Information Revolution - Utopia or Bust?

In response to TAhmed (Reply #32):

Dear TAhmed:

IT is a great development. Technology and capitalism are not mutually exclusive categories. Nobody has ever denied the positive role of IT. You, however, seem to suggest that the backwardness of Pakistan is due to the neglect of technology.

You have raised a good question: Why we Pakistanis are followers, and not leaders, in the world today? I think, there are several important reasons. Let me identify a few.

First, an important reason is the kind of education that we provide in our schools. In most Pakistani schools, the focus is less on learning and more on simply cramming. I remember, my own sister (as a child) could read her English textbook (The Radiant Way) very fluently. She went to a first rate school in Karachi. Being four years older than her, I was immensely impressed with her command of English language. One day it suddenly dawned upon me that she had memorized the material and she, in fact, was unable to read the text. This is just a simple example.

Second, most of our schools do not focus upon inculcating creativity and leadership qualities. Students, even in our colleges and universities, are rewarded for simply memorizing the material. Students are not encouraged to work on projects and write research papers. Most tutorials and papers are essentially verbatim reproductions from books and, in some cases, research journals.

Third, our schools should provide education in vocations. In most American schools, there are courses on woodwork, electricity, metal work, clay and pottery making, photography, sewing, arts and craft, music, journalism, debating, and a host of other things. American have learned the usefulness of vocational education from the Germans. I think, we need to focus on vocational education.

Fourth, most Pakistani teachers are not adequately educated and motivated. Teachers are paid poorly. So, more promising students do not like to be teachers.

Fifth, leadership and creativity is often a product of our ability to think freely and clearly. Neither Pakistani state nor civil society allows/encourages the freedom to think. I think, leadership is partly a product of our ability to think and act freely and fearlessly.

Sincerely, Bilal Ahmad

In response to Tariq (Reply # 30):

Dear Tariq:

Although I did not use the phrase ``omnipotence,`` the global dominance of capital and the capitalist states cannot be denied. The case of Iraq is a good example of the use/misuse of the combined power of capital and the capitalist states.

Tariq, you are right that capitalism is not a monolith. In fact, capitalism is ``uneven`` where the processes of development and underdevelopment remain entangled in a complex way. Of course, there are ``possibilities of change.`` So you are once again right, but the possibilities are not realistically available to most people in most parts of the world. A lot of sensible planning and hard-work is needed to bring any meaningful social change in any single country. The common people in many parts of the world may or may not be ``helpless on-lookers`` but the common people of Pakistan will remain helpless on-lookers as long as they are not really empowered through at least good governance. Who will ensure good governance in Pakistan? What kind of education and leadership do we need to ensure such a change?

Tariq, I want to draw your attention toward a book on ``Antisystemic Movements`` by Arrighi, Hopkins, and Wallerstein (1989). In basing itself on an analysis of resistance movements since the emergence of capitalism, this short book shows that such movements ``did not impede the consolidation of the modern capitalist world-system.``

``The authors argue that although capitalism generated resistance right from the beginning as it displaced populations, despoiled resources and established global exploitation, until about 1848 the capitalist world-system could crush or outflank an opposition which was dispersed, localized and down to recent times, more adequately organized social and national movements set some limits on capital accumulation, but generally remained confined in their effectiveness to the terrain of the nation-state. Indeed, paradoxically, the successes of the ``old`` social movements helped to boost the power and legitimacy of states while failing to remove the sources of class conflict or to grapple with the consequences of interstate competition.``

Then, in ``taking the year 1968 as a symbolic turning-point, the authors argue that ``new antisystemic movements have arisen which challenge the logic of the capitalist world-system more centrally than ever before. These new movements have a different ethnic and gender composition and different ways of organizing, while their key inspirations show an increasing ability to cross national boundaries. The authors suggest that the new assertiveness of the South, the development of class struggle in the East and the emergence of Rainbow coalitions in different world zones might hold out the promise of a future socialist world-system.`` (Read ``might``hold out . . . ; we instead have seen the kind of changes brought by the demise of erstwhile Soviet Union).

Now, after a decade of the publication of this book, a number of question come to our mind. Is the US hegemony eroding? What kind of alliances (or realignments of alliances) exist between the US, Western Europe, China, Japan, Russia, India, and most rich/powerful Muslim countries? How these developments have affected the world order? Is the capital still centralizing and the labor still marginalizing in most noteworthy nation-states? Is the ability of states to control their civil societies increasing/decreasing? Are the means of control generally peaceful/violent? Are the demands of the disadvantaged social groups in each country generally becoming stronger/weaker? Is the element of social welfare rolling-back in most mixed societies (where the state plays a key role)? Is the quality of life gap increasing/decreasing between the rich and the poor countries of the world? Is globalization a fancy word for the economic, cultural, or political imperialism of an increasing number of people around the world? Is it reproducing an environment of dependency in most crisis-prone nations, like Pakistan? Is there a continuous brain-drain and the flight of capital from less-developed parts of the world?

Regards, Bilal Ahmad

Re: TAhmed321 (32)

``It is the result of technological and scientific progress, not just another capitalist trick``

It seems to me that for you something scientific automatically implies morality. I would have to disagree. Many scientists have little or no morality. Much of the money for university research comes from the private sector. If scientists do not get grants, they are pretty much dead ducks in the academic and research community. Microsoft recently sponsored an study to highlight the flaws in the Linux OS. Of course, the results of the study were in the favor of MS. Another example is that of human genome project. Companies are trying to discover and patent segments of human DNA crucial for developing drugs. Are they really entitle such patents is a big ethical question. It`s not a trick of a chameleon to change color. It`s its nature.

