• Olivier Lawrie

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Balancing the Potential of Digitised Economies and the Need For Regulation

As societies across the globe become ever more globalised, so do the economies of those societies become ever more digitised. As Dahlman et al. (2016, p. 8) note‚ the world is currently ‘undergoing a digital revolution with significant implications for global economies and livelihoods’. Given how fundamental a functioning, prosperous economy is to the success of society, it is worth gaining a thorough understanding of what these aforementioned ‘implications‘ are. Should we fail to do so, we risk being ignorant of the potential damage of economic digitisation and the opportunities it presents for economic growth. This article intends to critically consider both of these factors, while investigating how governments can act to foster a prospering economy in a globalised, digital world.

Digital Prosperity

A digitised economy is capable of offering benefits to its subjects in a way which predominantly analogue economies are simply unable to match. Studies and academic literature have long shown the ability of technological development to positively impact economic development, be it through boosting economic growth, increasing productivity or creating employment (Arvin & Pradhan, 2014; Hardy, 1980; Fornefeld et al., 2008; Katz & Callorda, 2018; Mack & Faggian, 2013; Rohman & Bohlin, 2012; Sabbagh et al., 2013). A digitised economy has even been recognised as a key weapon in armoury for those wanting to boost economic output in developing countries, given the 'powerful capacity of digital economy to transform developing countries‘ economies and societies’ (Dahlman et al., 2016). This is further corroborated by the data; in 2011, digitisation contributed an additional ‘US$193 billion to the world economy and 6 million jobs worldwide’ (Sabbagh et al., 2013, pp. 36-37).

According to Connelly et al. (2021, p. 1) note, ‘as digital and social technologies advance, organisational processes and the nature and meaning of work continue to evolve‘. Through the availability of technology, companies overseas are able to provide flexible jobs in foreign markets, and therefore produce capital in that economy with unparalleled ease. In any technology-reliant digitised economy, geographical prerequisites are nullified, allowing those within reach of digital infrastructure and in possession of technological hardware numerous employment opportunities. Beyond the aforementioned economic benefits, a by-product of a digitised economy is marked innovation and progression in other areas of society. Dahlman et al (2016, p. 8) state that:

‘[Digitisation] has the potential to make workplaces and transportation systems safer, cities more liveable and domestic lives simpler. Associated applications are being used to transform the way people communicate, shop, travel and work, and are creating entirely new business models and markets’.

A digitised economy could go as far as to help in the fight against the climate crisis, as has been documented, in turn aiding future economic stability for future generations (Khan et al., 2015). Given economic productivity is no longer bound by physical space, predominantly in the service sector, less resources are required for the same output, be that businessmen no longer flying across the globe for a meeting that is now conducted over the internet, or simply using less paper given the availability (and convenience) of digital communication methods.

Dangers of Digitisation

While the benefits of a digitised economy are manifest, these must not overshadow the very real dangers of a mismanaged, unregulated digitised economy . Academia has been aware of the risks involved with economic digitisation, in particular the threat automation and AI pose to the employment of unskilled workers (Keynes, 1930). What Keynes noted in 1930 (1930) still rings true today, for while digitisation creates employment opportunities, in reshaping economies it also ‘destroys old ones and alters the composition of existing jobs’. As Kaplan and Haenlein note (2020, p. 46), ‘AI will touch some pink- and white-collar jobs in the same way as blue-collar workers were affected by automation on the shop floor decades ago’. Further, ‘offshoring' becomes ever more prevalent with digitisation; ’as companies in digitally advanced countries improve their productivity thanks to digitization, they transfer jobs to digitally emerging countries’ (Sabbagh et al. 2013, p. 37). All of these have severe implications for all economies, not only do they reduce employment in the host country of a business, but they further drain capital from local economies.

Connelly et al (2021, pp. 2-3) explain that, even for the jobs created by digitisation, fundamental questions remain about worker retention as well as the susceptibility of these jobs to be shaped and exploited to circumvent economically inexpedient policy (ie. ensuring workers have not contracted employees, and therefore companies don’t have to give them the same rights or pay taxes on them). This is a very relevant topic given the impact of the covid-19 pandemic and the new-found prevalence of digitised, remote work.

