Watch: Digital inequality reflects structural inequality

Watch RIA’s Alison Gillwald contribute to this ITU Economic Experts Roundtable on COVID-19 and the Digital Economy (her input starts at 2:04).

Speaking on an Economic Experts’ Panel on COVID-19 and the Digital Economy hosted by the ITU, Alison Gillwald argued that COVID-19 has highlighted the extreme digital inequality that has prevented many developing countries from being able to mitigate the social and economic fallout of the pandemic. However, this was also evident before COVID-19 when we could see how far off we were from the underlying digital indicators for the SDG’s and the 2030 targets, she argued.

Referring to the market and institutional failures that have contributed to this, Gillwald said that what COVID-19 has demonstrated is the way in which digital inequality reflects the structural inequalities that exist in our economies and societies.

For example, due to high levels of informality, from a livelihood’s perspective, people are unable to mitigate full substitution in supply chains, which have become completely decimated during lockdown. As a result, millions of people are starving and unemployed in many countries. In this regard, the potential of substitution was so limited that lockdowns couldn’t even be sustained, she argued.

From a digital inequality perspective, she said that in many countries, even though people have come online, this is still below the threshold of the 20% critical mass that’s required to provide the network effects associated with economic growth and development.

According to Gillwald, this is a demand side challenge. Referring to surveys conducted by RIA, on the question of mobile broadband data, for example, in a country like South Africa, coverage is well above 95%, but access and penetration levels are still low. So, the challenge is only partially an infrastructure and supply side challenge. Even if the coverage is there, the biggest barrier to coming online is actually affordability of the handset.

This requires us to look at the institutional arrangements in those countries as well as market structural reform and business models being adopted to understand where we have gone wrong, she said.

What COVID has made very clear is that we simply cannot continue to do the same things that we have done and hope to have different results. We need to look at some of the regulatory and institutional failures that exist.

The problem is that we have not done some of the critical competition regulation in order to get these markets to work. So, in large parts of Africa, we have actually not recognized the importance of economic regulation in the sector, she said. For example, there is regulatory capture from the state in South Africa around the availability of spectrum and rent extraction that’s gone with it. This also plays out in terms of the operators extracting rents. 

Another problem highlighted by Gillwald was that we’ve tended to adopt, without much adaptation, the so-called best practices of mature economies’ competitive markets and countries with institutional endowments rule of law and democratic frameworks that don’t exist in many of our jurisdictions.

Due to the severity of the crisis, Gillwald called for political economy analysis. Digital inequality is critical and needs a completely new digital deal. 

According to Gillwald, the central policy challenge is the digital inequality paradox, which refers to the fact that as we connect more people, we are actually increasing inequality. This is not only inequality between those connected in the data environment and those who are not. It’s also about those who are barely connected or eking out enough to make a call for a job or to communicate on social networks, as opposed to those who are productively using it.

Creating policy environments and institutional arrangements that will support measures to address inequality have to be located in the bigger structural and systemic issues that we’re dealing with, requiring a novel approach to addressing some of the problems. To this end, Gillwald called for more policy experimentation and regulatory innovation.