1995, Oct,3
Shumpei Kumon
1. Post-Cold-War Prospects for New Economic Development
In this paper I will present the hypothesis that in the post-cold-war setting, the world and especially the Asia-Pacific region have a chance to enter a new phase of inflation-free economic development supported by mutually reinforcing relations between front-runners and latecomers of the industrialization.
China's recent rapid economic growth led by its coastal regions has been truly breathtaking. Admittedly it is not yet clear how successful China will be in maintaining its unity as a political entity, and nobody knows what form the Chinese Communist Party's control will take in the years to come or how this control will influence economic growth. We must nonetheless acknowledge that the country has begun a powerful takeoff on a flight of industrialization. It is now preparing to join the other airborne East Asian economies, which are arrayed in a formation with Japan out in front, the four Asian "dragons" behind it, and the members of the Association of Southeast Asian Nations further back. In the light of the current confusion in Russia and other parts of the former communist bloc, China's takeoff perhaps cannot be explained only by its introduction of market principles. Many observers have been asserting that common cultural factors like a shared Confucian tradition and a degree of homogeneity within the "Chinese economic sphere" have given a boost to economic development across the broader region. It may well be that some cultural characteristics happen to have a good fit with a growth process made possible under certain environmental conditions.
In any event, the latecomers of East Asia are bound to be augmenting their ability to produce large volumes of high-quality, low-priced products incorporating reasonably sophisticated technologies--if not the most advanced high-technologies--as we move into the twenty-first century. Such a trend is currently in progress, and it is being accelerated by the shift into them of production facilities that had been based in countries like the United States and Japan. And with its gigantic and still-expanding population, East Asia will not just be selling products; it is also likely to be an important supply source for high-quality and inexpensive labor for some time to come. Workers will be moving temporarily or permanently from less-advanced to more-advanced countries to shoulder jobs in various areas, especially in the service sector.
How long will it be possible for these latecomers to keep their economies aloft? This will depend partly on how long other countries, particularly the leaders in the industrial flight, can continue to buy their goods and services. The possibility to rely on the returns earned from investment in the latecomers apart, the industrially advanced countries will also have to provide the latecomers with a steady supply of certain goods and services. Another condition is the capability of the latecomers to maintain the competitiveness of their goods and services in the world market even as they themselves undergo industrialization. That is to say, even though the growth process will tend to push up the real domestic prices of the factors of production such as labor, they will have to keep the prices of their products to a relatively low level.
As I see it, the conditions necessary for a long-term flight are now falling into place quite widely. The reason for this is the "information revolution," which began in the second half of the 1970s with its epicenter in the United States and which has been gaining momentum in the 1990s. This revolution is enabling the industrial front-runners to bring down the prices of the high-tech goods and services--notably the telecommunications systems--they supply to the world. By making effective use of high-tech imports, the latecomers should be able to curb increases in the costs of what they themselves produce and export. A virtuous circle of inflation-free growth can thus be engendered.
U.S. Vice-President Al Gore has observed that primitive telecommunications systems cause poor economic development, not that a lack of economic development causes poor telecommunications. This was the message he delivered in a March 21 address in Buenos Aires to a world development conference of the International Telecommunications Union, and I myself, seeing it as an apt expression of my own viewpoint, would like to label it the " Gore's First Doctrine." If the latecomers take this doctrine to heart and embark on the construction of sophisticated telecommunications networks, most parts of which they will have to import, the front-runners will be assured of sustained and possibly expanded exports for considerable time to come.
2. The Significance of the Information Revolution
The rapid industrialization now underway in Asia is not a new historical phenomenon, but the information upheaval that the United States has been spearheading is entirely without precedent. Actually it is only recently that people have come to perceive the ongoing technological advances as amounting to a full-fledged revolution. Not until last year did the term information revolution gain use in public documents issued in Washington, and not until June this year did Business Week put together an "information revolution" feature issue. In Japan, references to a "revolution" are not that common even today despite that fact that talk of johoka ("informatization") and joho shakai ("the information society") began to be heard back in the 1960s, before most of the world was showing much interest in the concerned technologies and processes of social change.