``why we Pakistanis are followers, and not leaders, in the world today.``

Sometimes it is better to be follower for if the leader falls off the clif one might have enough time to stop.

On going through the replies to this article, I am sorry to see that most of the thinking is geared to political issues - capitalism, East Timor, and so forth. The information revolution is clearly more fundamental than that. The information revolution is re-defining politics and economic systems, and not vice versa. It is the result of technological and scientific progress, not just another capitalist trick. The fact that the replies in chowk seem to be missing this point explains why we Pakistanis are followers, and not leaders, in the world today.

Re: Tariq # 30

Bravo !!

Your contention that the international geo-political environment is mirroring the conditions of ante-bellum Europe of 1914 is absolutely correct. After the demise of the cold war, the world is moving away from the ideological polarization of Soviet-American rivlry, which had frozen the status quo into an east-west confrontation. In many ways, international relations are the same today as they were in 1914; fragmented, conflicting, and fluid.

I also agree with you that capitialism, which has an irritating habit of being flexible to changing circumtances, will amend its interests to compliment IT and will thus, not necessarily die out.

As to East Timor, there is much to be answered by the countries, which turned a blind to the problem for the last quarter of a century. In this, I am specifically pointing an accusing finger at Australia`s role in appeasing Jakarta`s oppression in Dili. In this matter, Australia shares a larger proportion of the blame than the United States, because though the United States gave military support to Indonesia, it did so on the argumentive logic of Canberra`s agruments in this case.

Simply said, when Indonesia invaded and occupied East Timor, in wake of Portugal`s withdrawal, Australia welcomed the move, and the consequent subjugation of Timorese rights, because the Indonesian invasion and occupation filled a political vacuum, which might have erupted into a possible civil war. Considering that this was in 1975, the height of the cold war, Australia was not too keen on having a communist inspired insurgency operating only 400 miles from its own coastline.

Canberra sold this idea to the Americans, of Indonesians resisting communism, and perpetuated a problem, which started to simmer and finally boiled over in the last few weeks. The only American interest in East Timor was of resisting communism and since 1989, that logic has been mooted. Hence, when the Americans say that they have no interests in region, and that the Australians should take care of this problem, they are right!

Does this excuse Washington`s lack of inaction? The answer is no, but unlike the situation in Iraq and Yugoslavia, there are no American economic interests in East Timor worth risking American lives. The guiding principle of the American foreign policy is to judge each crisis individually, on a case by case basis, and determine American interests and only then intervene, if necessary.

East Timor, under this assumption, does not qualify.

Sorry for this being so long....!

Re- Bilal #28, Wasiq #25

Hello. Thanks for your comments.

I do not share your view re the omnipotence of the capitalist ruling class. I might be naive, but I see the possibility of enormous changes. Whether these changes lead towards democracy, authoritarianism, chaos, or a combination of all three in different parts of the world, will depend

on the configuration of political power that prevails in each society.

The possibilities of change owe their existence to the following sources:

First- the logic of capitalist development. It is guided by the imperitive to accumulate more and more capital, as an end in itself. The major contradictions which keep asserting themselves and ensure that the ruling class cannot gurantee stability are: 1. The contradiction between the social character of production, and its private appropriation. 2. The related contradiction

between capital and labour, or in other words, our good old fashioned friend, the class struggle.

While the first contradiction creates the tendency towards the development of monopoly capitalism, as bigger fish eat smaller ones, and then compete with eachother for a greater share of the surplus that the market might have the potential to provide. The class struggle imposes limits on this. In addition to these contradictions, during periods in which finance capital has political dominance, we observe enormous volatility, and potential for upheavals. In 1914, finance capital, and monopoly capital fuelled the competition for control over markets, and the realted arms race and military conflict. Eventually, in some societies, fascism was the political form chosen for the resolution of these contradictions, in someothers, it was social democracy. Russia had a communist revolution, and it led in Immanuel Wallerstein`s apt charaxterisation, to its mecantilist withdrawal from the global economy. It was the turmoil fuelled by these contradictions that led the world through the catastrophic experience of the second world war.

Coming to the present, we see economic and political volatility reminiscent of 1914. Finance capital is extremely influential. Last year, the South East Asian economies experienced a meltdown, largely caused by the absence of capital controls, and the resulting flight of hot money. It was the global financial crisis that hit Asia. It was not an ``Asian flu`` caused by ``crony capitalism``. It was government orchestrated rescue of the monster hedge-fund Long Term Capital Management, which prevented the possibility of catastrophic collapse of the U.S. economy, as all the respected financial houses were implicated in crony capitalist style lending to LATCM, for making profits by placing large bets on small movements of capital on the stock exchange. Government studies on the causes of LATCM collapse indicate that not only hedge-funds, but most corporations and financial firms are dagerously leveraged as LATCM was.

We do not have a robust and united capitalist bloc, capable of mobilising militarily for the impossible task of maintaining order every where. Since the invasion of Vietnam, the leading capitalist country, the U.S. has lost the ability to use soldiers as cannon fodder indiscriminately. This is what the U.S. elites refer to as the Vietnam syndrome. They need to justify resort to force. They need an enemy as monstrous as saddam, or Milosovich to justify military adventurism. Even proxy defense of pro-capitalist clients is becoming difficult. It is interesting, that regarding East Timor, even the U.S. is now justifying inaction in stopping the Indonesian army. In the 1960s, it would have provided, as it did in fact, all the help the Indonesian military needed to fix the Timorese. Increased human rights consciousness, and the incompatibility of political democracy with militarism, places restraints on the ability of the capitalist ruling elites to control the political environment.

