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Role of Technology in Economic Development

Updated: Oct 29, 2021

Technology is the catalyst for development in the new world. It increases the proportional value of resources in any given economy, defeating the old enemy of scarcity.


Technology can be regarded as primary source in economic development and the various technological changes contribute significantly in the development of underdeveloped countries.

Technological advancement and economic growth are truly related to each other.

The level of technology is also an important determinant of economic growth. The rapid rate of growth can be achieved through high level of technology. Schumpeter observed that innovation or technological progress is the only determinant of economic progress. But if the level of technology becomes constant the process of growth stops. Thus, it is the technological progress which keeps the economy moving. Inventions and innovations have been largely responsible for rapid economic growth in developed countries.

TECHNOLOGY & DEVELOPMENT ARE TWO SIDES OF THE SAME COIN. THEY ARE INTERRELATED AND THEREFORE, SHOULD BE INTEGRATED FOR OPTIMISATION.

The growth of net national income in developed countries cannot be claimed to have been due to capital alone. Kindleberger observed that major part of this increased productivity is due to technological changes. Robert Solow estimated that technological change accounted for about 2/3 of growth of the U.S. economy; after allowing for growth in the labour force and capital stock.

In fact, the technology can be regarded as primary source in economic development and the various technological changes contribute significantly in the development of underdeveloped countries. Therefore, digital revolution should be accepted and improved rather than ignored and repressed. The history of earlier general-purpose technologies demonstrates that even with short-term dislocations, reorganising the economy around revolutionary technologies generates huge long-term benefits. This does not negate a role for public policies. On the contrary, it is precisely at times of great technological change that sensible policies are needed. The factories created by the age of steam also ushered in regulations on hours of work, juvenile labor, and factory conditions.

Similarly, the gig economy is causing a reconsideration of rules: for example, what does it mean to be self-employed in the age of Uber? To minimise disruptions and maximise benefits, we should adapt policies on digital data and international taxation, labor policies and inequality, and education to emerging realities. With good policies and a willingness to cooperate across borders, we can and should harness these exciting technologies to improve well-being without diminishing the energy and enthusiasm of the digital age.

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