Beyond questions around unemployment, digitisation also stretches the ability of current governance structures to effectively regulate their economies, among others to suppress the innovation-limiting ‘winner takes all’ dynamic of such markets and ensure qualities such as fair competition (Steinberg and Roser, 2020, pp. 54-55). This dynamic may be desired in terms of providing an incentive for innovation. Due to the lack of transnational regulation in this area, however, it can also lead to those market leaders being in a position to erect barriers to competition entering their market. This serves to expose the inadequacy of public policies on taxation and trade that are traditionally geographically based indistinctly ‘placeless’ digital economies (Dahlman et al., 2016, p. 9).

Regulate or Risk Obsoletism

Prior research incontrovertibly indicates that economies profit from digitisation, be that ‘boosting productivity, creating new jobs, enhancing the quality of life for society at large’ (Sabbagh et al. 2013, p. 42) or even making economies more resilient to (economic) crises (Katz et al. 2020). As has been proven in Germany (Dahlman et al., 2016, p. 75), it is possible to preserve these benefits through a systematic manner of planning and execution of policy aimed at redesigning the workforce in the future through training. Likewise to promulgating cyber security measures for companies looking to implement further digitisation in the future. The European Union is also making strides in this area, for example with the adoption of digital contract directives in May 2019 (European Council, 2019). It has never been more imperative for governments to follow Germany’s lead in this area. Governments across Europe and beyond must ensure they are in a position to react to technological developments and that their legislatures are able to react appropriately, lest they risk obsolescence in an ever more competitive transnational economic landscape.


Arvin, M., & Pradhan, R. 2014. Broadband penetration and economic growth nexus: Evidence from cross-country panel data. Journal of Applied Economics, 46(35).

Connelly, C. E., Fieseler, C., Černe, M., Giessner, S. R., & Wong, S. I. 2021. Working in the digitized economy: HRM theory & practice. Human Resource Management Review, 31(1).

European Commission. 2018. DIRECTIVE (EU) 2019/770 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL. Official Journal of the European Union. Available from: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32019L0770

Fornefeld, M., Delaunay, G., & Elixmann, D. 2008. The impact of broadband on growth and productivity. MICUS: European Commission (DG Information Society and Media)

Hardy, A. 1980. The role of the telephone in economic development. Telecommunications Policy. 4(4), pp. 278–286.

Katz, R., & Callorda, F. 2018. The economic contribution of broadband, digitization, and ICT regulation. International Telecommunications Union.

Katz, R., Jung, J., & Callorda, F. 2020. Can digitization mitigate the economic damage of a pandemic? Evidence from SARS. Telecommunications Policy. 44(10).

Kaplan, A., Haenlein, M. 2020. Rulers of the world, unite! The challenges and opportunities of artificial intelligence. Business Horizons. 63(1), pp. 37-50.

Khan, S., Khan, S. and Aftab, M. 2015. Digitization and its impact on economy. International Journal of Digital Library Services. 5(2), pp.138-149.

Mack, E., Faggian, A. 2013. Productivity and broadband: The human factor. International Regional Science Review. 36(3), pp. 392–423.

Rohman, B, Bohlin, E. 2012. Socio-economic effects of broadband speed. Ericsson.

Sabbagh, K., Friedrich, R., El-Darwiche, B., Singh, M., Koster, A. 2013. Digitization for economic growth and job creation: Regional and industry perspective. The global information technology report, pp. 35-42.

Further Reading

Connelly, C., Gallagher, D. 2006. Independent and dependent contracting: Meaning and implications, Human Resource Management Review. 16(2), pp. 95-106

Docquier, F., Rapoport, H. 2012. Globalization, Brain Drain, and Development. Journal of Economic Literature. 50(3), pp. 681–730.


Reilly, P. 1998. Balancing Flexibility - Meeting the Interests of Employer and Employee. European Journal of Work and Organizational Psychology. 7(1), pp. 7-22.

Towse, R. 2019. A Textbook of Cultural Economics. Second edition, Cambridge University Press.

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