Can Digitisation Improve Productivity?
The implementation costs for digitising almost any aspect of society are easy to calculate, but what about the productivity benefits? In a speech at Eurofiling Conference 2019 Erkki Liikanen, Chair of the Trustees of the IFRS Foundation, discussed whether digitisation will eventually deliver increased productivity for the global economy.
With the economic benefits of globalisation levelling off and productivity plateauing, can digitisation and technology offer a solution? When standardisation of digital interactions reaches a tipping point where every action can be completed electronically, end-to-end, and data can be easily accessed, will productivity improve? Static productivity has been one of the key puzzles that economists have been trying to explain over the past 20 years.
Liikanen offers an optimistic argument that we often overestimate what technology can accomplish in the short term while underestimating its long-term effects. Technological innovation may not drive productivity in itself, but enable more efficient business processes and use of human capital. As this requires learning new skills and updating institutions there is a bottleneck for productivity gains where organisations are not yet ready to extract the full benefits of digitisation, as they are not ready, technology hasn’t been updated at the same rate worldwide and regulators are unprepared.
Digitisation and standardisation of business reports should offer productivity benefits – helping investors diversify and invest, facilitating cross border transactions and encouraging transparent, accountable, efficient markets around the world. Technology is an important enabler, but the real benefits will only come once long held habits are replaced, the right tools are available, and laws are updated to allow digitisation to be fully embraced by regulators.
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