Sasha Costanza-Chock on Fri, 6 Feb 2004 11:53:10 +0100 (CET)

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<nettime> Unpacking the Knowledge Economy - Anita Gurumurthy

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Unpacking the Knowledge Economy – Whither Knowledge Society?
Anita Gurumurthy

The euphoria about India’s meteoric rise in global and national popular 
imagination as a knowledge society and information superpower badly 
needs a reality-check. Unpacking the phenomenon requires that we 
reposition our inferences and projections for the knowledge economy or 
the IT industry, relative to our recent economic history, and our 
current development priorities. How do we understand the optimism in the 
rhetoric that surrounds us about the knowledge economy, even as more 
than a third of our population is illiterate, and the transfer of 
knowledge is governed by the hierarchies of class, caste and gender?

The subservience of knowledge society to knowledge economy

The discourse of the IT revolution marks the over-valorization of the 
information economy – the glorification of the IT industry - and a 
trivialization of the critical benchmarks of knowledge society in 
national development policy and practice. IT policies of most state 
governments in India look at training youth to join the ITeS sector even 
as they are unequivocally silent about the deployment of IT for 
strengthening the quality of the formal educational system. Given that 
industry projections point to the potential of ITeS to employ over a 
million people by 2008, states like Andhra Pradesh, Kerala, Gujarat and 
Maharashtra are giving emphasis to “producing English-speaking graduates 
with the right domain and functional expertise.” The Kerala government 
is investing Rs 2 crore in ITeS human resource training initiatives.

The scramble for getting there, seems to completely obscure policy 
attention to the opportunity cost of public expenditure in “producing an 
English-speaking workforce”.  A major failure of independent India, is 
our abysmal score-card on literacy.  Given the low level of literacy, 
the justification for the effort and the investment being made to extend 
the reach of computers across the country and provide access to all is 
indeed weakened. This is not about arguing against the relevance of 
technology per se for development, rather, it is about the conditions 
that will make the deployment of technology meaningful for the larger 
goals of equity and justice.

The extreme abdication of state responsibility to guarantee education is 
exemplified not only by non-achievement of targets, but in the lack of 
will to improve quality of education, particularly of the marginalized. 
The Chief Minister of Andhra Pradesh declared not too long ago that the 
State government would amend existing laws to enable compulsory 
education. It was proposed to introduce deterrent punishment and other 
disincentives to those who declined to send their children to school. 
Punishing parents has been one of the central issues in the State 
legislations, and the National Alliance for Fundamental Right to 
Education (NAFRE) claims that a large number of parents have indeed been 
persecuted.  Such transfer of liability to parents denotes absence of 
state accountability and a distortion and trivialization of the right to 
education. State apathy to quality of education and to the education of 
the poor and marginalized is well documented in India, and research has 
repeatedly held that poor quality of education is the primary cause for 
poor enrolment and drop-out and community unwillingness or 
irresponsibility is no more than a myth.

Excessive emphasis on building an IT-savvy human resource pool, in this 
context, could result in the diversion of resources away from the much 
more crucial expenditures on literacy and primary education, which are 
not just development goals in themselves but a must if the digital 
divide is not to widen rapidly.

A lop-sided emphasis on higher education , especially on engineering, 
has historically meant large numbers of highly skilled underemployed and 
unemployed. Fuelled by the promise of the glorious future in the 
knowledge economy, education policy and planning is plunging further 
down the engineering street. The number of engineering colleges is 
slated to grow 50%, to nearly 1,600, in four years. Obviously not all 
these students who graduate will get into elite institutions like the 
IITs, which accepted just 3,500 of 178,000  applicants last year, and a 
negligible minority will be in cutting-edge, highly-skilled IT jobs at 
home or abroad.  Which part of the knowledge economy will accommodate 
the rest is of course the moot question.

The enchantment with IT also coexists comfortably with complete apathy 
and inaction vis-à-vis development crises signaled by rural 
unemployment, agrarian distress and the collapse of the manufacturing 

In India in particular, and South Asia, in general, the macro economic 
model in the past decade or so has emphasized a substantial reduction in 
the fiscal deficit. There has been a reduction in real budgetary 
allocations for subsidies on food and to the social sectors, which is 
adversely affecting the task of improving indicators of the quality of 
life. In the Indian case, there is evidence of deceleration in growth, 
after an initial spurt in the immediate post reform years (reform began 
in 1991); and evidence that even the growth that is occurring is having 
little impact on employment growth, especially in the 
commodity-producing sectors, viz. agriculture and industry. Census 
figures also show very clearly the intensification of the process of 
marginalisation of the rural workforce.
In fact, increasing employment generation is now the explicit concern in 
most of recent planning and policy documents that have been published in 
the region.
It is strange, however, that while the explicit goal has changed from 
growth in itself to employment generation, the strategies that are 
supposed to achieve this essentially involve further doses of 
neo-liberal marketist reform, rather than policies that would directly 
affect employment.

