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[Opinion Column] Digital Economy Depends on Resolution of New and Old Industries
In 2012, two iconic events took place, illustrating the advent of the digital economy. Founded in 1888, Kodak, who was the dominant player in the global camera and film markets, declared bankruptcy in the US court on January 19 of that year, without overcoming the changes in the image and video markets generated by the digital camera and smartphone. In April, Facebook acquired Instagram, a 1.5 year-old company which has just 13 employees, with only $1 billion.
People take more pictures than ever before. Every minute, more pictures are taken than in the 19th century and are shared on social media. With a smartphone, you can take unlimited pictures free of cost and share them with unlimited people. Paradoxically, the popularization of photography and distribution along with the development of digital technology has led to the collapse of the traditional photography industry, while digital companies such as Instagram, which employs merely a handful of advanced engineers, has risen to prominence.
Was Kodak unaware of the changes that would occur in the image and video industry as a result of digital technology? Kodak anticipated the shrinking of the traditional film market from the 1990s and developed the world’s first digital camera, but why couldn’t they create a business model like Instagram in the early 2000s? The same question applies to Blockbuster, the world’s leading video rental company, which went bankrupt due to the introduction of a subscription model by Netflix, as well as Sears, a leading US retailer who filed for bankruptcy due to the distribution revolution brought about by Amazon. Everyone knows the impact of digital technology on the industry, but many companies have failed in the present market because they don’t understand which business model will be successful in today’s digital world.
The expansion of the digital economy not only led to market changes, but also called for governments to fundamentally review industrial, competition, welfare, labor, education, and tax policies that have been market-centered since the 18th century. The digital economy has had the following changes: the collapse of existing industries and the emergence of new industries; the redistribution of wealth and employment stability; the development of talented people suitable for the digital economy; the redefinition of the concept of market power; and the new economic and societal policy that can effectively respond to the taxation problems of digital trade. The issue of policy needs is being raised.
Many of the social conflicts our society is experiencing with the expansion of the digital economy are common to all countries. The gap in conformity between economic and social changes and policies due to the development of digital technology is described by the Organization for Economic Co-operation and Development (OECD) as ‘a problem of policy 1.0 in the age of technology 4.0’.
The key factor of national competitiveness in the age of industrialization was to accumulate capital and technology through industrial policy and to increase market efficiency through revitalization of competition. In contrast, the national competitiveness of the 4th Industrial Revolution depends on how quickly social conflicts resulting from the expansion of the digital economy can be resolved through social consensus and is the development of a policy framework designed to support digital technology innovation.
If we lag behind our competitors in establishing a framework for social consensus, our companies will also lag behind our competitors in creating innovative products and services. Our consumers will buy digital goods from global companies, and our people will find jobs in foreign companies.
As we have experienced in the legislative process of the Data 3 Act, in order to reconcile diversified interests and achieve social consensus, all social actors must make concessions and compromises. Considering the aggressive and speedy digital innovation support policies of competitors such as the US and China in the global digital environment, a social consensus system should be established as soon as possible to solve the problems caused by the digital economy. That will determine whether our country will continue to be a significant part of the global economy, or whether the “miracle of the Han” in the age of industrialization will be a history of the past.
Please click here to read the original article (Korean).
Source: Korea Economy
Date: February 3, 2020