Rethinking the Twenty-First-Century Economy
With the rise of digital technologies and big data, the global economy is undergoing a fundamental transformation that poses significant challenges to governments and policymakers. Unless tools are developed to measure new sources of value in the real economy, current and future generations' wellbeing will be in jeopardy.
GENEVA – Before the threat of a US-China trade war arose, surging stock markets and corporate profits had obscured the fact that the global economic system is under existential stress. Global financial stability remains considerably in doubt. Indeed, as world financial leaders gather for the annual IMF/World Bank spring conference in Washington, DC, the rapid pace of technological change and rising inequality are fueling ever louder calls for root-and-branch revision of the entire system.
For governments to cope with these mounting pressures, they will need to rethink the key policy tools on which they have relied for well over a century, starting first and foremost with taxation.
Death and taxes may have been the only certainties in the world of Benjamin Franklin two centuries or so ago; today, only death remains undeniable. With the rise of the digital economy, more and more economic value is derived from intangibles such as the data collected from digital platforms, social media, or the sharing economy. And because company headquarters can now be moved between countries with ease, governments are finding it ever harder to raise taxes. At the same time, public spending will likely have to increase to meet the demands of those left behind in the era of globalization and digital technologies.