UNECE mobilizes experts to explore how the platform economy could boost countries’ sustainable and circular transition
Digital platforms have the potential to transform society fundamentally – creating new opportunities for economic growth and unlocking benefits in terms of poverty reduction on the one hand, and environmental sustainability on the other. They could help support less resource-intensive consumption in the spirit of the circular economy transition.
Platforms are not a recent phenomenon – in fact, they function along the same logic as town squares or markets. The difference is that digital technology, affordable connectivity, and data can overcome the obstacles that stood in the way of broad interaction in the past. Importantly, the ability to transact easily – to find what you need when you need it – could radically reduce the need for companies and citizens to own everything from cars to power tools. This better use of excess capacity is central to resolving key trade-offs.
The platform economy will, inevitably, continue to grow and transform society. This could be good news overall and in the long-term – but, as always with societal transformations, there will be winners and losers in the short term. The economic benefits will be substantial, but most of these will accrue to consumers, or consumer surplus that is not measured in GDP. Platforms automate services the way robots automate manufacturing – innovation is essential to use surplus capacity and create other opportunities, or “platformization” may end up reducing GDP. While this could make services more and more affordable, including for low income groups, the transformation may also further increase the premium on skills in the labour market and reduce unskilled job opportunities. The same goes for inequality between leading cities and rural areas, and between countries with advanced and transition economies.
Several factors also constrain or influence the path of the platform economy. Platforms require a critical mass of both supply and demand at a given time – a chicken-and-egg problem known as network externalities that is hard to overcome. Regulations often stand in the way, reflecting the status quo and often protecting established interests. Enabling broad use and trade of standardised data requires a framework that resolves and balances trade-offs with issues such as data security and privacy. The nature of platforms inevitably creates problems of monopolies and dominant market positions.
The UNECE Team of Specialists on Innovation and Competitiveness Policies (ToS-ICP) brought together policy-makers, entrepreneurs, and experts on this topic for a thematic webinar on 21 October for dialogue on how to enable and ensure an effective role for government for the platform economy, in particular in transition economies. The leading insights included:
- Affordable and ubiquitous connectivity is essential to ensure and distribute benefits;
- The platform economy requires a rethink of the approach to regulation that focuses on impact rather than technical specifications and allows for some experimentation with ideas that may run counter to the letter, rather than the spirit, of rules in place;
- Social policy should better address the needs that will emerge through, for instance, the rise of contract work – the “gig economy”;
- Continuous investment into building the right skills is essential to ensure entrepreneurship and opportunities for all;
- Active interventions to support innovative entrepreneurship is important to enable and promote broad experimentation with new ideas that could work on platforms across society;
- Uncertainty is to be reckoned with, and governments need to be agile, or innovative themselves – this involves learning from experiments across the world, trying them out systematically, monitoring developments carefully, and scaling up what works.
UNECE aims to facilitate the development of innovation policies, which play a key role in enabling the growth of platform economy, and will publish a policy paper on this topic as input for the 2021 Commission session, which will be largely focused on the transition of UNECE countries towards circular economy. The paper will provide insights and policy recommendations for policymakers who seek to support this transition. To find out more about the discussions at UNECE thematic webinar, please click here.