Sorry, this is getting too long. No the MQM ,and Poonam will not challenge the capitalist system on their own. But even these vulgar nationalist forces, some of which subscribe to the cult of violence, do represent the desire of the people to participate in running their affairs, and their continued influence is reflective of the ruling elites to achieve stable control.

The point is that capitalism is not a monolith. There are, possibilities of change. The struggles of people affected by capitalist exploitation and domination will play a role in determining the future. We, the common people of the world are not helpless on-lookers.

i think the emergence of a technocracy may be the most significant contribution of the information revolution. technology today intimidates the non computer owning, non engineering read ?average? person (still a majority of the American population).

at the beginning of the century, technology was seen as a means for social change and embraced as progress by the masses. today, however, technology is enigmatic except for those chosen few who understand it, and progress is seen by the masses as occurring outside of their sphere of existence.

future divisions among people will not be over class or race or ethnicity, but among those who have and can use information and those who can not. a corollary, then, may be that today`s hackers will be tomorrow?s revolutionary.

How about the disinformation revolution:

I hope people here are not using ``information`` as if all of it is ``good`` and the more one has of it the better it is. Few would argue that there is good information and bad information. There have been several aspects of the modern world, which in the conjunction of rapid information movement seem troublesome. The intellectual hierarchy is the thing of past. It used to be that only few learned had the authority to render judgments and intellectual opinions.

This certainly is not the case now. This has allowed intellectual freedom but at the same time anyone can say anything about anything and send it on information superhighways to be heard by millions. Truth and falsehood had never been so ill defined as in the modern age. People like Jerry Springer are the prophet of the new age. There is something to be worried about.

Further, today`s markets run on real time basis with time critical bits heading to and from financial powerhouses. Yes, there are secure links but ultimately there is the belief that what is being projected on displays is the truth. We have become too complacent and/or proudful for our technology to distinguish real signals from the false ones. The high-speed information exchange, which is the backbone of today’s markets, might trigger its ultimate crumbling.

In response to Tariq (Reply # 24):

Dear Tariq:

Your statement: ``The contradictions . . . are increasingly asserting themselves. These, combined with the struggles of dissident movements and oppressed peoples could change the nature of the global economy. From its present savage capitalist phase, it could evolve into a more benign social democratic one.``

Comment: I wish I could share your optimism. The power of capital has long been increasing in accordance with its logic. What evidence do you have to conclude that the present ``savage`` capitalist phase could evolve into some kind of social democratic one? With the exception of just a few lucky ones, most developing economies (including India and Pakistan) have long been expecting to become developed. Do you think that the movements of MQM and PONAM are going to change the nature of Pakistani economy let alone the global economy? Are you expecting a global upheaval against the so-called capitalist core?

Regards, Bilal Ahmad

``Globalisation``, which primarily refers to the liberalisation of the international financial regime is the result of conscious state policies, adopted by the US and UK since the early 1970s, which have gradually changed the post-War Bretton Woods financial regime which imposed controls on the movement of finance between states. As such, ``globalisation`` should not be viewed with superstitious awe, as a permanent fait accompli. The contradictions inherent in the adventurist and dogmatic neo-liberal view that the free market will on its own resolve the major problems of global civil society are increasingly asserting themselves. These, combined with the struggles of dissident movements and oppressed peoples could change the nature of the global economy. From its present savage capitalist phase, it could evolve into a more benign social democratic one.

Re the role of the internet. Pressure on the state to make access to the internet available in public reading rooms, and libraries could make it really useful for the people in the 3rd world. If the states do not do this, on more limited scale, NGOs and dissidents could try to increase access to it on their own.

I am interested in knowing whether there is interest in Pakistan in the free and democratic

development of alternatives, such as Linux.

To UR,

There is an old economic theory by Milton friedman that under free international trade, the wage rates will become equal. In the case of because IT, because of it ethereal nature, is instentaniously trasportable at low cost, there is an evergrowing trade and the wage rates are tending to level out. A simple help desk job, or a call centre function in the US can be easily tranfered to some one in india. It is unlikely that a plumbing job could be. That is why the plumbers in the US are paid 100 times than the indian counter part, in the case of IT, this is fast declining and I know of cases where the tax paid salaries are comparable.

I do recognise most of the points you raised, particularly the low capital intensity, from a theoretical perspective. From a practical point of view, in the absense of venture capital and the free wheeling individual spirit, hardly any `new` IT companies have come up in India. The largest in India, Tatas, L&T, Infosys, Mahindras and Wipro were all established industrial houses before they ventured into IT. I wonder why the GE and EXON and United technologies did not venture into IT.

Now about China, I completely disagree with your view that chinas industrialisation is pioneered by IT. Far from it, Chinas IT exports are only 20% of Indias, so is the share in the GDP. Chnas economy and all the rest that go with it is a beat up, it is only based on the foreign exchange surplus. It is simply used as a `model` to ask the other countries to allow `export` processing zones, and other forms of subsidy. If you ever cared to look at the price of chineses products in the US supermarkets, allow for the margins (i know it is 120% at the retailer) and other costs, you will realise the product is subsidised, in chinese currency to earn foreign exchange. The way of reporting the GDP, problems of calculating price in a communist economy and my direct observations in china, yes i am inclined to believe that it is a `conspiracy`.

