By Deiniol Brown
Dr Rohinton Medhora is an esteemed economist and Professor of Practice at the Institute for the Study of International Development at McGill University in Canada. He served as president of the Centre for International Governance Innovation (CIGI) between 2012 and 2022 and is currently a distinguished fellow. Dr Medhora is the chair of the Institute for New Economic Thinking, a global research organisation that seeks to challenge traditional approaches to economic policy. Dr Medhora also sits on the boards of the Partnership for Economic Policy, which supports local capacity building for research and policymaking in developing countries, and the Global Centre for Pluralism, a charity that advances pluralism in policy, education and political leadership. Dr Medhora is a member of the Commission on Global Economic Transformation, co-Chaired by Michael Spence and Joseph Stiglitz, established in 2017 to meet the challenges of drastic changes in the contemporary global economy. Dr Medhora has published extensively on the topics of international development, monetary policy, and global digital governance. In our interview we discussed his pioneering research into the Intangibles economy, and its implications for development, as well as the future for global digital governance in light of recent political changes.
In a publication in 2018, you comment on the prevalence of algorithms in contemporary society and their sizable impact on social dynamics. How impactful have algorithms become today and how should governments respond to the issues that they present?
Algorithms are incredibly pervasive, even more so than we recognise. Algorithms are used in any allocation mechanism, such as a simple search on a computer, and are involved whenever ‘big data’ is used to match an input to an output. I like to think of them as the new “factory floor”. When you own a factory you have a myriad of regulations to adhere to and are inspected by authorities to keep your workers and customers safe maybe a couple times a year. If your factory floor is an algorithm there is no regulation. It is presented as a black box; proprietary technologies that must be kept secret without being monitored. However there is a movement now pushing for algorithms to be monitored, because of their potential for having profound social consequences. In other industries we already have auditors; people who can view proprietary or restricted information to monitor and regulate companies, why can’t we apply this to algorithms? In an ideal world, multilateral and national legislation should be combined on this issue to provide a united approach towards algorithms. But in practice, it is often exemplars who lead the way, and then their approach spreads. The EU has led on issues such as GDPR in the past, and the EU and China are current exemplars for regulating AI. However, there needs to be more discussion on governing algorithms.
Private sector tech leaders seem to have featured heavily in his early days of the Trump administration. What will the Trump presidency mean for the future of global digital governance?
It is difficult to say at this point. We have already seen two very different Trumps; the one that is an outsider, standing against mainstream platforms, and one that embraced the social media tycoons at his inauguration. There is currently a sense that Trump will support the US private digital platforms, but this is not guaranteed. First, let’s not forget that Trump himself is a competitor; he has his own platform Truth Social, and has recently launched his own cryptocurrency. Second, some of these relationships are very combustible. For example Elon Musk: these are two huge characters, and how long their dalliance will last is yet to be seen. Finally, Trump’s base is not tuned in to Silicon Valley, they are in many ways the antithesis of Silicon Valley. Which side Trump will take is uncertain, but even with the recent developments around DeepSeek it is assured that the US will remain a key player in the global tech space.
Could we see a digital governance regime emerge without the US?
This is not only possible but it is our only hope. This is not at all definitive but I see seeds of it emerging in multiple places. The G20 has contributed to this question consistently, with a dedicated track concerning digital governance, and each summit devoting a substantial amount of time to it. The G20 is the only major platform where opposing powers can still cooperate, and I see a lot of hope in the ‘Indian stack’ of digital governance becoming a model for many developing countries. We can define the Indian stack as consisting of digital ID, digital payments, digital health records, and financial inclusion, (and soon, parts of judicial adjudication), with effectively all civic government functions being assisted through digital platforms. India can afford to be more assertive on this issue in the G20 because of its success in this space. The EU as well can act as an exemplar, it may not spearhead a global movement but many states are looking to copy their approach, which I term ‘tacit multilateralism’. Another recent development has been the Digital Economy Partnership Agreement, created by Singapore, New Zealand and Chile, and recently joined by South Korea. it is the first agreement to cement a digital understanding of key issues, creating a framework for the digital economy. Other countries have begun to show interest in joining, which may create a wider movement.
Your work on ‘intangible assets’ seems to demonstrate their absence in mainstream debates on economics. How much are intangible assets missing from our current conception of the economy?
I think they are very missing from the picture. Intangibles are all around us but we don’t recognise them. We don’t measure them adequately, and haven’t been able to treat them as an asset class or an economic factor. We don’t even have the right statistical tools to measure them; we need a global measurement system comparable to the one created in the 1950s by the UN System of National Accounts to be able to understand them sufficiently.
You might ask then, how important are intangible assets to measure at all? Efforts made to measure their impact so far show them to be hugely important. Intangibles have risen from constituting about 15% of the S&P 500 index fifty years ago to now constituting 90%. We don’t know the exact size of the intangibles economy, but we need to be able to quantify it to make adequate policy concerning it. As of yet intangible assets are highly under researched, with the books Capitalism Without Capital by Haskel and Westlake, and Cogs and Monsters by Diane Coyle, being my two favourite out of very few on the subject.
How do developing countries interact with the intangible asset economy, has it enhanced their capacity for growth or heightened their disadvantages?
