Effective global partnerships, sufficient financing and close cooperation between Governments and the private sector will be indispensable to harness the evolving global innovation and technology landscape and deliver the policy response required to achieve prosperity for all while preserving the planet, says UNCTAD in its latest Policy Brief.

Leveraging innovation is central for achieving the Sustainable Development Goals (SDGs) agreed by the international community in September 2015 as part of the 2030 Agenda for Sustainable Development. The expansion of the digital revolution into production processes, exemplified by what some have come to call the fourth industrial revolution, promises far-reaching development benefits, but also poses new challenges to inclusiveness.

Achieving the Goals will require realizing the potential of these new innovations not only for transforming economies, tackling vulnerability and building resilience (Goal 9), but also for attaining economic growth and decent work (Goal 8) and reducing inequality (Goal 10). To harness these benefits, a strengthened and revitalized global partnership (Goal 17) will be crucial, supported by policies that address a host of emerging issues, from translating innovation into investment to safeguarding universal benefits from productivity growth.

The contribution of innovation to development is greatest when innovation-based investment raises productivity growth and allows workers operating new machinery and software to demand higher wages, with resulting higher aggregate spending further boosting investment and the prosperity of society as a whole. Relative to the productivity gains and economic transformation engendered by the steam engine and electricity, the digital age has yet to deliver. Part of this underperformance may be due to mismeasurement, as the many products the digital economy provides for free are not captured in productivity statistics. Another possibility is that many of the benefits have yet to be seen.

Reaping the full benefits of the digital revolution is becoming increasingly likely given the move to an era of big data and what is called the Internet of Things. What is often termed the fourth industrial revolution is set to address the slowdown in productivity growth that has afflicted the world economy over the past few years. If such innovations permit the digital age to have an impact on the order of the earlier industrial revolutions, the digital economy will, sooner or later, provide universal benefits and contribute to the 2030 Agenda for Sustainable Development.

Key points:

• Expanding the digital revolution into production promises far-reaching welfare and productivity gains.

• Robotization in developed countries erodes developing countries’ traditional labour-cost advantages, while robotization in the latter reduces the potential of manufacturing to absorb surplus rural labour, the basis on which industrialization strategies have traditionally relied.

• Effective innovation policies and stepped-up capital investment can help capture benefits from digitization and tax reform may replace lost fiscal revenue from a robotized workforce.

• Enhanced social protection for freed labour, and innovation that complements the digital revolution, can help ensure inclusiveness.