Finance

Corona, staff shortage and lack of space are driving digitization

Yes, the Netherlands is again 4th in Europe in the latest The Digital Economy and Society Index. We lead the way when it comes to the share of residents with basic digital skills, the coverage of broadband connections and the 5G network, and the percentage of companies that use big data.

In fact, according to this study by the European Commission, after Ireland and Denmark, we have made the greatest progress in digitization in the last five years.

When the corona crisis broke out, the Netherlands benefited from this. After all, the switch to working from home and to digital production and consumption in a lockdown is easier. Own research suggests that the computer access of citizens in EU countries limited the first direct economic damage.

For the whole of 2020, I found indications that Member States with a higher percentage of households with an internet connection at home had less GDP loss. It’s quite ignorant that Mario Draghi wants to pull fiber optic cables throughout Italy with his billions from the European recovery fund.

I am curious about the super jump we will make in the near future. Because these times are really boosting the digitization of the Dutch economy. Forced by a virus and lockdowns, an aging population and staff shortages, and limited physical space and many wishes.

Everything that can be done digitally does not have to be physical. Very useful in times of corona restrictions that limit social contacts. Very useful for coping with current and future labor market shortages – think of the healthcare sector! Very useful if you have to deal ingeniously and smartly with the lack of space through concepts such as smart mobility and smart cities.

We can produce and consume smarter. Transaction costs, wage costs and inventory costs decrease due to digitization. Transaction costs decrease when search and information costs to find a match on a market are virtually zero, a contract is concluded in a jiffy and payments are made digitally immediately.

Labor costs decrease when digital tools better determine which physical labor is needed when and where and travel times decrease. Inventory costs fall if big data is used to make a better estimate of necessary stocks and replenish them at exactly the right time – storage spaces can be smaller and waste decreases.

Obviously there are risks. Groups in society will not be able to cope well. The Central Planning Bureau warns that twenty percent of Dutch people between the ages of 16 and 65 do not have the OECD basic level for digital skills, including a group of young people.

And our government will react too late to the emergence of new digital positions of power, because devising the market organization takes time. Privacy rights and neutral dealings with citizens are under pressure due to digital data collection and the increasing use of algorithms at companies and governments.

In the modern economy, digital data is a means of production, just like the classical factors of capital, labor and nature. The more data a company possesses, the better it can tailor its goods and services to consumers’ needs, the more new data the company will receive afterwards, can use it again for more intelligent customization and an indispensable platform, and so on. It is a self-reinforcing spiral that leads to concentrations of power.

Citizens will expect the government to protect them. Unfortunately, this will turn out to be a misconception more often than we would like. Our government simply has too much information backlog and too little insight into the effectiveness of different types of regulation. It is a logical consequence of the emergence of a new, unknown world and technological leaps.

In doing so, the government is also digitizing its own policy implementation for reasons of efficiency, clarity and customization. The State is a major player in big data, artificial intelligence and logarithms: just look at these activities of Statistics Netherlands.

It is right that our government wants to join the pace of the peoples. Successes will be achieved, big mistakes will be made, but progress will be made in the long run. The digital economy of the Dutch government is now in 8th place in The Digital Economy and Society Index.

Yes, corona, staff shortages and lack of space are driving the digitization of the Dutch economy. The uncertain question at hand is: how should the government act?

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