I would argue that the information revolution has two aspects: one being the "third industrial revolution," and the other the "third social revolution" in the evolutionary process of the modern civilization, a revolution comparable in scale and depth to the industrial revolution itself.
Let us first consider the industrial-revolution aspect. The first industrial revolution that took place in the last quarter of the eighteenth century was powered by innovations based on the use of iron and coal (steam engine). This revolution ushered in mass production of physical goods in factories equipped with machines for producers. The second industrial revolution began late in the nineteenth century and was powered by innovations that created new materials like plastics and utilized new energy--oil and electricity--in the internal combustion engine and the electric motor. This gave us such consumer durables as cars and electric household appliances, whose use facilitated the supply of services within the home.
Now late in the twentieth century the third industrial revolution has begun, and it is being powered by innovations that make use of computers linked in networks. As the American commentator George Gilder has put it, we are entering an age when anybody will be able to make abundant use of almost free computing power and telecommunications bandwidth and spectrum, which until now have been regarded as being scarce and expensive. More than that, work stations and personal computers that individually have nearly the power of yesterday's super computer--and that will have even more power not long from now--are being mutually connected in networks that allow a quantum leap in performance. They are enabling epochal improvements in data-processing and communication efficiency in the home and the office as well as the plant. Until today productivity has been hard to elevate in non routine office work and in labor-intensive service industries, but big productivity gains have come within reach.
In the world of computer hardware and software, it is taken for granted that each year will see meaningful decreases in prices and increases in performance. Now we can expect these same trends to extend to almost all goods and services. Even the costs of public administration, welfare services, and health care should come down. What this may mean in the front-running industrial nations, many of which face a rising share of senior citizens in their populations, is that they can look forward not just to inflation-free growth but also to relief from fiscal belt-tightening. Indeed, there may be a steady decline in the burden of tax payments and social security contributions. This prospect will become yet more likely if their trade with the latecomers remains brisk.
Turning now to the other aspect of the information revolution, I would note that warnings of a possible social fissure and pattern of confrontation between "information haves and have-nots" are being issued in the United States. Given that industrial development in the past worked to widen the gap between the bourgeois and proletarian classes at least to a certain extent and that calls for proletarian revolutions resulted in some parts of the industrialized world, we cannot rule out the possibility that informatization will be accompanied by analogous developments. Hence I can understand why the Americans, who have been leading the way down the information highway and thus far have managed to proceed relatively peacefully, should be sufficiently concerned about this possibility that they are implementing policies to avert it.
A more alarming scenario, however, would be an information-society version of the French Revolution, when the "citizen"--the rising power in France's modern society--squared off against the ancient regime, or the military and the aristocratic bureaucracy, and a bloody uprising ensued. The rising power in information society is the "netizen," those who inhabit in the net, and what the netizen wants is deregulation, political reform, and "information rights" (including protection of privacy and the freedom to communicate and copy). The worst case would then come about if the modern Old Guard, led by corporate executives and public officials, placed roadblocks on the informatization infuriating enough to spark a violent revolt.
In the American vice-president's Buenos Aires address, he gave voice to a conviction that might be called the " Gore's Second Doctrine." I refer to his assertion that the new telecommunications networks are in themselves a metaphor for democracy--not representative democracy, moreover, but direct democracy--and that they have the potential to accelerate its maturation.
Be this as it may, the unfolding of the information revolution is not merely driving forward the third industrial revolution but also enabling the advent of the new social class of netizens. Linked in communication and collaboration networks supported by computers, the netizens are making use of "group media" to engage in free communications and undertake collaborative activities spontaneously, and they are doing so as a collective --or perhaps I should say as a "connective." Each netizen is a whole man (or whole woman) who, while logged on to a network, can produce and consume, work and play, send and receive information, and participate in public activities. The cyberspace in which these activities take place lacks the kind of distinct boundaries that mark off the workplace and the home of industrial society. Likewise the computer that supports the netizen is a "whole computer," one enabling the user to play games, conduct business, do volunteer work, and engage in other activities.