Israel, you should recognise cannot be compared to other countries. To give you an example, the US military budget expense incurred in Israel is treated as the same as that incurred in the US. Now think of the US budget, it is more than a trillion annually, and what can a trivial element of it do the economy of any country.

It is not my intension to devalue or belittle thetremendous contribution of IT professionals who are in say, india and who have and are emigrating to other countries. But I cannot but ignore the parallels in an earlier time, the sugar cane cutters from north india who went to Fiji, The south indian plantation workers who went to Malaysia and srilanka, the farmers who went to Surinam and the traders and miners of South Africa.

Can I not just add another group, THE IT PROFESSIONAL OF USA. will they do anything different from the ones listed above. If so why and how.

My optimism is not because I feel the IT revolution will somehow or the other transform third-world countries into the first world. This may or may not happen. However, I am very optimistic about the opportunities that the IT revolution has created for poor nations. Whether third-world countries take advantage of these opportunities is a different story. But, at least there exist opportunities now for the poor nations, that could never have existed through the industrial revolution.

I have had a chance to work in both the aerospace, and software industries in Pakistan as well as in the US. Aerospace is on the cutting edge of the industrial revolution, while software is on the cutting edge of the IT revolution. The dissimilarities in both these industry, with regard to third world countries, are astounding.

The international aerospace industry has hardly any state or individual level participation from the 3rd world. The deck is stacked highly in favor of the 1st world countries. The infrastructure required to produce one aircraft is astronomical. It requires excellent test facilities, wind tunnels, a well-developed mettalurgy industry, an advanced avionics industry, a gigantic amount of capital etc. etc. This is true for other by-products of the industrial revolution, as well. 3rd world countries can never have access to all these facilities.

However, the IT industry is different. It does not require nearly the same facilities. Due to the microscopic infrastructure requirements (in comparison to the industrial products), it is much easier for 1st world IT nations (basically the US) to shift their software houses into the third world. Individuals from the 3rd world already control a chunk of this industry, in comparison to the 1st world countries (not including the US). I am willing to bet, that the combined market cap of the IT companies, started in the last 10 years, by Indians based in America is higher than the combined market cap of IT companies, started by certain 1st world European coutries, during the same time. AST Research, a company started and run by a Pakistani-American, at its peak, had annual revenues of over 2 billion dollars. I believe (not 100% certain) this is higher than the total annual revenue of the Pakistani IT industry, as a whole.

You cannot look at the IT industry (or any other industry, for that matter), by simply looking at the products produced and exported by 3rd world countries. In this scenario, the 3rd world countries will not immediately be able to match the 1st world countries, due to the reasons mentioned in other replies. You have to take a look at the amount of capital, resources, and institutions controlled, and influenced by 3rd world individuals. Whether not all of them are currently living in the 3rd world will not make too much difference in the long run. Israel, plays a much larger role in the international economy as compared to the size of its population, or to the number of products it exports. That is because, a lot of the economic institutions of the world are controlled by pro-Israel individuals.

So there are definitely more opportunities out there because of IT. The question is how can the 3rd world governments tap into the opportunities that 3rd world individuals have already tapped into. This is the 64 million ruppee question.

So far China is the only country that has succeeded in doing the above. Before the IT revolution, China was a third world country, with a per capita income less than that of Pakistan. Its technological exports consisted of unreliable copies of Russian defence, and aircraft technology. Its main source of export were simple items like pencils, and children`s toys. After the IT revolution, China is on its way out of the third world, and destined to become an economic power. It certainly did not do this by selling cheap pencil sharpeners. It also did not do this by exporting proprietary software. Hardly any of the major software programs are written by Chinese companies. It did so by utilizing the human resource capital of professinals, both inside and outside China. India sends over four times as many software engineers to US, as does China. However, the amount of money pouring back into China per US-based Chinese software engineer is much higher than his/her Indian counterpart. Also, the amount of foreign investment flowing into the Chinese IT industry is much higher than that flowing into India, or Pakistan. Why? Becuase, the Chinese govt. is playing its cards right; the Indian govt. is playing its cards only partially right; the Pakistani govt. is not playing its cards, at all. The way to attract foreign investment is not by offering high interest rate bonds, or by relying on the goodwill of expatriates. It is done by offering the correct business climate that can tap into the IT skill and money, controlled by 3rd world individuals, all over the world. Pakistanis and Indians would love to invest in their countries of origin, if they were provided the proper business climate. This is human nature.

The IT revolution has given the 3rd world countries access to the economic pie, that the industrial revolution could never have provided.

Re: Wasiq

I do not think, ``The actual outcome will be somewhere between the extremes that people are apt to go to in their projections.``

Infact, I see just the opposite. There will only be extremes. The third-world countries that get IT (no pun intended) will surf the IT wave out of the third world. The poor countries that do not get it, will be wiped out by this wave, and sink even furthur into the third-world black hole. I do not see a middle ground.

Re: Jay

Your point about the high-rate bonds was answered above. That is a very naive way to convince businessmen to invest in their countries of origin. Almost as naive as the, ``Qarz utaro, Mulk sawaron.`` scheme started by Nawaz Sharif. The reason money does come into these schemes from the middle east is, because the middle eastern Pakistani and Indians send the money to support their home-based relatives.

Re: sac

I read both books by Yourdon. I remember his name to be Ed Yourdon, but I must be mistaken. In both his books, he mentions the impact and importance of 3rd world engineers in the IT revolution.

