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Technology as Agent of Development

Technology as Agent of Development The New Economy in Development: ICT Challenges and Opportunities edited by Anthony P D


Technology asAgent of Development

The New Economy in Development: ICT Challenges and Opportunities

edited by Anthony P D’Costa; Palgrave McMillan with United Nations University (2006); pp 264, £ 50.00 (hardback).


his book is a useful addition to the growing literature that explores what the rise of the “new economy” means for low-income countries. Like many others in this genre, it draws upon in good measure from a set of conference papers – a 2002 World Institute for Development Research conference at Helsinki. The book traverses a vast canvas in terms of both the regions covered and issues addressed. The papers locate themselves between two idealised views on the new economy; one that perceives a mere intensification of inequities and exploitative relations of earlier regimes of accumulation, and a celebratory view of a “gift” economy characterised by costless exchange and providing creative and fulfilling employment. Conceding the possibilities that new technologies open up for socio-economic development in lowincome regions, the papers reiterate the need to embed technology in appropriate institutions to gain from such openings.

The idea of “catching-up” informs at least half the papers in the book. Shorter production cycles erect high barriers for entry into manufacturing requiring high fixed investments. In the case of sectors like software, however, it opens up windows of opportunity for low-income regions, as they are yet to be “locked-in” to earlier sets of technologies. Using theoretical perspectives and the experience of several low-income regions including the Arab world, the transition economies in Europe, Argentina and South Africa, the papers converge on the need for appropriate state intervention to take advantage of the new technologies. Also, while there is a concern about the global regimes governing these technologies and the possible disequalising implications of such a regime, most papers stress the greater importance of improving domestic, institutional and infrastructural environment. The nature of intervention or rather the emphasis on specific aspects, however, differs.

ICT and Productivity

A set of papers conceptually and empirically explores the ability of information and communications technologies (ICTs) to improve productivity growth. Set in the context of anticipated productivity growth and weak empirical evidence for such growth in several instances, the papers examine the relevance of these debates for low-income countries. Productivity measurement issues plague not only sectors that utilise ICTs but also importantly the expanding services sector. The growing share of the services sector in both high- and low-income countries warrants the use of more appropriate techniques to capture gains from and in this sector. The reasons, Andersen and Corley argue, have to do more with the way productive economic activity has been conceptualised in the first place. Seldom does one see such use of sociological and institutionalist perspectives in a discussion on productivity measurement. The paper does not offer a way out of this complication but offers a richly textured discussion on the evolutionary trajectory of this category and how it constrains an appropriate understanding of this facet. The authors partly trace it to the conceptual baggage of the classical political economy that saw services as an unproductive and “immaterial” activity. Categories used in measurement are derived from such conceptions that render the extension of such techniques into the domain of the service economy highly problematic. By offering a range of classifications and definitions and the pitfalls of each, the paper underscores the conceptual inadequacies in understanding productivity. Work in this direction, the paper argues, has a long way to go to match the advances in techniques of measurement. The diffusion of ICTs further compounds this problem. Use of ICTs alters the social and spatial division of labour in the manufacturing and services sector and also increases the role of “human capital” in its efficient utilisation and production. Some of the issues that the paper raises are particularly relevant to the Indian case. The neglect of excess working hours in the measurement of productivity in software services is a case in point. So is the case of the quality of the workforce that is never mapped on to productivity gains reflected in revenue per employee.

Piatkowski looks at the transition economies for a better understanding of this relationship. The paper distinguishes three distinct routes for productivity gains; use of ICTs in other goods and services, increase in total factor productivity (TFP) in the ICT sector itself and increases in overall TFP due to spillover effects. Conceding the productivity enhancing capabilities of ICTs, he attributes the lack of evidence to measurement tools and the time lag found in advanced capitalist countries. He finds the linkage strongest in the case of ICT investments. Further, he also points out that positive spillovers are likely to be higher in the case of ICT consumption rather than ICT production. While his suggestions for greater flexibility of labour markets sit very easily with neoliberal prescriptions for development, the call for a more active role of the public sector is less so. He suggests a strong public “push” factor with the public sector as a major user serving to augment information technology (IT) induced welfare gains. This suggestion has obvious implications for low-income countries like India that are able to penetrate the global market for software services but lag considerably in terms of IT diffusion across different sectors and user segments.

Interestingly, the optimistic view of the benefits of ICTs and productivity growth in the services sector does not find adequate support in Kenney’s paper. Kenney uses both theoretical and empirical material to explore the disjuncture between the

Economic and Political Weekly March 10, 2007 promise held out by the internet as a prime source of economic growth and the actual advantages on offer in low-income regions. With increasing recognition among mainstream economists of the role of technological adaptation in growth, the internet emerges as a prime candidate for such a growth-inducing role. But he argues that even as the evidence in advanced capitalist countries for such a role is rather weak, it is likely to be much weaker in low-income regions. Poor levels of infrastructure, low human capital and a weak institutional environment will further reduce the possibility of gaining from IT use in these regions. He points out that due to negative externalities like loss of employment for some transactions that are routed through the internet, social returns may be much lower than private returns. He therefore emphasises the more important role of efforts outside the IT sector in reducing inequities.

