Economy in Knowledge Society

 Amended version of the paper presented at the IT 2000 Kerala International Seminar, “Crafting a Knowledge Society in the 21st Century”,

23-25 November at  Technopark, Trivandrum
Sitaram Yechury
Extending one of Karl Marx's famous and oft quoted out of context statement that "the hand mill gives you society with the feudal lord and the steam mill gives you society with the industrial capitalist", one commentator, noting the epochal shifts under globalisation added that "the microchip gives you society with the global capitalist".[i] Undoubtedly, the revolutionary advances in information technology have transformed the world. But, it would be erroneous, to conclude that these technologies are in any way creating a situation (like the transition from the  hand mill to the steam mill) that would provide any reprieve from the intensifying degree of exploitation under capitalism. These advances, by themselves, are the result of the internal dynamics of the capitalist system. By saying so, one does not in any way seek to undermine the scientific advances in this field as a mere corollary of capitalist development. Neither does one seek to negate the possibilities that these advances open up for the democratic forces to advance their struggles. For, after all, knowledge and information do have their liberation potential. However, the concrete manifestation of these possibilities in any given actuality, depends on the struggle between contending forces at the ground level.
In the very process of development, capitalism creates the internationalisation and concentration of Capital on vast scales. These developments, in turn, require speedier communication and massive levels of information in order to allow Capital to conduct its global operations. The development of capitalism to this stage of a highly concentrated internationalisation of Capital which is globally mobile required a highly developed information and communication network. There is thus a dialectical linkage between the development of capitalism and the present day scientific advances of the IT revolution.
The present day rapid strides in the information, communication and entertainment (ICE) technology have created an enormously large global industry. The convergence of these technologies, as someone commented, is more "fiscal than digital".[ii] The present day emergence of giant corporations in the entertainment and information industries reminds us of what Karl Marx had said nearly 150 years ago:
"Production not only provides the material to satisfy a need, but it also provides the need for the material. When consumption emerges from its original primitive crudeness and immediacy -- and its remaining in that state would be due to the fact that production was still primitively crude -- then it is itself a desire brought about by the object. The need felt for the object is induced by the perception of the object. An object d'art creates a public that has artistic taste and is able to enjoy beauty -- and the same can be said of any other product. Production accordingly produces not only an object for the subject, but also a subject for the object." [iii]
The entire raison d'être of the advertisement industry today has not only been anticipated long long back, but predicted as a consequence of the internal dynamics of capitalist development.
The present day information technology revolution, apart from its impact on vast areas of human activity, has three aspects that we wish to take up here. The first is a narrow one as an industry. The second, its impact on society in terms of social and economic inequalities; and finally its impact on the quality of life.
It will be useful to recollect at the outset, the hopes and possibilities raised by the rapid technological advances in this sector for overall economic growth. Gordon Moores's prediction, which has virtually become a law in this field, has seen the number of transistors on a microchip increasing from 2300 on a 4004 in 1971 to 26 million on a Pentium III. In terms of costs, one MHz computing power declined from $760 to ¢17 cents during this period of three decades from 1970.  Similarly, the cost of storing one mega bit of information declined from $5257 to mere 17 cents.  The cost of transmitting a trillion bits of information declined from $150,000 to 12 cents.[iv]
These advances in microprocessor technology have a vast indirect impact. New advances from microwaves to mobile telephones have come into being as a result. These technologies have the potential to transform the industrial base through numerous design and manufacturing possibilities. Further, in the services sector, ranging from banking and insurance to entertainment and information, these technologies have opened up hitherto unknown vistas of development.
