.
In the case of companies, it brings increased responsibilities to their leaders, who will have to invest in innovation, knowing how to adapt and reinvent their businesses, with flexibility and agility, in order to take advantage of opportunities and mitigate risks. The digital world allows companies to expand and diversify their presence in the market, while also facilitating internationalization. It allows them to be more attentive to the behavior and preferences of consumers, as well as to their competitors and the market where they operate, through data analytics e Business intelligence. However, it also implies that they face increased competition.
Another facet of the digital revolution, automation, can also bring developed countries and their companies an opportunity to recover types of productive activity that have been lost in the past, although it is unlikely to bring significant job creation on its own. It is precisely the workers who, without due attention, may prove to be the weakest link in the digital transition.
The replacement of some tasks performed by the human hand, made possible by digital automation, may lead to a phenomenon of work polarization. In it, jobs with medium skills tend to be eliminated, leaving the job market divided only between jobs with low skills and those with high skills. This will tend to aggravate inequalities, and may encourage the emergence of groups in society willing to destabilize political and social spaces, with the potential to worsen the situation.
Ultimately, digital transformation also poses challenges to governments as guarantors of the well-being of their citizens, and they must ensure that the benefits brought by it will be distributed evenly to all. This requires that those injured by the process - for example, workers who lose their jobs due to the replacement of their functions by robots - be compensated in some way and, above all, helped to re-qualify, so that they can also enjoy and contribute to the economy resulting from the fourth industrial revolution.
Finally, the need for a greater degree of multilateralism and international solidarity must not be overlooked, allowing the benefits of the digital revolution to be shared by all countries and preventing them from becoming the privilege of a restricted club.
The crisis caused by the pandemic has accelerated the ongoing process of transforming the economy, making the future come faster. Historically, technology has brought enormous progress for humanity, especially when it is placed at its service in an inclusive way. Nevertheless, inclusiveness will depend a lot on how the institutions and their protagonists will deal with the new challenges aggravated by the accelerated change and the crisis situation.
Taking up references
Anderton, R., Jarvis, V., Labhard, V., Morgan, J., Petroulakis, F., Vivian, L. (2020). “Virtually everywhere? Digitalization and the euro area and EU economies”, Occasional Paper Series, ECB.