Institutions and development: Electronic commerce and economic growth

Trade in e-commerce is well known to have benefited individuals, firms and countries in the developed world. However, according to organizations including the WTO, OECD and UNCTAD, as well as the USA and EU, trade in e-commerce is also a means of improving the overall economic growth and performance of less developed nations. In fact, the WTO considers e-commerce to be the key force in integrating LDCs into the multilateral trading system. This paper sets out to problematize this view, not by arguing that e-commerce cannot make an important contribution to development, but by querying the assumptions that underpin current thinking. We start by repairing these defects: the absence of any role for the state; the underestimation of polarization in society and its effect on economic growth; and the failure to distinguish between types of e-commerce. Employing the participation and enhancement classification of e-commerce adoption, we consider whether developing states are ready for the participation phase of e-commerce, if developing countries have the kinds of industries that might act as demand-pull sectors for e-commerce growth, and whether social, political and institutional arrangements are in place to encourage and sustain e-commerce.