Heiko Recktenwald (by way of Pit Schultz <pit@contrib.de>) on Sun, 22 Dec 96 03:07 MET

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nettime: [information] revolution ? (fwd)

Subject: Re: The Information "Revolution"

I'm certainly not a libertarian, but I received this scary piece. That
revolution word again. What do you think? Paranoia? Avant garde corporate
elite? And where would artists fit into this picture? Especially low-tech
poets? Any thoughts anyone?

From: The Libertarian Alliance <LA@capital.demon.co.uk>
Subject: [LA] The Information Revolution


By Ian Angell

Political Notes No. 114

ISSN 0267-7059
ISBN 1 85637 306 1

An occasional publication of the Libertarian Alliance,
25 Chapter Chambers, Esterbrooke Street,
London SW1P 4NN, England

Email: LA@capital.demon.co.uk

(c) 1995: Libertarian Alliance; Ian Angell

Ian Angell is Professor of Information Systems at the London School
of Economics.  This article was first published in the 'LSE
Magazine' Summer 1995, and is reprinted with permission.

The views expressed in this publication are those of the author, and
not necessarily those of the Libertarian Alliance, its Committee,
Advisory Council or subscribers.

LA Director: Chris R. Tame
Editorial Director: Brian Micklethwait


Just open any newspaper, or switch on the radio or television, and
you'll find journalists worldwide bemoaning a crisis of confidence
in social, political and economic institutions.  There is a deep
feeling that it is all coming to an End.  For they know we are on
the verge of an Information Revolution that is taking us out of the
Machine Age, into ...  who knows what.

Many commentators are deeply pessimistic, they see only chaos ahead.
In Britain, both press and politicians keep asking themselves (and
us interminably) "where is the `feel good' factor?" Even when the
"numbers" look good, with the economy growing, low inflation, and
unemployment falling ...  the country is still miserable.  A malaise
has contaminated the national consciousness.  The British people
aren't stupid.  They know that for the majority of our society, any
society, it has gone forever - and there is nothing that anyone can
do about it.  Everywhere the socioeconomic certainties of the
twentieth century are collapsing.  The world as we know it is
changing; it may even be moving in reverse.

"History is the natural selection of accidents" (Trotsky) and our
world today is full of accidents just waiting to happen.  The very
nature of work, of institutions, of society, and even of capitalism
itself, are mutating.  These mutations are confronting each other in
the political power vacuum left by the fall of communism, and the
increasing impotence of liberal democracy, as the utopia promised by
science and technology has turned into a nightmare for the "common
man".  Poverty, unemployment, pollution, overpopulation, mass
migration, global plagues etc, have left us with a world full of
frightened people.  For the masses will not win in the natural
selection for dominance of an increasingly elitist world.  Naturally
the politicians don't like it.  For the past two centuries "the
values of the weak prevailed because the strong have taken them over
as devices of leadership" (Nietzsche).  But no longer.  The
politicians may promise, but now the markets decide.


But why is it happening now?  The answer is quite simple: a new
order (which many will call disorder) is being forced upon an
unsuspecting world by advances in telecommunications.  The future is
being born in the so-called information superhighways.  Very soon
these electronic telecommunication networks, covering the world via
cable and satellite, will enable everyone in the world to "talk" to
everyone else.  We are entering a new elite cosmopolitan age.
Global commerce will force through the construction of multi-media
highways, and anyone bypassed by these highways faces ruin.
Information technology, together with speedy international travel,
is changing the whole nature of political governance and its
relationship to commerce, and commerce itself.

One major consequence emerging out of the new freedoms bestowed by
global telecommunications is the globalization of organizations, and
not merely their internationalization.  Individuals and companies
are setting up large transnational networks that pay absolutely no
heed to national boundaries and barriers.  The commercial enterprise
of the future will be truly global, it will relocate (physically or
electronically) to where the profit is greatest and the regulation
least.  The umbilical cords have been cut; the global company no
longer feels the need to support the national aspirations of the
country of its birth.  Recently this new business paradigm was
expressed most forcibly by Akio Morita, causing uproar in Japan,
when he announced that Sony was a global company and not Japanese!