Dear SR:

To quote you:

``I`ve noticed references to it in other messages, but I doubt if either of the writers has as yet read the book. (My copy is on its way from amazon.com by UPS Ground.)``.

Notice any inherent contradiction in your reply my friend? Please get some jolt cola or whatever libation you need to loosen up and don`t mess up what seems to be a very entertaining discussion.

Also the chowk staff should be careful about infringing copyright laws when they allow verbatim copies of Prefaces to a book to be published on their websites.

Going back to the article at hand,I would argue that software is a commodity just like cars.

Whereas the high-end stuff may continue to some out of Silicon valley or Seattle(:-)), the low-end stuff may end up in places like Bangalore or Singapore. The growing trend toward server-centric programming may actually accelarate that trend. I would highly recommend Peter Yourdon`s 2 books(something titled the Death of the American programmer and then the Rebirth(?) of the American programmer) that delve in greater detail on the subject.

Interesting discussion!

I think it was Jay and UR who were debating about the nature of American economy, which was becoming increasingly Information Technology based and thus, creating more wealth than most other countries for the USA.

This is highly true and the fact of the matter was that since the middle 1980s and then from the 1990s, Americans have ``cornered`` this market and are now well into what can termed as an information industry and that they are well poised to control the global flow of information.

This is where I would like to add a caveat to this scenerio. There was an interesting interview with US Secretary of Labor, on one of those of Sunday talk-show circuits, which I accidently surfed into, thanks to Wasiq and the interest his article prompted in me on this topic.

According to the US SecLabor, the US economy in is becoming global in the information sector and it is by far the fastest growth industry in the nation, thanks to new emerging technologies as internet etc. However, the down side to this, shown by a Labor Dept. internal study, was that this info economy`s strenght is based on foreign workers who have H1-Bs for temporary work in the US. According to Labor Dept. data, US schools and colleges are not producing the required numbers of graduates, which this info industry requires and hence, in the future it will see a slow, but marked down turn, because of what can be called as a recession as the industry levels out and a new round of growth can not be generated due to a lack of skilled American employees.

This then nicely compliments the recent Congressional attempts, by both Republicans and Democrats, to increase the cap of H1-Bs for foreign workers in computers and to create a new class for student visas, for science, which would enable a student to work and study at the same time. Though the Americans business see this a viable alternative, to a lack of American talent, to recruit foreign workers, the American government is becoming increasingly concerned, because though these foreign workers generate wealth for the American IT sector, their talents are ``fluid``, that is open to international job mobility and hence, not subject to American control and in fact, pose a ``brain drain`` for the American IT industry.

This is specically worrisome to the Americans in the defense R&D spheres, given the recent case at Los Alamos, that these foreign workers pose a threat to the security of the United States, but to ban them from working, would in fact mean crippling and degrading its own defense, because there are very Americans with required skills to replace the foreign workers in the US without causing severe internal problems for the IT industry in the States.

This is becoming a serious problem and it is igniting considerable interest and so far, this problem has fully escaped the notice of the press in these Ego-Centric States.

To UR

The general discussion is about the fortunes of the countries, not the ones who emigrate. There is a demand for software engineers, met by immigrants to the US, and most of them are from the third world, primarily from India. No doubt about it, it is good for the ones in the Us, but how good is it for india. Leaving aside the `brain drain` rhetoric, in economic terms the effects are near zero. The relatively high salaries in the west is accompanied by high expenses and expectations, the net result is fun transfers from the US is negligible when compared to those, the `un-educated` workers from the middle east.

A good example is the `Resurgen India Bonds``, 80% of it was itt was subscribed by the middle east workers while the US indiancontribution was less than 3%. I do not deny the intangible benefits of indians being in the US.

One of course should not forget the parallels of the present indian emigration to that in the earlier times. Majority in Surinam and Fiji are indian origins, may be in those days I am sure those fortunate indians also might have echoed your sentiments, but all that happened is they got integrated into the host country.

Now about the Microsoft comparisons. I believe that the market capitalisation of MS cannot be usefully compared to the GDP. GDP is the annual production in the country, which at best can be compared to the turn over, or total revenue of MS. The total productive assets of a country, even a small country will be much larher than that of MS.

To SR

I know of one person who doesnt share the truth uttered by Soros, that is Malaysian PM Mahatir Mohammed. At a time when currency speculation is wreaking havoc in the small economies where people are loosing real jobs, when the amout of money flowing in the speculative funds are comparable to the total forign exchange earnings of countries like Thailand, it is depressing to see the ramblings of a speculator and gambler, occupying so much of space on the chowk. Of course, success is every thing, and everything is money which gives one the right expound a world view.

Dear Wasiq,

What a great theme you`ve touched upon. Before anything else, I`d just like to post excerpts from George Soros` recent book titled ``The Crisis of Global Capitalism``. I`ve noticed references to it in other messages, but I doubt if either of the writers has as yet read the book. (My copy is on its way from amazon.com by UPS Ground.) What Soros says is quite relevent to one major aspect of the discussion here: global economy in the next century.

What follows are George Soros words, not mine.

In The Crisis of Global Capitalism, Soros dissects the current crisis and economic theory in general, revealing how theoretical assumptions have combined with human behavior to lead to today`s mess.

Introduction

This book seeks to lay the groundwork for a global open society. We live in a global economy, but the political organization of our global society is woefully inadequate. We are bereft of the capacity to preserve peace and to counteract the excesses of the financial markets. Without these controls, the global economy is liable to break down. The global economy is characterized not only by free trade in goods and services but even more by the free movement of capital. Interest rates, exchange rates, and stock prices in various countries are intimately interrelated, and global financial markets exert tremendous influence on economic conditions. Given the decisive role that international financial capital plays in the fortunes of individual countries, it is not inappropriate to speak of a global capitalist system.