The immediate impact of these developments on India has been estimated by various agencies. In the last six months alone, software exports from India increased by 63 per cent to reach $ 2.4 billion or 12.5 per cent of the total exports.[v] In terms of FDI, in the first six months of this year, the computer software sector attracted as much as Rs. 3907.45 crores. Compare this to Rs 445.43 crores in automobile sector and Rs 202.01 crore in oil refinery. The telecom sector which has directly benefits from the IT advances has attracted Rs. 1658.13 crores.[vi]
Given this, large hopes have been generated in India. IT sector is being projected as the vehicle of India's entry into the advanced world.  NASSCOM expects that by 2008 the overall turnover of IT enabled service opportunities for India would be to the tune of $140 billion. The projections for export earnings are up from $4 billion in 1999-2000 to $50 billion in 2008. The size of the industry during this period is expected to increase from $3.3 billion in 1998 to $87 billion, an astounding compounding annual growth of 40 per cent. Its share in the GDP is expected to grow to 7.5 per cent from the present less than 2 per cent and in terms of exports, its share is expected to grow to 30 per cent. In 1997-98 the IT sector employed 1.8 lakhs of people. This is expected to grow to 2.2 million i.e. more than the growth in public and private sector employment between 1990-98. The total number of people directly and indirectly employed is estimated o be 7 million by 2008.[vii]
Is this all hype, or, can this be translated into reality? In order to answer this question, it is necessary to understand the constraints within which this industry is operating in India.
Two-thirds of the domestic IT industry is accounted for by hardware and packed software that comes in from abroad. Only 8.9 per cent of the software services originate domestically.[viii] The growth potential of this sector and its impact on the overall economic development must be tempered with the fact that this sector has a very high and growing import intensity. This reality must also be seen in the background of the unbridled liberalisation process going on in the country. The import liberalisation in this sector has virtually led to a situation where domestic producers are unable to face the competition. Unless this trend is reversed, India may well produce only domestic sales agents for international firms. Hence, India's hopes for channelising the potential of this sector to change the overall Indian economy rests mainly on the export of software services. Here again out of the 1250 firms currently existing in the country, only 37 export software services of a value greater than Rs. 100 crores annually.[ix]
In the sphere of computer hardware there is a global monopoly in the hands of a few firms like Intel, Motorola, AMD etc. The process of assembling in India contributes very little to the value added domestically. It is estimated that of the global information technology market of $750 billion, the third world contributes only 27 per cent.  What is worse is that less than 5 per cent of the world's population participates in the internet, which currently involves over 330 million users.[x]
Hence, given the highly unequal and monopolised ownership and control of this technology globally, the hype of the IT sector, liberating India from economic backwardness must be considered with more than a pinch of salt. Major problems for India lie elsewhere i.e. in the spheres of socio-economic infrastructure. In 1998-99, India had a ratio of personal computers per population of 3 per thousand and telephone access of 22 per thousand. Worldwide these figures are 60 per thousand and 125 per thousand. According to the Govt. of India projections by 2008, these will grow only 20 per thousand and 100 per thousand respectively.[xi]  Further, the advances that India had made in this sector is based on the education system that produced the necessary intellectual manpower. But it is precisely this sector that is coming in for heavy erosion in the name of "doing away with subsidies". Therefore the future potential of India's capacity to utilise the IT revolution is being seriously undermined by the present policies. It must be noted that the IT industry in India would not have taken off like it has today if education, particularly technical education, had been the privilege of the only the rich.
Thus, unless the basic economy is addressed, the information technology advances may well end up in expanding inequalities rather than bridging them. The e-brick and e-mortar economy cannot replace the brick and mortar real economy which remains the basic driving force behind economic development. IT through e-commerce can at best cut down trading costs. The economic value still remains in the strength of the basic economy. There is a danger that with all this hype of IT, the focus of attention may well be diverted away from tackling India's industrial slow down.
Thus, in terms of the impact on the quality of life, while at the margin IT does enhance the accessibility of information and expands the possibiliteis before human beings, the catchment areas of the population that can benefit from this is directly dependent upon the strength of the basic economy. If this does not improve, then the IT revolution may well end exacerbating global and domestic inequalities. No less than Bill Gates had to say "We are all created equal in the virtual world" but "virtual equality", he states "is far easier to achieve than real world equality".[xii] In the world of information highway tens of millions of poorer individuals in the United States, not to mention the great majority of the population in the world economy will simply be left behind.
In the Indian context, it should be noted that according to the published report on basic education in India, at the time of the 1991 census and the National Family Health Service 1992, half the country's population (61 per cent of women and 36 per cent of men aged 7 and above) is unable to read and write. Less than 30 per cent of all adults had completed 8 years of schooling, one-third of all children aged 6 to 14 years (about 23 million boys and 36 million girls) were out of school.[xiii] This, in itself, in a telling manner demonstrates India's capabilities of utilising the IT revolution for its overall economic development. We may well end up in a situation of widening the social divide between the educated info-rich and the under-educated info-poor.