But paradoxically, globalization is resulting in a trend towards
localization or, as Morita calls it, "global localization".  Global
companies are setting themselves up within virtual enterprises, at
the hub of loosely knit alliances of local companies, all linked
together by global networks, both electronic and human.  These
companies assemble to take advantage of any temporary business
opportunity; and then separate, searching for the next major deal.
Apart from local products, local companies also deliver local
expertise and access to home markets for other products created
within the wider alliance.  Companies and countries outside such
networks have no future.

International trading now includes new forms of barter and exchange
on these networks, particularly in superior scientific and
technological expertise and knowledge.  Money, which is merely a
means of facilitating economic transactions, has itself become
electronic information, and what constitutes money can no longer be
monopolized by national Governments.  This inevitably lowers the
transaction costs of money - a real competitive advantage for any
virtual enterprise with a moveable centre of gravity; and for those
individuals who are willing to trade their expertise in this
electronic market.


With the rise of teleworking/telecommuting/televillages Peter
Drucker has a very interesting forecast.  He says that humanity is
polarizing into two employment categories: the intellectual,
cultural and business elite (the mobile and independent knowledge
workers), and the rest (the immobile and dependent service workers).
In a similar vein, Robert Reich believes in the Information Age
there will be three categories: symbolic- analytic services (the
knowledge workers who are problem identifiers, solvers and brokers),
in-person services, and routine production services.  The latter two
groups roughly correspond to Drucker's service workers.

Routine production services can either be replaced by robots or
exported anywhere on the globe.  Wages in this sector are already
beginning to converge worldwide to Third World levels.  British
Polythene Industries is to close its factory at Telford with the
loss of 150 jobs, and switch to China.  BPI's payroll bill will be
cut by 90%.  Even the Home Office at one time was seriously
considering subcontracting a large but straightforward data-entry
job to the Philippines.  Such "social dumping" is dragging down the
wages of in-person service workers, a sector which is itself being
increasingly automated.  It is estimated that 150,000 UK bank jobs
will eventually be lost because of automation.  Millions of jobs
will be lost if teleshopping takes off.  Inevitably the slow
redistribution of wealth that has occurred over the last centuries
is being reversed, rapidly.  Societies are stratifying; new elites
are appearing.  The future is inequality; at the very bottom of the
heap, western societies are already witnessing the emergence of a
rapidly expanding underclass.

Now we can see that knowledge workers are the real generators of
wealth.  The income of these owners of intellectual and financial
wealth will increase substantially, and they will be made welcome
anywhere in the world.  As from October 1994, foreign
"entrepreneurial investors" with stlgl million at their disposal could
bypass the usual entry rules into Britain.  But Britain has been
slow off the mark, with the added embarrassment that none of the
migrant rich want to live here.  In the United States, there is a
fast-track immigration policy for businessmen and women who can
offer $1 million and guarantee to employ 10 people.  Six hundred
millionaires emigrated to America in 1993.  It is only a matter of
time before intellectual capital, such as scientific and
technological expertise, will be included on the balance sheet.

On the other side of the coin, there is a growing realization that
each service worker is a net loss both to the state and to the
company - they cost far more than they generate.  Service workers
will now be expected to add far more value to the company, unlike in
the past where service work meant just turning up.  Companies will
be reducing the wages and staffing levels of service workers, and it
is no accident that most Western companies are presently instigating
major downsizing programmes.

This is all happening against a background of an exploding
population in the third World (95% of the world's population
increase is in developing countries).  To combat the inevitable mass
migrations, state barriers will be thrown up everywhere to keep out
alien service workers; each state has a surplus of its own to
support.  It is already happening.  Canada is to impose a c$1,000
tax on people seeking landed immigration status, thus sending out a
message which is likely to reduce applications from poor service
workers but increase applications from richer knowledge workers.  In
California, proposition 187 intends to bar the nearly two million
illegal immigrants from schools, welfare services, and all but
emergency health care.  How long will it be before there are
"differential rights" for "differentiated citizens", identified in a
data base and policed by smart cards?  How long before the notion of
"Human Rights" is as outdated as the "Divine Right of Kings"?


At a time when their skills are in increasing demand by global
companies, knowledge workers feel more and more undervalued and
betrayed by the nation-state.  Exile no longer holds any terrors,
and so it was inevitable that predatory global networks would drive
loyalty to the state into a steep decline among the swelling number
of would-be "economic mercenaries".  Those who wrap themselves in
the flag can soon expect to be buried in it.

