Digital economy creates both threats and opportunities

Stralfors.co.uk

The global economy is becoming increasingly digital. Since 2005, e-commerce has grown from three to twelve per cent of global trade.

But the digital economy is much more than just a small, new part of the economic mix. It is bringing a structural shift in society, as physical products are being transformed into digital services. This is the view of Anna Breman, senior macroanalyst at Swedbank and Ph.D. in Economics. She has joined forces with her colleague Anna Felländer, senior economist at Swedbank, to write a report about the digital economy in Sweden.

“We believe that this is a global trend, even though there are some differences in how much progress different countries have made. Sweden is at an advanced stage in the process, with a high level of Internet use and several companies in this sector,” says Anna Breman.

At present it is above all books, CDs and daily newspapers that are being affected by this transformation, as they can easily be digitised. But a large proportion of trade is also being affected by greater competition from e-commerce. Another example is iZettle, which has created a card payment solution for small businesses with the aid of the Internet.

Creates opportunities and risks

The Internet and the digital economy bring many benefits. It creates new opportunities, not least for new business startups.

“Thanks to the Internet, a company can be global from the start and reach its customer group much more quickly. The range increases as goods that used to be available locally are now available everywhere.”

At the same time, the rapid transformation brings major risks for companies that are already established in the market. Even market-leading companies that have been around for years. Those that don’t have a digital presence and don’t keep up with developments are soon excluded. One obvious example is the music industry, which has undergone a massive transformation in recent years.

At a macro level, the digital transformation creates a problem in measuring growth with the aid of GDP. For example, GDP does not include the value of a free online newspaper, and it’s more difficult to measure streamed music online than to count the number of CDs being sold. So there is a risk that digitisation is being underestimated in official statistics.

“National accounts are adapted to how people used to calculate at the beginning of the last century, they’re not adapted to the modern economy. Which makes it difficult to measure certain things,” says Anna Breman.

What is required of companies and politicians if we’re to be able to make use of the growth potential offered by the digital transformation?

“The first step is to maintain high quality in basic education and to invest in both breadth and depth. This is relevant for all countries. In Sweden we also need to think about how we can attract people with the competences that we’re lacking.”

Pluses and minuses of diginomics according to Anna Breman

+ New companies can be global from the start. This increases the range on offer.
+ Life is made easier for many people, as you no longer depend on the opening hours of shops and banks.
+ It creates healthy growth. In the longer term, growth potential is even greater.
- The labour market is concentrated into certain highly qualified professional groups. It’s getting more difficult for those with lower qualifications to get into the labour market.
- The digital transformation is happening extremely quickly. Companies that don’t keep up risk being excluded.

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