I see it cutting both ways. The biggest conundrum we face is that the model of development we have had since the first Industrial Revolution has been upended by robotics, AI and machine learning. There has been a pattern so far, from Britain, Western Europe to the Soviet bloc and more recently the Asian tigers, where development has been pursued through industrialisation, specialising in low cost (often export) manufacturing, utilizing excess labour through urbanisation and moving up the value chain by producing higher value goods and services. As we automate the low end tasks, the bottom rungs of the ladder are being kicked away from developing countries, therefore countries like Ethiopia need to enter the development process further up the ladder.
Throughout history, technological advancement has always led to more jobs, but this might be the point at which innovation leads to unemployment, and an excess of unskilled, and even potentially skilled, labour. The question of how we keep people employed is huge, especially in developing countries where their comparative advantage is surplus unskilled and semi-skilled labour.
There is the potential for leap frogging though. We have seen how developing countries such as China and India have accelerated through the digitisation with things like digital banking and payments. Developing countries can harness the potential of technology to skip or shrink the initial stages of development, but this may not make up for their disadvantages in the long run. There are also a lot of social and political consequences bound up in the use of technology, with privacy and human rights potentially coming under threat. These are the different factors we have to balance when thinking about development in such an interconnected world.
How feasible is the ‘entrepreneurial state’ approach for developing countries in today’s economy?
I believe it was Mariana Mazzucato who first coined the term the ‘entrepreneurial state’ in her book of the same name. I think all successful developing countries have always been entrepreneurial. The criticism of developing states has always been that they squeeze out the market with government intervention, as we saw with the east Asian miracle where entrepreneurial states played a central role. However, all states have had to be entrepreneurial to drive development. The US has not succeeded purely through markets; the state carefully deployed an industrial policy through the defence and space budgets in the postwar period, which drove a lot of the technological innovation of the US. The entrepreneurial state is a necessary factor for success in development, but not a sufficient one – not every state is capable of this. States that have developed recently – Asian tigers, Chile, Brazil – have all used successful intervention by the state, but the problem is making sure that the state’s intervention is effective.
In a publication from 2014 in which you describe future trajectories for international development, you predict that inequality will become increasingly important. This I think has largely come true in the intervening years. What has been the impact of leaving inequality largely untreated?
In the broadest terms, the story of inequality is that it has been falling between countries because of the immense growth of India and China, and the poverty alleviation this has brought. But within countries, inequality has been rising, especially in the west. There have been huge increases in returns to capital, profits and executive pay, but little difference in the incomes of the middle and lower class. In developing countries, inequality has been rising for the reasons we would expect; risk takers and entrepreneurs are getting rich quick and it takes time for the rest of society to catch up. In the US especially there has been a rise of inequality without any social policies to mitigate this, and the net result is the rise of populism and Trump. Even the ‘good news’ story of rising incomes in many developing countries is not unalloyed. The growth of the global south has in many ways driven the increasing inequality and with it resentment of globalization in the west. This is where the policy problems arise, and where we can provide a solution. There are a series of policy choices that we can make going forward to challenge the current direction of travel.
What are the implications of the rise of intangible assets for the concepts of international development and overseas development assistance (ODA)?
We don’t really know yet, we must hope it is a positive outcome but this is not assured. Although, even before the rise of intangible assets, concepts like ODA were already under threat. The new big players in ODA don’t even recognise it as such, and couch it in terms of cooperation and solidarity. The impact of intangible assets will be decided if these new big actors make the right decisions in their investments; supporting skills, digital literacy and STEM education in developing countries, and helping to implement strong data governance regimes.
Currently, data is an uneven relationship where data is ‘mined’ by large companies, mostly in the US, who then avoid paying tax at source on their profits. The trick for developing countries will be to recognise the public value of data, and to capture those benefits themselves. I’m indirectly involved with a group at the University of Vienna which is exploring the concept of ‘data solidarity’. This is a principle which argues that states should recognise data as a public good, and seek to maximise its value and minimise its risk to society. If developing countries can capture the value of their data by starting their own companies or by taxing fairly existing ones, they will benefit from the intangible economy, but if they fail to do so they will be excluded.
My final question, there has recently been an announcement of a freeze on all US foreign aid. How will this affect international development as a practice?
These are very recent moves, however they were not unexpected. Let’s not kid ourselves, ODA has been in trouble for some time now, and people have been questioning for years why we are funding what they view as potential competitor states. Even the UK has been redefining ODA, and using the budget for things like refugee relocation. So, ODA was already becoming diluted and degraded.
This is a moment for us all to rethink an enterprise which has served us well since the Marshall Plan eighty years ago. It is a moment where China and India have to decide how they will participate in international development. Europe is now being asked to become a bigger player in international development at a time when it is also having to increase defence spending and address domestic socio-economic exigencies. There is going to have to be an interface to handle all of these issues. The bottom line is that we live in an interconnected world and we should want to see other countries being successful. I think the best strategy is to invest in building institutions that are open, transparent and generate positive externalities, which is relatively low cost, in order to foster cooperation and facilitate the transfer of ideas and goodwill within and between states.
UK Forum on a Multipolar World 
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