The situation is possibly even more complex, because of the
increased reliance of companies on the symbolic-analysts, the owners
of intellectual equity.  We are witnessing an intensifying power
struggle between the symbolic-analysts and the owners of financial
equity in those companies, and this is likely to change
fundamentally the very nature of capitalism itself.  This battle is
likely to be at least as significant as that between landowners and
industrialists in the early part of the nineteenth century, that was
formative of today's capitalism.

We are rapidly approaching a situation where, in order to attract
and keep the elite with their knowledge and money to enliven the
economy, the elite group will be expected to pay less tax and not
more!  The great majority of governments are lowering top tax rates
in line with declining global levels.  "Top income tax rates fell an
average of 16.5% between 1975 and 1989." "The main producers and
repositories of wealth - multinational companies - have increasingly
been able to adjust their accounts and the prices of their internal
international transactions so that their profits are declared in low
tax countries, while they continue to operate in high tax ones."
Very soon companies will be negotiating preferential tax deals not
only for themselves but also for chosen elite employees.  A major
growth market will be servicing the global information flows of the
mobile rich: anywhere, anytime, anyhow.  Karl Ziegler claims that
already 60% of the world's private banking is held in trust in
offshore unsupervised tax havens.

All the while, the disposable income for most of society will be
drastically reduced.  The power in global economic forces means that
the tax burden is moving irrevocably onto the shoulders of the
immobile; and away from income and onto expenditure.  When Leona
Helmsley said "only the little people pay taxes" she was unwittingly
making a prediction.  This goes counter to every notion of social
justice that has been prevalent over the past two hundred years.
Inevitably in the transition we can expect massive civil unrest and


Everywhere the nation-state is in retreat.  All the while citizens
are losing their faith in the nation-state, seeing it as a
peculiarly twentieth century phenomenon.  For the state is failing
to deliver its side of the Faustian pact, where the individual
submits to the legitimate violence of the state in return for
protection and security.  Globalization has shown the James Bond
myth, that the state is good and global corporations (Spectre) are
bad, to be blatant propaganda on behalf of the nation-state.  James
Bond, the patron saint of the nation-state, is now just another
dirty old man.

The nation-state is based on the premise that the state owns the
individual and that the leaders of the state can dispose of his
property as they see fit.  But knowledge workers call it social
injustice: for there is no justice in equality.  All taxation is
theft.  It is the state obtaining money with menaces.  They say with
derision that the "Common Good" isn't good, it is merely common!
The protection of the interests and independence of the knowledge
workers is going to be big business in the Information Age.

The very nature of the nation-state itself is mutating; increasingly
it will have to behave as merely another form of commercial
enterprise.  According to western sentiment some states are becoming
criminal enterprises, but these too will be part of global trade.
That the roles of governments and organizations are converging was
unconsciously highlighted in the Guardian of 10 December 1993.  They
asked the question: "what's the difference between Zambia and
Goldman Sachs?" The answer: "One is an African country that makes
$2.2 billion a year and shares it among 25 million people.  The
other is an investment bank that makes $2.6 billion ...  and shares
it between 161 people.  FAIR ENOUGH!" Of course the "bleeding heart"
liberals of the Guardian haemorrhage at such gross unfairness and
make snide comments about "Goldmine Sachs".  Unfairness?  They fail
to see that the symbolic-analysts of Goldman Sachs earned that
money.  Yes, they earned it, and they earned it fairly.

To the knowledge workers, this call for fairness is the mere
whinging of failures and parasites.  They say it is time to rid
ourselves of that backward looking idea, that work involves physical
effort.  Of course labour is needed - but there is a world full of
labourers out there.  It is that rare commodity, human intellect,
which is the stuff of work in tomorrow's world.  Politicians really
must stop saying "nanny knows best" and playing to the
sentimentality of the herd.  Governments, like all other
organizations will have to survive economically on the efforts of an
elite few - and no nation-state has an automatic right to exist.