The class of citizens gave birth to the business entrepreneur--a person dedicated to accumulating the power to make transactions and thereby gain wealth--and to the enterprise, the business organization supporting this individual. In the same way, the class of netizens will undoubtedly give birth to the "intelpreneur"--a person dedicated to accumulating the "wisdom," that is, the power to persuade others--and to the "intelprise," the organization supporting this individual. Whereas in the early days of industrialization there developed various forms of collaboration between the state and the enterprise, the early days of informatization is likely to see the evolution of various forms of collaboration between enterprises and intelprises, though I will not explore this point here.
It would seem that 1992 was the year of significant progress toward a proper understanding of the information revolution in the United States. In that year the Americans forged a broad consensus on a number of points, including (1) that digitalization of signals is enabling the convergence of computing with communications, (2) that therefore the building of social infrastructure, namely, the "national information infrastructure (NII)," for integrated processing of broadcasting, telecommunications, and computing, is an urgent priority for the society, and (3) that with the support of the NII, a network-oriented multimedia industry will be the break-through industry of the twenty-first century.
And in the second half of that year the Internet, a "network of networks" of computers, initially designed to link computers used for research and higher education, went through a transformation and began to grow explosively, reportedly by more than 10% each month. One part of this transformation was the opening of the "Net" to commercially provided network access services, and another was the start of an expansion in the kinds of net users, who soon came to include teachers and students in elementary and secondary education,libraries, business firms and other organizations, and individual citizens.
The next year saw the start of a "new gold rush," a vigorous and still ongoing debate and fierce competition by the private sector over the specific architecture and use of the NII. Some experiments are aimed at making cable television networks interactive and "full service"; others seek to introduce broad-band communication technology (for video transmissions and other purposes) to the switched networks of telephone companies; and yet others seek to upgrade the "connectionless" packet-switching architecture of the internet to make it faster and better suited to multimedia or multiprotocols. At the same time, a number of schemes have been unveiled for using LEO (low-earth-orbits) satellites to construct global wireless networks that enable users with mobile phones to converse or send and receive data at low cost. In the process, it gradually became clear that the probable winner in the NII race can only be a network of networks for computers, with the internet as its prototype.
Initially the main applications of the multimedia industry were expected to be in the field of entertainment, where they would evolve as extensions of such twentieth-century mass media as the television, and interest also focused on possibilities in education, medical care, and welfare. Attention then began shifting to applications aimed at enhancing productivity in the practical affairs of business and government, and for the time being at least, this is emerging as the foremost expectation of the multimedia. If the information revolution is indeed a new industrial revolution above all, quite naturally it will be put to use as a direct tool for reengineering the work of business and government. And it will no doubt be used next as an indirect tool for raising productivity, one that achieves this end by upgrading the skills and general qualities of workers through better education, health care, and social welfare . From this perspective, the entertainment applications are an unimportant category. Or perhaps I should say they form a field in which good technologies and services will succeed eventually, regardless of whether or not they receive outside help.
From the viewpoint that the information revolution is a social revolution comparable to the industrial revolution, clearly it will be desirable to have information infrastructure of the internet type, which gives each netizen the ability to acquire and transmit information easily any time, anywhere at an affordable price. Also, since the boundary between entertainment and business or voluntary activities tend to be blurred in the information society, it is obviously not appropriate to view the future potential of the multimedia industry only in the extension of the needs the "couch potatoes" have today.
3. The World Social (Information) Order as the Third Axis of the Post-Cold-War World Order
Having gotten off to a good start in the United States, the information revolution is now sending ripples around the world.
Vice-President Gore at the end of 1993 enunciated five principles for NII construction based on all that had been learned until then, and in his Buenos Aires address the following March, he indicated that the same principles could be applied to the creation of "global information infrastructure (GII)." He went on as follows:
When I began proposing the NII in the U.S., I said that my hope is that the United States, born in revolution, can lead the way to this new, peaceful revolution. However, I believe we will reach our goal faster and with greater certainty if we walk down that path together. As Antonio Machado, Spanish poet, once said, "Pathwalker, there is no path, we create the path as we walk."