The demise of the textile industry and impoverishment of thousands of 
workers in Gujarat, is now an extensively documented terrain. 
Agriculture in Andhra Pradesh has had to contend with droughts in 
consecutive years and the suicide of farmers. These are the states that 
see themselves as poised to harvest from the projected growth in the 
knowledge economy. Essentially this means infrastructural development of 
urban pockets, better urban teledensity, and private investment in 
telecom infrastructure which can least be expected to serve equity 
goals. It also means distortions in cities that join the global 
information economy – the acceleration of real estate prices, the 
undermining of the capacity of traditional industries to survive, the 
retreat of these industries into the shadows –the informal economy, and 
sharpening income inequities.

This duality, between the positive developmental profile and increasing 
immiserisation of the urban poor is stark in states like Andhra and 
Karnataka. In Karnataka, which is an industrially advanced state, 
statistics point to an increase in the absolute numbers of urban poor. 
The lack of growth in regular manufacturing employment, which has pushed 
large numbers into the informal sector of work, as also the crisis in 
the SSI sector which has displaced large numbers from their jobs are 
factors that have underlined deepening urban poverty in the state. 
Bangalore, known as India’s Silicon Valley, has, ironically, experienced 
an exponential growth of slums in the decade of the 1990s, from 444 
slums in 1991 with a population of 1.12 million, to 763 slums in 1998-99 
with a population of 2.2 million, about 20 per cent of the city’s 

Sobering realities of the Knowledge Economy

Recent economic analyses highlight how the euphoria about the knowledge 
economy is misplaced.

Even as it exists today, the ratio of gross IT sector output to GDP is 
only around 2 to 3 per cent.  Also, according to latest figures, the 
rate of growth in the sector has also reduced. Even if the ITES/BPO 
business grows five- or eight-fold over the coming five years, as 
optimistic projections estimate, its contribution to India's GDP will 
remain relatively small.

IT remains what is called an island-phenomenon. It cannot drive the 
entire country into another epoch or "stage" of development. First, the 
computer software business is nearly 80% export-dependent (implying poor 
linkages with domestic industry). Even in external sector accounts, 
software exports ($7.2 billion) still contribute less than remittances, 
mainly from poor workers in the Gulf ($8.1 billion). The geographical 
distribution of India's IT business is extremely uneven. For instance, 
of the total exports of computer software and electronics hardware, the 
South alone accounts for over 50 percent, with the North coming a 
distant second (26 percent), and the East lagging at a pitiable 2 
percent. If Delhi and adjoining parts of Uttar Pradesh and Haryana are 
excluded, the North's share falls to an embarrassing 4 percent.

Sociological research points to how call centres signal a new kind of 
work, and a new kind of worker, whose invisibility (in the network) is 
mirrored by a rhetorical excess of ‘national wealth generation’, ‘new 
global work culture’ and ‘cheap labour’ that, in the end, renders the 
conditions that produce this work and the experience of the worker, 
equally invisible.

Attrition in the ITeS industry is high and industry estimates show that 
15-18% of the employees move on to higher studies. Another 28-33% quit 
the industry altogether because of job pressure and tough timings. The 
balance continues with the job, and although we are still in early times 
to map the future of these workers, career paths within the sector are 

The global knowledge economy –a  win-win for transnational capital

At a global level, the story of the knowledge economy is about the 
impunity of transnational capital.  The economics of location in 
outsourcing is not only about cheap labour. Every investment decision 
for transnational capital rests on a careful calculation of ‘the cost 
per unit’. Infrastructural capacity, the cost per unit of energy, 
taxation policies, interest rates, and the relative flexibility of 
labour laws are all elements in such a calculation. Productivity, 
efficiency, bargaining norms and the normative concerns that mark the 
workplace (what management can do, enforce, get away with or even what 
it cannot do) are all crucial to the cost/benefit calculation. 
Transnational capital is inherently self-serving and India need not be 
tomorrow’s destination.

Earlier manufacturing was hollowed out, primarily to China; today 
countries like India have become off-shore locations / centres for BPO, 
but political decisions in the neo-liberal capital order are still 
controlled by Northern corporations. Lee may have shut their last 
factory in the US and moved it offshore, but has been careful to assuage 
feelings back home and in asserting their ‘American identity - “we are 
still an American company.” (read “we still control the rest of the world”).

In countries like the USA, where outsourcing to India and the paranoia 
about loss of jobs has acquired deep significance, especially in the 
run-up to the presidential elections this year, new economic theories 
are being written about how outsourcing need not be looked at as a part 
of the free market mechanism. This justification of protectionism, by 
the votaries of the free market, is blatantly contradictory to their 
prescriptions for the developing world.

In the context of the omnipotence of transnational capital and the 
hypocrisy of the political leadership of the North, the knowledge worker 
in the global South stands at the vulnerable intersection of class and 
geography. Thus for countries like India, the ITeS industry and its 
constituting parts such as call-centres epitomizes a no-win situation 
for workers and their rights.

Reading the Writing on the wall

The euphoria over the current trends and future projections of the 
knowledge economy, and the eagerness to join the global IT bandwagon 
foreclose the exploration of models that will deploy information 
technology for building equitable knowledge societies. Being part of the 
global assembly line is not the only means to harness technology. 
However, as things stand, the supportive environment needed to exploit 
the potential of ICTs, does not exist in India.

I would submit that the recourse to ITeS reflects the lack of will to 
rethink policies towards more active state intervention in terms of 
supporting employment-intensive activities through a range of trade, 
fiscal and financial measures. It also suggests the absence of vision 
for building an equitable and just knowledge society.

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