Because of the need to employ local workers, the major social
problem for politicians in the coming decades is going to be how to
attract global employers to partner local companies, and how to keep
them attracted.  Governments will have no choice other than to
acquiesce to the will of global enterprises.  A new paradigm is upon
us, in which the nation-state has mutated into just another form of
organization, which will delegate market regulations to
continent-wide bodies such as North American Free Trade Agreement or
the European Union, which in turn will use their economic muscle and
conspire with local communities to undermine each member state.  Not
only will state be pitted against state, but also area will compete
against area, town against town, even suburb against suburb.  It
will be inevitable that nation-states will fragment: rich areas will
dump the poor areas.  Such shakeout trends can be interpreted as
downsizing, a strategy that is being considered by most shrewd major
corporations these days.  As Daniel Bell so eloquently put it, "the
nation-state is too small for the big things and too big for the
small things".  Some futurologists, such as Heineken, expect that
early in the next century the number of states in the United Nations
will increase from the present number of 184 to over 1,000.  Each
state will permit entry to holders of "UN style" company passports.
Tax holidays and reduced regulation aimed at attracting employers
will be "the name of the game" everywhere.  Already different states
in Europe have embarked on "regulatory arbitrage" to tempt financial
sector companies away from their "European partners".  Inevitably
this trend will undermine national legislation and taxation
policies.  Any area with independent aspirations will use economic
weapons against its neighbours and distance itself from their
legislative oppression.

One inevitable consequence of global trade will be the rise of the
New City State at the hub of global electronic and transport
networks.  The non-democratic model of Hong Kong is an exemplar,
even though the city itself doesn't yet realise that it has defined
the future.  Singapore under the enlightened leadership of Lee Kuan
Yew is another.  What European city will be the first to break ranks
with the nation-state mentality holding back progress?  A number of
European cities can make the leap.  Liechtenstein has already
started; what about Monaco?  And let us not forget Venice, perhaps
it will rediscover former glories.  What about Lisbon?  They have
the singular example of attracting the Gulbenkian wealth earlier
this century.  The Corporation of the City of London too has
enormous potential and could be revitalized.  However, the dead hand
of the "Mother of Parliaments" will make this far more difficult.

To protect their wealth, rich areas will also undertake a
rightsizing strategy, ensuring a high proportion of (wealth
generating) knowledge workers to (wealth depleting) service workers.
Rich areas have to maintain and expand a critical mass of scientific
and technological expertise, and use it to underpin an effective
education system to regenerate the resource.  These rich areas will
reject the liberal attitudes of the present century, as the
expanding underclass they are spawning, and the untrained migrants
they welcomed previously, are seen increasingly as economic
liabilities.  "Many too many are born.  The state was devised for
the superfluous ones" (Nietzsche).  Mass-production methods needed
an over-supply of humanity; in a sense the Machine Age spawned the
nation-state, but with its demise what is to be done with the glut
as we enter the Information Age?

As far as global enterprises are concerned liberal democracy is an
artefact of the Machine Age, an ideology from a time when the masses
were needed - but it will soon mutate into an irrelevancy.  It will
be merely the means of governing the immobile and dependent service
workers.  That citizens elect their slave masters makes democracy
slavery none the less.

Global companies have no interest in populism, unless it adversely
affects their business, when they will simply leave: in the
Information Age "democracy is bad for business".  The Marxist myth
that labour creates wealth has been buried once and for all.  A
large population, particularly an uneducated and ageing population,
has now become the major problem facing all Western governments.
The masses themselves will put employment and economic well-being
before the dubious privilege of electing powerless representatives.
Even Karl Marx anticipated politicians becoming ineffective, but for
other reasons!

As the nation-state mutates into corporation-states in the new
order, the role of each corporation-state is to produce the right
people, with the right knowledge and expertise, as the raw material
for the global companies that profit from the Information Age, to
service these companies, and to provide them with an efficient
infrastructure, a minimally regulated market and a secure, stable
and comfortable environment.  If a state cannot produce a quality
"people product", in sufficient quantities, then it must buy them
from abroad.  Each state will have to view education, not as the
right of every citizen, distributed arbitrarily, but as an
investmenton which it must expect a return: they must invest in
success and not failure.

If the state can convince the commercially attractive elite of
knowledge workers and local entrepreneurial companies to stay, then
a virtuous circle of success is ensured.  For then, migrating global
players and their wealth will also be attracted into that country.
If, however, the state maintains a greedy collectivist and populist
stance, under the defunct motto "power to the people", then the
entrepreneurial and knowledge elite will move on to more lucrative
and agreeable climes, and, in the long-term, leave that country
economically unviable, composed solely of the unproductive masses,
sliding inevitably into a vicious circle of decline.

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