Financial capital enjoys a privileged position. Capital is more mobile than the other factors of production and financial capital is even more mobile than direct investment. Financial capital moves wherever it is best rewarded; as it is the harbinger of prosperity, individual countries compete to attract it. Due to these advantages, capital is increasingly accumulated in financial institutions and publicly traded multinational corporations; the process is intermediated by financial markets. The development of a global economy has not been matched by the development of a global society. The basic unit for political and social life remains the nation-state. International law and international institutions, insofar as they exist, are not strong enough to prevent war or the large-scale abuse of human rights in individual countries. Ecological threats are not adequately dealt with. Global financial markets are largely beyond the control of national or international authorities. I argue that the current state of affairs is unsound and unsustainable. Financial markets are inherently unstable and there are social needs that cannot be met by giving market forces free rein. Unfortunately these defects are not recognized. Instead there is a widespread belief that markets are self-correcting and a global economy can flourish without any need for a global society. It is claimed that the common interest is best served by allowing everyone to look out for his or her own interests and that attempts to protect the common interest by collective decision making distort the market mechanism. This idea was called laissez faire in the nineteenth century but it may not be such a good name today because it is a French word. Most of the people who believe in the magic of the marketplace and the merits of unlimited competition do not speak French. I have found a better name for it: market fundamentalism.

It is market fundamentalism that has rendered the global capitalist system unsound and unsustainable. This is a relatively recent state of affairs. At the end of the Second World War, the international movement of capital was restricted and the Bretton Woods institutions were set up to facilitate trade in the absence of capital movements. Restrictions were removed only gradually and it was only when Margaret Thatcher and Ronald Reagan came to power around 1980 that market fundamentalism became the dominant ideology. It is market fundamentalism that has put financial capital into the driver`s seat. This is, of course, not the first time that we have had a global capitalist system. Its main features were first identified in rather prophetic fashion by Karl Marx and Friedrich Engels in the Communist Manifesto, published in 1848. The system that prevailed in the second half of the nineteenth century was in some ways more stable than the contemporary version. First, there were imperial powers, Great Britain foremost among them, that derived large enough benefits from being at the center of the system to find it worthwhile to preserve it. Second, there was a single international currency in the form of gold; today there are three major currencies - the dollar; the German mark, which is soon to become the euro; and the yen - which are rubbing against each other like tectonic plates, often creating earthquakes, crashing minor currencies in the process. Third, and most important, there were certain shared beliefs and ethical standards, which were not necessarily practiced but were nevertheless quite universally accepted as desirable. These values combined a faith in reason and a respect for science with the Judeo-Christian ethical tradition and on the whole provided a more reliable guide to what is right and what is wrong than the values that prevail today.
Monetary values and transactional markets do not provide an adequate basis for social cohesion. This sentence may not make much sense to the reader as it stands, but it will be expounded in the book. The nineteenth-century incarnation of the global capitalist system, in spite of its relative stability, was destroyed by the First World War. After the end of the war, there was a feeble attempt to reconstruct it, which came to a bad end in the crash of 1929 and the subsequent Great Depression. How much more likely is it, then, that the current version of global capitalism will also come to a bad end, given that the elements of stability that were present in the nineteenth century are now missing? Yet a calamity could be avoided if we recognized the deficiencies of our system and corrected them in time.

How did these deficiencies arise and how could they be corrected? These are the questions I propose to address. I argue that the global capitalist system is a distorted form of an open society and its excesses could be corrected if the principles of open society were better understood and more widely supported. The term open society was given currency by Karl Popper in his book Open Society and Its Enemies. At the time the book was published, in 1944, open society was threatened by totalitarian regimes such as Nazi Germany and the Soviet Union, which used the power of the state to impose their will on the people. The concept of open society could be readily understood by contrasting it with the closed societies that totalitarian ideologies fostered. This remained true right up to the collapse of the Soviet empire in 1989.

The open societies of the world - commonly referred to as the West - exhibited considerable cohesion in the face of a common enemy. But after the collapse of the Soviet system, open society, with its emphasis on freedom, democracy, and the rule of law, lost much of its appeal as an organizing principle and global capitalism emerged triumphant. Capitalism, with its exclusive reliance on market forces, poses a different kind of danger to open society. The central contention of this book is that market fundamentalism is today a greater threat to open society than any totalitarian ideology.

This statement is rather shocking. A market economy is an integral part of an open society. Friedrich Hayek, the greatest twentieth-century ideologist of laissez faire economics, was a firm believer in the concept of an open society. How can market fundamentalism threaten open society?

Let me make myself clear. I am not saying that market fundamentalism is diametrically opposed to the idea of open society the way fascism or communism were. Quite the contrary. The concepts of open society and market economy are closely linked and market fundamentalism can be regarded as merely a distortion of the idea of the open society. That does not make it any less dangerous. Market fundamentalism endangers the open society inadvertently by misinterpreting how markets work and giving them an unduly large role to play.

My critique of the global capitalist system falls under two main headings. One concerns the defects of the market mechanism. Here I am talking primarily about the instabilities built into financial markets. The other concerns the deficiencies of what I have to call, for lack of a better name, the nonmarket sector. By this I mean primarily the failure of politics and the erosion of moral values on both the national and the international level.