Let us build a global community in which the people of neighboring countries view each other not as potential enemies, but as potential partners, as members of the same family in the vast, increasingly interconnected human family.
Let us seize this moment. Let us work to link the people of the world. Let us create this new path as we walk it together.
Gore's call is one that I fully endorse. Still, I am not entirely persuaded that his five principles will be adequate for creating a path. As I understand them, they can be restated in three basic points. First, on the industrial-revolution side of the information revolution, the construction of the NII should in principle be left mainly to competition in the private sector. Second, on the social-revolution side of the information revolution, the operation of the NII should in principle guarantee netizens "open access" (free access to the sources of information and to the means to disseminate information) and to provide universal service (anyone can use NII any time anywhere for an affordable price) so that class-division can be avoided. The third point applies to the both sides of the information revolution and is the principle to determine how government regulation should be during the information-revolution age. Stated generally, regulation must be neither so strong as to suffocate private enterprise nor so weak as to permit monopolies. But because determining the best forms and degrees of regulation is inherently difficult at a time of information revolution when technology is advancing at a furious pace, the regulatory framework must also be provided with flexibility sufficient to accommodate the advent of unanticipated goods and services (and, it seems reasonable to add, the emergence of new social organizations and activities).
If this reading of the five principles is correct, how universally applicable are they and Gore's two doctrines to global society in its entirety? At least in the industrial world's front-runners, their applicability seems reasonably adequate. Quite a few Japanese have been saying that the five principles ought to be applied in Japan without modification. But as made manifest by the ponderous way deregulation has recently been discussed and implemented here, agreement in general does not mean agreement on all the particulars. When the reform process gets down to that level, attempts to impose limitations and make exceptions will be expected almost inevitably from the bureaucracy and the business world.
In nations now gearing up for industrialization, even disagreement in general is to be expected. For instance, it is hard to imagine that China's present rulers will accept Gore's first doctrine endorsing the use of telecommunications networks to foster democracy, and they will not be easily persuaded that either open access or universal service is a necessary principle. And when we come to those countries with forms of civilization and contents of culture that differ radically from modern industrial civilization, as in some Islamic nations, we may find that resistance to the Gore's doctrines and principles is fiercer yet. Evidence that concerns of this sort are not groundless can be found in the attempts now being made by some countries to ban the sale of dish antennas for satellite television and to censor the programs broadcast.
For that matter, even in the United States a debate has been raging over the proposal to limit encryption methods to the "Clipper Chip," a device that allows the government to decipher encrypted telephone conversations made by private parties. Many Americans are also up in arms over the issue of awarding the exceedingly broad "Compton's patent," which has a bearing on much of the multimedia industry. Disputes like these arise from conflicts among the three kinds of social rights: sovereignty of the state, private property rights, and the information rights the new class of netizens is demanding. For information technologies to advance smoothly, prudent adjustment of the social rights involved will be indispensable.
With such circumstances in mind, I would underline the following points.
First, the social order consists not of only two but of three axes. One is political order, including that in the realms of military power and security; another is economic order; and the third is social (or information) order. This third axis of the social order serves as a foundation for the first two; in fact, we may say that it sets the stage for social integration. For the members of a society to engage in communication buttressed by mutual trust and, on that basis, construct a system of political and economic acts and institutions, they must first be in broad agreement on the ideals of the socio-cultural order. They must, in other words, share a system of social meanings and values.
When modern civilization began to flower in Europe, a loose but common foundation of a shared socio-cultural order was already present. As a result, the Europeans had no need to devote exhausting efforts to the construction and maintenance of the third order-axis of modern society. In fact, conscious recognition of the very existence of this third axis did not become essential until, on the one hand, a number of Asian countries began to take off independently on industrial flights and, on the other, informatization began advancing, leading to the rise of a social groups sharing new systems of social meanings and values.
The second point is that within modern society, especially the twentieth-century industrial society and, above all, the post-cold-war society of the United States, opinions on the desired world political and economic order seem to be converging upon the thesis expressed by scholars like Francis Fukuyama. In their opinion the best global political order is one that uses democracy as the tool to achieve peace while placing constraints on dictatorships, and the best global economic order is one that uses economic liberalism as the tool to realize prosperity while placing constraints on monopolies. To put this concisely, the international community has in the twentieth century pinned its hopes on realizing peace and prosperity by means of democracy and the free market economy. Such is the order that has been seen as ideal.
