unctad.org | High-level Policy Dialogue of the Economic and Social Council on Information Technology
Statement by Mr. Rubens Ricupero, Secretary-General of UNCTAD
High-level Policy Dialogue of the Economic and Social Council on Information Technology
New York
04 Jul 2000

Is the present Information Revolution really going to reverse the trend towards more inequality within and between countries, or will it prove to be a major factor contributing to that trend? Will it expand or contract our already limited control over financial volatility, such economic bubbles as trade in high-tech shares, and the precariousness of jobs and even lives? To these questions we can only meekly reply that we just don´t know. It can go right or wrong depending on the way we steer the process of change.

If we turn to history for an answer, it won´t help us very much. Those who, with somewhat exaggerated exuberance, like to compare what we have been witnessing in our days with the Industrial Revolution usually forget one disturbing aspect of that remarkable phenomenon: not only was it, along with the Neolithic Agricultural Revolution, one of the most important breakthroughs in human productivity ever. It also literally cleaved the gap between the Western countries and the rest of the world, a gap that has only continued to widen since then. In some powerful and perhaps sinister way, it invented underdevelopment at the same time as it was creating development.

The late economic historian Paul Bairoch has shown that in the early eighteenth century, the differential ratio in the production level, if any, between Western Europe and the major countries of what was later to be called the Third World, including China, was in the range of 1.2 or 1.3 to 1 - that is, between 20 and 30 per cent. The same was true of differences in technology, productivity, well-being. Now the ratio has risen exponentially by hundreds of percentage points.

The same pattern is found when we look at the first Information Revolution, Gutenberg´s invention of the printing press. Some of his contemporaries drew the right conclusion from that invention : they promoted literacy and put books, starting with the Bible, into people´s hands. Others did not. In my own country, Brazil, it was not until the Portuguese king fled there from Napoleon´s army in the early nineteenth century that the first printing presses were allowed to operate.

In both cases, it was not the mechanical innovations that posed the difficulty - movable type in the first instance, to which today we might add the computer, the telecommunications satellite, the cell phone - but the change of attitude necessitated by the advent of these technologies; changes in the traditional ways of doing things and of doing business; and the adoption of appropriate policies at the international and domestic level that would allow full advantage to be taken of technological progress.

These changes are by no means an automatic consequence or foregone conclusion of the great technological turning points in history. Sooner or later, they spread all over the world, or at least most of the world. But the differences in the pace of that propagation will determine who lags behind and becomes underdeveloped or marginalized, as happened after the Industrial Revolution.

For an organization like UNCTAD that looks at events from the perspective of development and assesses the necessity not only of measures aimed at disciplining the debtors but also of policies addressed to the creditors, the basic question is whether the global environment is in a sufficiently balanced and healthy state to support a pattern of IT-led growth that brings significant benefits to poorer countries. The fact that the introduction of these technologies has coincided with slower or faster growth is food for thought. There clearly are some fundamental truths about technological change that should be faced.

Technological knowledge is not a universal panacea, nor is it autonomous in relation to the other conditions prevailing in a given society. It is difficult to access and difficult to adapt; markets for it are often missing or imperfect; and it depends on a broad array of "social capabilities" that are not always present.

Neither is it independent of the macroeconomic context. New knowledge is always embodied in new machines and human skills. Its diffusion and absorption require new investment, often on a large scale and almost certainly including a sizeable public component. Entrepreneurial effort alone will not bring wider socio-economic gains.

The United States has spearheaded the use of new technologies and reaped the rewards in terms of faster productivity growth and job creation. Already the American economic landscape has been transformed by a technological revolution that is exciting other countries, including the world´s poorest. One way for European and Japanese firms to catch up has been to acquire companies in the US or to locate there. This has triggered a surge of cross-border mergers and acquisitions in new technology sectors. But most firms from developing countries are obviously excluded from playing the mergers and acquisitions game, except as losers.

There are other worrying developments arising from the technological disruption. The shortening product cycle for many IT goods increases R&D expenditures, adding to the competitive pressures on firms in developing countries. New knowledge-centred activities tend to use fewer natural resources, thus exacerbating an already unfavourable trend in commodity prices. Highly paid jobs in IT are attracting some of the brightest minds from developing countries in a sort of "hollowing out" of their best resources. Another serious concern arises from the tendency to overprotect intellectual property rights. As Jeffrey Sachs so forcefully put it in a recent article: "rich countries should exercise restraint in the use of property rights. Rich countries are unilaterally asserting rights of private ownership over human and plant genetic sequences, or basic computer codes, or chemical compounds long in use in herbal medicines. These approaches are of dubious legitimacy and will worsen global inequalities. A better balance needs to be struck between incentives for innovation on one hand, and the interests of the poorest, on the other."

Even in the industrial countries, the entrepreneur is competing with the rentier for the soul of the new technologies, feeding a worldwide financial bubble in technology stocks, whose prices have been rising faster than productivity. Fear of a stock market crash beginning in this sector remains a concern of policy makers everywhere, and the impact of a hard landing would be most damaging to developing countries.

These concrete problems, including the concern that technology is wresting from us our control over our own lives, are at the very heart of the widespread fears aroused by globalization. But they have to be balanced against globalization´s no less brilliant and encouraging promises. As a matter of fact, for developing countries, the emergence of a global knowledge-based economy should in principle be good news. As the ratio between power and price of information equipment continues to rise, and as the cost of transferring information across borders keeps dropping, there are unprecedented opportunities to catch up. At the same time, the portability, flexibility and affordability of such technologies allow smaller players to become competitors worldwide.

Responding effectively to these challenges will, as with past technological revolutions, require new attitudes and mindsets. Strengthening the resource base through education, R&D and training will be essential, and favourable treatment will prove indispensable for both users and potential producers of new technologies in developing countries. In its absence, those countries will only remain workshops where incomes are determined by value added from a cheap labour force in the assembly of high-tech products, thereby facing an ever-widening technological gap.

The truth of the matter is that there are no quick technological fixes to the development challenge, nor can IT development be pursued in isolation from the "old" issues. Investment remains a key to growth in the digital age, just as it was in the heyday of the railroad. Because investing in phone lines, satellites or computers involves the new technology through the import of capital goods and licensing arrangements, technological catching-up requires increased foreign exchange earnings to pay for the needed imports.

UNCTAD has for some time now been calling on policy makers in the industrial countries to take seriously the global imbalances and asymmetries which are damaging the economic prospects of developing countries. For all their potential, new technologies are not a fast track to economic prosperity for all but are an integral part of a global structure which remains heavily biased against the poor and underprivileged. Regional cooperation can be one way for developing countries to challenge those biases by establishing the larger markets needed to support their technological efforts. Such cooperation might also be most appropriate for establishing new financial arrangements that can match those available to high-tech companies in the developed countries.

But in the end it is the advanced countries that need to rethink their approach to development in the digital age, facilitating access to technology and supporting it by providing greater market access and external resources to developing countries, including more effective development assistance and debt relief.

Whatever the advanced countries do or do not do, however, the answer to the problems of extreme inequality and poverty will not come solely from technology and the economy. Solving those problems will rather depend on such values as equity, solidarity and compassion, which belong to quite another domain. Technology and the economy should be treated as what they are -- non-autonomous and non-absolute instruments of great value - but they should also be resolutely subordinated to a far nobler human pursuit: the creation of a more just, generous and balanced society.



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