The only paper that empirically examines efficiency gains at the micro-level due to use of ICTs is by Bhavani. Taking the case of the auto component sector in India, she examines the role of three aspects of technological change; transformation, organisation and information. Based on data from a primary survey, she also seeks to explicitly incorporate each of the three aspects into the production function so as to discern the effects of specific technological interventions. Her analysis points to the greater role of numerical control machines in improving competitiveness as compared to traditional and communication improvements.

Country Experiences

Another important aspect of the rise of ICTs is the nature of global governance institutions that regulate networks of flows. The growing disembeddedness of service consumption from the point of its production implies that a sector that was once seen as non-tradeable and embedded in production can now be transmitted via global networks of ICTs and corresponding institutions. While traditionally, the nation state has been one of the key modes of governance of flows like commodity trade, in the case of the internet, there has been a greater role for private agents to shape and direct flows. The extent to which the flows under such a regime can benefit lowincome regions and the challenges that the new forms pose for existing institutional arrangements is the subject of Cogburn’s paper. Based on the South African experience, the author points to the various dimensions to be taken on board for a lowincome country seeking to direct the new regime towards its developmental goals.

In their search for answers to Argentina’s inability to make inroads into the global market for IT products and services, Chudnovsky and Lopez try to draw lessons from the successes of countries like Israel, Ireland and India in the software sector. Though quick to point out differences between these countries in terms of their market segments, they contrast the global market exposure of firms in all these countries with a relatively inward looking strategy in the case of Argentina. The inward orientation has meant a lack of awareness of quality standards and business culture in client countries. Also, small and medium enterprises are not linked to any research or financial institutions such as venture capital funding. Such weak institutional linkage coupled with a lack of appropriate macroeconomic environment has scuttled the possible expansion of the sector. It is interesting that the same macroeconomic processes like currency devaluation have created some proposed advantages like lowered labour costs but have increased the cost of infrastructure development rendering the growth of a more robust export sector problematic. Opening up or deregulation is unlikely to overcome the limitations of an inward oriented strategy. Strong state support to help firms explore new markets is more likely to succeed.

Nour fills in the need for some baseline data on the extent of IT diffusion in the Arab region. Pointing to the wide disparities between the Gulf countries and the rest of the Arab world in this respect, he reiterates the strong relationship between extent of IT use and economic growth and level of human capital. He also hints at the role of strong national level policy measures to ensure that the digital gap between the advanced and low-income regions does not increase.

Development Outcomes

A common theme that runs across some of the papers is a move to embed technology in social relations and not merely in physical capital. Through this, they highlight how social and other institutions play an equal if not more important role in deriving growth and productivity benefits. Such a conceptualisation goes against more technicist conceptions of internet usage among policy-makers whose concerns are more about diffusion and production than about such institutional inadequacies. Another important observation that the book makes is the synergetic effect of both production of ICT goods and their local consumption on development outcomes. India, for instance, has failed relatively in developing local consumption whereas it has established itself as a major player in the global market for software services. In fact, scholars even contend that this growth is only symptomatic of a process of “dependent development” that benefits advanced capitalist economies much more than the host country in the long run.

While the “catching-up” approach assumes a linear developmental trajectory, two papers in the book address alternate modes of use of ICTs in low-income regions that have less to do with “catching-up” than with deploying new technologies to alternate ends. Kaushik’s paper maps three efforts to use ICTs to deliver public services in rural India to draw some lessons for policymaking. All three are “successful” experiments that have been hailed as examples of ICTs’ ability to intervene in rural poverty directly. While he is critical of these initiatives especially with regard to their sustainability, he hardly lays stress on local institutions like caste and gender and how they may intervene to produce socially regressive outcomes. The fact that others have examined some of these and other similar experiments is never mentioned. Even his suggestion for an alternate model with a stronger role for civil society can hardly lay claims to novelty.

Saloma-Akpedomu’s paper is an extremely interesting exploration of production of identity and “locality” in the current regime of globalisation. Taking on the exponents of the “homogenisation due to globalisation” thesis, she points out how actors in different regions produce the global and local simultaneously through a creative negotiation with globalising impulses. She uses the case of the Pinoymail, a Philippino variant of the free mail Hotmail, to illustrate how the promoter of the venture uses notions of Philippino identity to promote the use of this free mail among the Philippinos. The category “imagined communities” used by Benedict Anderson to understand the rise of nationalism is deployed to map out how such identities can be used to build local markets for IT related services. A domain that is often held to potentially undermine traditional nationalist barriers is now home to

Economic and Political Weekly March 10, 2007

the use of traditional methods like use of vernacular modes to protect and expand markets. Here, she also points to the role of intermediaries who are familiar with frontier global technologies but simultaneously use their locations to produce a hybridised technology. Such moves highlight the ability of local actors to shape the process of globalisation in ways that are not anticipated by actors in core capitalist regions.

Like most edited volumes, the papers are of uneven quality. Though the book takes pains to cover a wide set of low-income countries, the issues addressed with regard to specific countries/regions are not similar. Possible insights from a comparative perspective are therefore not forthcoming. Also, since the papers have a range of positions on the impact of ICTs on low-income regions and the nature of intervention required, a comprehensive introduction may have given a more concrete direction to the book. Nevertheless, it is a well-produced book that substantially contributes to our understanding of these issues.



Economic and Political Weekly March 10, 2007

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