I want to say at the outset that I consider the failures of politics much more pervasive and debilitating than the failures of the market mechanism. Individual decision making as expressed through the market mechanism is much more efficient than collective decision making as practiced in politics. This is particularly true in the international arena. The disenchantment with politics has fed market fundamentalism and the rise of market fundamentalism has, in turn, contributed to the failure of politics. One of the great defects of the global capitalist system is that it has allowed the market mechanism and the profit motive to penetrate into fields of activity where they do not properly belong.

The first part of my critique concerns the inherent instability of the global capitalist system. Market fundamentalists have a fundamentally flawed conception of how financial markets operate. They believe that financial markets tend toward equilibrium. Equilibrium theory in economics is based on a false analogy with physics. Physical objects move the way they move irrespective of what anybody thinks. But financial markets attempt to predict a future that is contingent on the decisions people make in the present. Instead of just passively reflecting reality, financial markets are actively creating the reality that they, in turn, reflect. There is a two-way connection between present decisions and future events, which I call reflexivity.

The same feedback mechanism interferes with all other activities that involve cognizant human participants. Human beings respond to the economic, social, and political forces in their environment, but unlike the inanimate particles of the physical sciences humans have perceptions and attitudes that simultaneously transform the forces acting on them. This two-way reflexive interaction between what participants expect and what actually happens is central to an understanding of all economic, political, and social phenomena. This concept of reflexivity lies of the heart of the arguments presented in this book. Reflexivity is absent from natural science, where the connection between scientists` explanations and the phenomena they are trying to explain runs only one way. If a statement corresponds to the facts, it is true; if not, it is false. In this way, scientists can establish knowledge. But market participants do not have the luxury of basing their decisions on knowledge. They must make judgments about the future and the bias they bring to bear influences the outcome. These outcomes, in turn, reinforce or weaken the bias with which the market participants began.

I contend that the concept of reflexivity is more relevant to financial markets (and to many other economic and social phenomena) than the concept of equilibrium, on which conventional economics is based.

Instead of knowledge, market participants start with a bias. Either reflexivity works to correct the bias, in which case you have a tendency toward equilibrium, or the bias can be reinforced by a reflexive feedback, in which case markets can move quite far from equilibrium without showing any tendency to return to the point from which they started. Financial markets are characterized by booms and busts and it is quite amazing that economic theory continues to rely on the concept of equilibrium, which denies the possibility of these phenomena, in face of the evidence. The potential for disequilibrium is inherent in the financial system; it is not just the result of external shocks. The insistence on exogenous shocks as a kind of deus ex machina to explain away the frequent refutation of economic theory in the behavior of financial markets reminds me of the ingenious contrivances of spheres within spheres and divine forces that pre-Copernican astronomers used to explain the position of the planets instead of accepting that the earth moves around the sun.

Reflexivity is not a widely accepted concept, at least in mainstream thinking, and it will take more than a few sentences to explore all its implications. It will occupy much of Part I of the book. In Part II of the book, I then use this framework to draw some practical conclusions - about financial markets; about the world economy; and about such broader issues as international politics, social cohesion, and the instability of the global capitalist system as a
whole.

My second main line of argument is more complex and more difficult to summarize. I believe that the failures of the market mechanism pale into insignificance compared to the failure of what I call the nonmarket sector of society. When I speak of the nonmarket sector, I mean the collective interests of society, the social values that do not find expression in markets. There are people who question whether such collective interests exist at all. Society, they maintain, consists of individuals, and their interests are best expressed by their decisions as market participants. For instance, if they feel philanthropic they can express it by giving money away. In this way, everything can be reduced to monetary values.

It hardly needs saying that this view is false. There are things we can decide individually; there are other things that can only be dealt with collectively. As a market participant, I try to maximize my profits. As a citizen, I am concerned about social values: peace, justice, freedom, or whatever. I cannot give expression to those values as a market participant.

Let us suppose that the rules that govern financial markets ought to be changed. I cannot change them unilaterally. If I impose the rules on myself but not on others, it would effect my own performance in the market but it would have no effect on what happens in the markets because no single participant is supposed to be able to influence the outcome. We must make a distinction between making the rules and playing by those rules. Rule making involves collective decisions, or politics. Playing by the rules involves individual decisions, or market behavior. Unfortunately the distinction is rarely observed. People seem largely to vote their pocketbooks and they lobby for legislation that serves their personal interest. What is worse, elected representatives also frequently put their personal interests ahead of the common interest. Instead of standing for certain intrinsic values, political leaders want to be elected at all costs - and under the prevailing ideology of market fundamentalism, or untrammeled individualism, this is regarded as a natural, rational, and even perhaps desirable way for politicians to behave. This attitude toward politics undermines the postulate on which the principle of representative democracy was built. The contradiction between politicians` personal and public interests was, of course, always present, but it has been greatly aggravated by prevailing attitudes that put success as measured by money ahead of intrinsic values such as honesty. Thus the ascendancy of the profit motive and the decline in the effectiveness of the collective decision-making process have reinforced each other in a reflexive fashion. The promotion of self-interest to a moral principle has corrupted politics and the failure of politics has become the strongest argument in favor of giving markets an ever freer reign. The functions that cannot and should not be governed purely by market forces include many of the most important things in human life, ranging from moral values to family relationships to aesthetic and intellectual achievements. Yet market fundamentalism is constantly attempting to extend its sway into these regions, in a form of ideological imperialism. According to market fundamentalism, all social activities and human interactions should be looked at as transactional, contract-based relationships and valued in terms of a single common denominator, money.

