Danielle Goldfarb is head, global research at RIWI Corp., a global trend-tracking and predictive analytics firm.
Earlier this month, Statistics Canada published estimates of the size of Canada’s digital economy: It represented about 5.5 per cent of total Canadian economic activity in 2017, more than mining and oil and gas. This is an important step toward capturing e-commerce and other digital-economy activities that are central to our daily lives but left out of traditional economic data.
The widespread use of the internet has fundamentally altered the global and Canadian economies, yet most economic measures haven’t caught up with this dramatic change. That’s a problem: If we don’t measure the global digital economy, we risk missing significant economic changes. As a result, we might underestimate tax revenue, train young people with outmoded skills, underinvest in digital infrastructure or invest in the wrong kinds of physical infrastructure, among many other implications
In order to understand the trajectory of any industry, economy, global trade and the future of work and leisure, we need to complement existing measures with a suite of innovative new data approaches that capture the digital economy in real time. And we need a global approach, since the internet has made many things that were previously local now global.
Here are three important ways the rise of the internet has changed the global economy but are not well reflected in most economic measures.
- We now sell “intangibles” globally. Trade is no longer only about selling products or commodities globally. With digitization it is now both possible and attractive to sell many intangibles globally. Canada’s trade in services – such as banking, insurance, coding and data analytics – has been growing more rapidly than its trade in products. Governments are able to capture some of these activities sold globally. Yet much of our statistical architecture, economic analysis and public discourse focuses mainly on the data from tracking products as they cross borders.
- Anyone can be a global “producer.” In the digital economy, any individual can sell or buy graphic design services globally. Yet trade data are based on data from businesses. For a true signal of how significant trade in hotel services is and how quickly it is growing, you need to ask not only hotel owners, but individuals who are Airbnb hosts.
- China is at the forefront of digital economy change. China has the world’s largest internet-using population. The country is by far the leader on most digital-economy measures we track at RIWI, including the use of digital wallets, the adoption of online health consultations and the adoption of online “gig” work. Yet many attempts to capture the digital economy are North America-centric. To understand what the future of banking, work or transportation may look like, we need reliable China signals. But experts regularly accuse China of manipulating its economic data. It’s difficult to get clean data signals on either the traditional or digital economy in the country which likely represents the most significant change.
Capturing these changes is not necessarily straightforward. When it comes to “intangibles,” for example, customs officials can’t count them as they do for products. Moreover, it is difficult to capture intangible activities that are embedded in physical ones. Statistics Canada’s digital-economy measure doesn’t capture, for example, the growth in data analytics in physical-economy sectors such as agriculture.
We shouldn’t abandon our existing economic measures of exports, imports, employment and GDP, nor existing China and emerging-markets data. But we do need to recognize that existing data fail to give us the full picture and may give us noisy readings of true economic behaviour. For example, a 2019 Bank of Canada study finds that official jobs measures understate the true size of Canada’s labour force because they do not include informal gig work such as freelance online tasks and driving Uber.
We therefore need to add new dimensions or new measures that are global and that include the full and expanding range of digital-economy activities. Fortunately, there is a range of innovative new data approaches that, when adopted rigorously, can help us get clean signals on these trends. Two new approaches to measure online gig work, for example, include the Oxford Internet Institute’s Online Labour Index and RIWI’s global indicator of online-facilitated gig work.
The data gaps between reality and existing measures will widen as global internet penetration continues to rise. This will be especially so in China and other emerging markets that are no longer bit players in the global economy. These countries don’t just follow trends in the developed world, but are key players in the adoption of digital-economy practices.
If we fail to understand and measure the digital economy as it is in reality, and to do so from a truly global perspective, we are likely to miss the key inflection points that signal change, and we risk misreading the future.