How The Internet Makes Commerce Borderless

The internet has enabled a variety of commerce, from entirely new industries such as the internet-of-things and big data to reimagined versions of retail and logistics. But its main power is in breaking down barriers – whether linguistic, cultural or geographic. The internet allows truly democratic movement of information. A recent frontier of the internet’s trailblazing is in the breaking down of economic barriers, allowing users in the developing world to participate in a developed country’s market.

Today, this takes the form of a ‘gig’ economy, in which users exchange short-term contracts for freelance work. Domestic examples can be seen in Uber and Airbnb, but services such as Fiverr and enable skilled individuals anywhere to get paid for their work. Jobs offered range from voiceover and translation work to search engine marketing, app development and logo design. Measuring the impact of these gigs on the lives of workers – who often live in developing nations – is difficult, as gigs are rarely their sole source of income. Freelancers also make up a relatively small portion of the economy. What makes a less secure job appealing, however, lies within purchasing power parity: workers in developing nations are often paid well above the market rate in their home country. The wealthy customer, too, pays less than they would otherwise. Thus, the internet causes markets to operate more efficiently. Why would an American business owner pay an American eight dollar per hour to answer calls when he could pay a Filipino worker two dollars per hour for the same work?

The origins of the gig economy can be traced to the first overseas call centers in the business process outsourcing (BPO) industry of the 1990s, when American companies realised they could cut costs by shipping jobs overseas – usually to India or the Philippines. However, service quality often suffered. As anyone who has spent time on a customer support line will attest, these overseas call centers can be frustratingly difficult to use. Outsourcing, while controversial due to worker rights, does offer attractive salaries in developing countries and, when done right, can create strong economic growth in both countries. But the broader impacts of the internet on a developing country’s economy are strong: economist Richard Thanki found that for every 10 percent growth in internet access, GDP growth rose by 1.38 percent.

E-commerce websites such as Alibaba, the ‘Chinese Amazon’, reduce the friction of purchasing from businesses online. In the past, many businesses chose to manufacture and produce in America simply because it was the only option available to them: there was no way to capitalize on lower labour costs when even sending a letter overseas took weeks. Now, a Chinese factory can be spurred into action with just a few clicks. This helps speed up both economic development in China, where Alibaba processes more than 75% of the country’s mobile merchandise volume, and the rate at which American companies can receive their goods. Although the ethics of outsourcing can be murky, the business proposition is not. In most cases, it has served to improve life in the countries of both outsourcer and outsourcee. While some decry outsourcing as illiberal exploitation of foreign workers, the reality is that it enables both business owners and foreign workers to get a better deal. Domestic workers must re-train or offer more compelling services to remain competitive. A preference for foreign workers can cause friction at home, where Steven Pearlstein of the Washington Post says that structural unemployment in low-skilled US workers may reach “a couple of million”. Not only do unemployed workers not contribute to the economy, but they increase the burden on rich countries’ welfare systems.

The internet has also brought less conventional ways to earn a living remotely: content creators on YouTube, a global video sharing site, can monetise their videos with ads to earn money – if they have enough traffic. In China, where YouTube is blocked, livestreaming services allow people to broadcast their daily lives to fans, who in turn repay streamers with donations in the form of stickers and emoji. The least exciting – yet most realistic – internet money-making tactic for the masses is simply opening an online store. In America, e-commerce is growing 23% annually, and attitudes are changing to reflect this – a majority of Americans finally prefer to buy online. This bodes well for both gig economy businesses and e-commerce stores. Along with business growth and new employees, American internet growth is creating dozens of booming online sub-industries such as website development and online marketing. These sub-industries are often themselves outsourced to a developing country at a generous rate, such that a website builder or digital marketer in developing countries can make above-average income for their economy.

The internet’s main strength is still in breaking down barriers. By enabling people to earn a living and, in some cases, make a fortune, it equalizes birth, race, class and nationality. Although the gig economy has allowed a minority of professionals to earn big bucks in the developing world, the best way the internet can help developing countries prosper remains getting people online.

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