Global Roundtable of Chief Economists: Will digital technologies counter declining productivity growth?
Can digital technologies help reverse a long-term decline in business productivity and fuel world economic growth in the years to come?
That was one of the key topics at the first-ever Global Roundtable of Chief Economists held at BDC’s headquarters in September. The conference brought together chief economists from development banks around the world whose focus is on small and medium-sized businesses.
A time of economic uncertainty
The roundtable unfolded at a time of heightened uncertainty in the world economy. Despite improving this year, global growth remains well below levels seen before the 2008-09 financial crisis.
In fact, the gap has widened in recent years and is actually larger today than at the depths of the crisis, according to Ted Chu, Chief Economist at IFC, World Bank Group, and my co-host at the roundtable.
Investments in digital technologies are growing rapidly
I observed that banks are being called upon to increasingly finance non-tangible assets as digital technologies take on more importance. In Canada, 20 years ago, 80% of business investment was in tangible assets—equipment and buildings. That percentage has basically been turned upside down; more than 60% of investment is now in non-tangible assets such as software.
Chief economists from several European banks expressed confidence that digital transformation will produce major productivity gains. For example, Jörg Zeuner, Chief Economist at Germany’s KfW Bankengruppe, noted that Germany’s labour force will shrink by about 15% over the next 15 years and digitization “is coming at just the right time to replace a lack of skilled labour.”
New technologies are also encouraging entrepreneurship in developing countries, the conference heard. Mavis Chaile, Chief Investment Officer at the Development Bank of Zambia, said the spread of mobile phones has allowed for growth in business activity in sub-Saharan Africa through such things as online loans, money transfers and electronic payments.
Technology is a high-speed train
Quebec City entrepreneur Yves Proteau offered a fascinating real-life example of how business owners are reaping the benefits of what’s known as Industry 4.0. Yves is Co-President of APN, a company that manufactures metal parts, primarily for use in the aerospace industry.
Since 2004, APN has invested heavily in sophisticated software, smart machines, robots, digital sensors and employees with advanced technical and engineering skills. The result is a highly automated operation where processes are monitored and controlled in real time to optimize work flow, quality and output. Sales and productivity have risen sharply.
Yves agreed that banks have to adapt their lending to the new economic realities and said entrepreneurs shouldn’t wait to adopt new technologies. “Ready or not you have to jump on the train because the train is going faster and faster and faster.”
The conference brought together chief economists or their equivalent from development banks and associated organizations in 17 countries. During the two-day conference, economists shared their views and expertise on a range of topics including global economic trends, measuring the impact of development banks and best practices in conducting research.