Activities should be regulated, as far as possible, by nothing more intrusive than the invisible hand of profit-maximizing competition. The incursions of market ideology into fields far outside business and economics are having destructive and demoralizing social effects. But market fundamentalism has become so powerful that any political forces that dare to resist it are branded as sentimental, illogical, and naive.

Yet the truth is that market fundamentalism is itself naive and illogical. Even if we put aside the bigger moral and ethical questions and concentrate solely on the economic arena, the ideology of market fundamentalism is profoundly and irredeemably flawed. To put the matter simply, market forces, if they are given complete authority even in the purely economic and financial arenas, produce chaos and could ultimately lead to the downfall of the global capitalist system. This is the most important practical implication of my argument in this book.

There is a widespread presumption that democracy and capitalism go hand in hand. In fact the relationship is much more complicated. Capitalism needs democracy as a counterweight because the capitalist system by itself shows no tendency toward equilibrium. The owners of capital seek to maximize their profits. Left to their own devices, they would continue to accumulate capital until the situation became unbalanced. Marx and Engels gave a very good analysis of the capitalist system 150 years ago, better in some ways, I must say, than the equilibrium theory of classical economics. The remedy they prescribed - communism - was worse than the disease. But the main reason why their dire predictions did not come true was because of countervailing political interventions in democratic countries.

Unfortunately we are once again in danger of drawing the wrong conclusions from the lessons of history. This time the danger comes not from communism but from market fundamentalism. Communism abolished the market mechanism and imposed collective control over all economic activities. Market fundamentalism seeks to abolish collective decision making and to impose the supremacy of market values over all political and social values. Both extremes are wrong. What we need is a correct balance between politics and markets, between rule making and playing by the rules.

But even if we recognized this need, how could we achieve it? The world has entered a period of profound imbalance in which no individual state can resist the power of global financial markets and there are practically no institutions for rule making on an international scale. Collective decision-making mechanisms for the global economy simply do not exist. These conditions are widely acclaimed as the triumph of market discipline, but if financial markets are
inherently unstable, imposing market discipline means imposing instability - and how much instability can society tolerate?

Yet the situation is far from hopeless. We must learn to distinguish between individual decision making as expressed in market behavior and collective decision making as expressed in social behavior in general and politics in particular. In both cases, we are guided by self-interest; but in collective decision making we must put the common interest ahead of our individual self-interest even if others fail to do so. That is the only way the common interest can prevail.

Today the global capitalist system still stands near the height of its powers. It is certainly endangered by the present global crisis, but its ideological supremacy knows no bounds. The Asian crisis has swept away the autocratic regimes that combined personal profits with Confucian ethics and replaced them with more democratic, reform-minded governments. But the crisis has also undermined the ability of the international financial authorities to prevent and
resolve financial crises. How long before the crisis starts sweeping away reform-minded governments? I am afraid that the political developments triggered by the financial crisis may eventually sweep away the global capitalist system itself. It has happened before. I want to make it clear that I do not want to abolish capitalism. In spite of its shortcomings, it is better than the alternatives. Instead, I want to prevent the global capitalist system from destroying
itself. For this purpose, we need the concept of open society more than ever.

The global capitalist system is a distorted form of open society. Open society is based on the recognition that our understanding is imperfect and our actions have unintended consequences. All our institutional arrangements are liable to be flawed and just because we find them wanting we should not abandon them.

Rather we should create institutions with error-correcting mechanisms built in. These mechanisms include both markets and democracy. But neither will work unless we are aware of our fallibility and willing to recognize our mistakes.

At present there is a terrific imbalance between individual decision making as expressed in markets and collective decision making as expressed in politics. We have a global economy without a global society. The situation is untenable. But how can it be corrected?

This book is quite specific with regard to the deficiencies of financial markets. With regard to the moral and spiritual fields where market fundamentalism is squeezing its way into the nonmarket sector, my views are, of necessity, much more tentative.

To stabilize and regulate a truly global economy, we need some global system of political decision-making. In short, we need a global society to support our global economy. A global society does not mean a global state. To abolish the existence of states is neither feasible nor desirable; but insofar as there are collective interests that transcend state boundaries, the sovereignty of states must be subordinated to international law and international institutions.

Interestingly, the greatest opposition to this idea is coming from the United States, which, as the sole remaining superpower, is unwilling to subordinate itself to any international authority. The United States faces a crisis of identity: Does it want to be a solitary superpower or the leader of the free world? The two roles could be blurred as long as the free world was confronting an ``evil empire,`` but the choice now presents itself in much starker terms. Unfortunately we have not even started to consider it.

The popular inclination in the United States is to go it alone, but that would deprive the world of the leadership it so badly needs. Isolationism could be justified only if the market fundamentalists were right and the global economy could sustain itself without a global society. The alternative is for the United States to forge an alliance with like-minded nations to establish the laws and institutions that are necessary to the preservation of peace, freedom, prosperity, and stability. What these laws and institutions are cannot be decided once and for all; what we need is to set in motion a cooperative, iterative process that defines the open society ideal - a process in which we openly admit the imperfections of the global capitalist system and try to learn from our mistakes.

It cannot happen without the United States. But conversely, there has never been a time when a strong lead from the United States and other like-minded countries could achieve such powerful and benign results. With the right sense of leadership and with clarity of purpose, the United States and its allies could begin to create a global open society that could help to stabilize the global economic system and to extend and uphold universal human values. The opportunity is waiting to be grasped.

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