The biggest of myths is generated by seeking to replace human teaching by IT. Our human neurons processes as much as 11 million bytes per second.  The present technology does not permit us to remotely reach this speed. IT provides information divested from its richness. The classroom  and the teacher are central to teaching and can at best be complemented by IT and by no means substituted.
IT has also provided opportunities for e-governance. Certain initiatives in the country like the disaster management project in Maharashtra or the mandal revenue officers network in Andhra Pradesh or the village level project "Wired Village" being implemented in Waranagar in Sangli and Kohlapur districts in Maharashtra are all efforts for providing greater transparency and accountability to governance apart from providing information to the people on various administrative matters. Laudable as they are, constraints at utilising these for India as a whole must be underlined. For instance, the 70 villages cluster in the Waranna project costs $ 6000. If this were to be considered for all the 5,50,000 villages in India, then it would cost $4.7 billion or 12.5 per cent of the GDP in 1998-99. Consider this in the background of the fact that India has never spent the universally accepted 6 per cent of the GDP on education.
As far as India is concerned, there is an apparent dilemma. Not investing in IT implies forgoing the possibilities for economic development. However, excessive emphasis on IT means the danger of diverting resources away from the basic economy which is the very foundation for the IT to take off.
While judicious balance is required in this direction, it must be emphasised that the present hype over IT neglecting the basic economy can only prove disastrous for India.
Kerala, however is uniquely placed to take advantage of the IT. Its high levels of literacy and the social quality of life place it in a position to take full advantage of the IT revolution. With the paucity of mineral and other resources required for heavy industry, Kerala should attach a high priority to take up the IT advances in a big way for the state's development. In the spheres of e-governance Kerala is once again, best equipped to provide the people with access to information on developmental programmes with transparency and accountability of its implementation through the People's  Plan. Kerala, in this context rightly seeks to improve the livelihood and quality of life of its people through the IT revolution.
Finally, we can only conclude by asserting that the economy in the knowledge society, however radically impacted by IT, has to develop by strengthening the real brick and mortar fundamentals and cannot afford to be hijacked into the virtual reality of e-brick and e-mortar. While utilising fully the potentialities and possibilities unleashed by IT revolution, proper attention must be paid to the limitations and constraints noted above. Unfortunately, the mindless and reckless policies of liberalisation currently pursued in India by the Vajpayee government, prevent the tapping of the full benefits of IT. These policies are in fact, axing the tree on which we are sitting.

[i] A. Sivanandan, “Globalisation and Epochal Shifts: An Exchange”, Monthly Review 48, No. 9:20
[ii] For instance, consider the fact that three of the world’s far largest media giants now own the three largest global book publishers.  Such convergence is dramatically illustrated in the film-based industries.  Disney or Time Warner, when they produce a film can simultaneously guarantee the showings on pay television channels and  networks, produce and sell audio sound tracks, produce related amusement park rides, CD-ROMs, books, comics and related material.  Consider that Disney’s Hunchback of Notre Dam raked a disappointing $200 billion in the global box office. Yet according to Adweek  magazine, it is expected to generate $500 billion in profit (not just revenues) through other streams.  For more details on this consequence see, Robert N. McChesney, “The Political Economy of Global Communication”, in Capitalism and the Information Age, Monthly Review Press, 1998.
[iii] Karl Marx, A Contribution to the Critique of Political Economy, Moscow, 1970, p. 197
[iv] For a descriptive survey of computing and information technology, refer
[v] Jayati Ghosh, People’s Democracy, November 5, 2000.
[vi] Hindustan Times, November 19, 2000 (New Delhi edition)
[vii] NASSCOM at
[viii] Dataquest, New Delhi, Vol XVIII, No. 13, July 15, 2000.
[ix] The Economic Times, July 4, 2000
[x] The Economic Times, July 21, 2000
[xi] GOI, Ministry of Information Technology, Annual Report 2000, New Delhi.
[xii] Bill Gates, The Road Ahead,  p. 183.
[xiii] The Probe Team, Public Report on Basic Education in India, New Delhi, Oxford University Press, 1999.