Today, however, quite a few peoples and regions possessing cultures that differ from Western culture have become members of modern civilization. Particularly in the Asia-Pacific region, which is shaping up as the new growth center of the twenty-first century, we must now give careful thought to the following three issues.
My own thinking is that in constructing the social (information) order to supplement the political and economic order that seeks peace and prosperity rooted in freedom and democracy, we will most probably have to strive for mutual comprehension and "coemulation" with the aid of free communications and spontaneous collaborations. In a nutshell, we need an order that facilitates the use of collaboration to achieve comprehension. The kind of integration currently most needed in the Asia-Pacific region is not, of course, political integration, nor is it unification of economic systems and policies, at least for the time being. Is it not instead a loose and easy integration based on a social (information) order designed to facilitate free communications and spontaneous collaborations? When we adopt this perspective to reexamine global situations in the aftermath of the cold war, moreover, will we not find that the Asia-Pacific region is not alone in this respect, that conscious endeavors to construct a social (information) order are required in almost all of the world's major regions?
In this regard, what might be the significance of the ongoing information revolution--and especially the construction of global information infrastructure to give the revolution global dimensions--to the formation of a world social (information) order? If, as I have suggested for the Asia-Pacific region, the content of the world order should be aimed at facilitating collaborations to achieve comprehension, the information revolution and the GII should serve as most potent supporting tools. Depending on what kind of world or regional order is regarded as most desirable, however, the information revolution and the GII to be built according to Gore's doctrines and principles may be perceived as fearsome threats.
4. The New World Order and Japan
Turning finally to Japan's role in the new world order I have been discussing, I would raise two sets of questions.
To preface the first, I would observe that Japan has yet to adequately open its domestic markets and organizations to the goods, services, and human resources Asia's latecomers have to offer. Moreover, it is lagging far behind in the information revolution. Might not the price for this lag be that at some future point Japan will no longer have anything to export even if by then it is sufficiently open? In other words, might not the shifting of manufacturing facilities offshore, especially to other Asian countries, in response to the yen's towering climb proceed to the point where Japan's industrial base has been hollowed out? And might not banking and securities, which have been operating in isolation behind such a vast array of protective barriers that in recent years the outside world seems almost to have given up on them, go quietly into decline? And might not similar trends take hold in such overly protected fields as transportation, communications, construction, education, and even medicine? If this is the way the future unfolds, surely the Japanese economy will never have a chance of entering the next virtuous circle of growth in the Asia-Pacific region.
Second, though the Japanese see their role as one of bridging East to West, is there not a danger that the ultimate result of their acts will be that neither Easterners nor Westerners want anything to do with them? In the arena of policy debate over the growth process in the Asia-Pacific region, the Japanese are hoping that they can help development proceed smoothly by serving as moderators between the Asian socio-cultural camp and the American (or Western) camp. But is it really possible for them to serve as moderators? And even if it is, do people in other countries really want them to undertake this role? When the cold war ended, for a while there was some interest in the possibility that the Japanese style of development might serve as a model for the former Soviet Union and China, because at that time Japan, together with West Germany, did seem, if only briefly, to be the real winner of the cold war. But whatever the relevance of the Japanese catch-up model may have been to conventional industrial development, or what I call the "twentieth-century system of industrialization," how useful is the Japanese experience today, when informatization must be factored in and the "twenty-first-century system of industrialization" must be constructed? And if informatization is to unfold itself not just as an industrial revolution but also as a social revolution, what might Japan be able to offer other countries for the sake of coemulation?
Unfortunately, I myself cannot confidently provide answers one way or the other, and I must bring this essay to an end just with the raising of questions. Still, the path Japan will be walking has not been predetermined by fate. Undoubtedly much will depend on the efforts we ourselves make and on our collaboration with people around the world.
Shumpei Kumon
Center for Global Communications
International University of Japan