“Digital economy” is a term used to refer to an economy based on the use of digital technologies. It includes not only the application of digital tools to engage in traditional economic activity but is increasingly also used to refer to a new model of economic interaction, in which  knowledge and information constitute the primary material of commerce and exchange.  In this new economic model, internet networks and computing devices preform the essential functions of  traditional business practice and also create the digital content (data, information, and online services) that form the basis of the new system of exchange. [see this Infographic]


The development of the digital economy has created opportunity for many, an impact most apparent in the global wave of tech start-ups and the enormous profits many of these  produce. But rapid transition to the use of these new digital tools and forms  has also disrupted existing economic patterns with sudden shifts for local businesses,  markets, and entire industries. According to  a recent report in the MIT Technology Review, this transition has created disruptive impacts in four key areas: employment, customer retention, supply, and asset valuation (infographic).[1] Many strategists interpret recent declines in American manufacturing and the resultant unemployment in these traditional industries as an outcome of these larger disruptive forces, requiring  workforce retraining in technical skills .

While the scope of the economic consequences of the digital economy is difficult to measure using traditional metrics [2], its impact as a source of innovation and growth in all sectors is unquestioned.  In a recent report, the European Commission described the digital economy as “the single most important driver of innovation, competitiveness and growth” [3].  Many agencies, including the World Bank and the U.S. Organization of Economic Cooperation and Development, consider the digital economy to be the key to increasing national and international prosperity.[4]

It is critical that New Mexico recognize and respond to the key role that digital development will play in its economic future.  This development cannot occur without an increase in broadband access and its effective application to activities that scaffold economic growth. The U. S. Commerce Department’s Digital Economy Agenda for 2016 calls for such an increase in broadband access and “skill-building initiatives.” [5]  State level leadership can promote this expansion through dedicated funding, coordinated planning, and development of public-private partnerships. These actions, implemented quickly, can help New Mexico take advantage of the benefits that the digital economy will provide.


[1] “The Digital Economy’s Disruptive Quartet.” MIT Technology Review.  Accessed 19 November 2016.

[2] Andrew Sheehy, “GDP Cannot Explain The Digital Economy,” 6 June 2016, Forbes. Accessed 19 November 2016.

[3] “The Importance of the Digital Economy.” Accessed 19 November 2016.

[4] Information and image from the executive summary of the Global Institute (MGI) report, Digital globalization: The new era of global flows.  Downloaded from the McKinsey Global Institute.  Accessed 20 November 2016.

[5] Alan Davidson, “Commerce Department Digital Economy Agenda 2016.”  Accessed 20 November 2016.