answer to this question is of crucial importance to economies in
transition. If investment in IT (information technology) actually
RETARDS growth - then it should be avoided, at least until a
functioning marketplace is there to counter its growth suppressing
effects.
The notion that IT retards growth is counter-intuitive. It would seem
that, at the least, computers allow us to do more of the same things
faster. Typing, order processing, inventory management, production
processes, number crunching are all managed more efficiently by
computers. Added efficiency should translate into enhanced
productivity. Put simply, the same number of people can do more,
faster, more cheaply with computers than they can without them. Yet
reality begs to differ.
Two elements are often neglected in considering the beneficial effects
of IT.
The first is that the concept of information technology comprises two
very distinct economic activities: an all-purpose machine (the PC) and
its enabling applications and a medium (the internet). Capital assets
as distinct from media assets are governed by different economic
principles, should be managed differently and be the subject of
different philosophical points of view.
Massive, double digit increases in productivity are feasible in the
manufacturing of computer hardware. The inevitable outcome is an
exponential explosion in computing and networking power. The dual rules
which govern IT - Moore's (a doubling of chip capacity and computing
prowess every 18 months) and Metcalf's (the exponential increase in a
network's processing ability as more computers connect to it) - also
dictate a breathtaking pace of increased productivity in the hardware
cum software aspect of IT. This has been duly detected by Robert Gordon
in his "Has the 'New Economy' rendered the productivity slowdown
obsolete?"
But for this increased productivity to trickle down to the rest of the
economy a few conditions have to be met.
The transition from old technologies to a new one (the computer renders
many a technology obsolete) must not involve too much "creative
destruction". The costs of getting rid of old hardware, software, of
altering management techniques or adopting new ones, of shedding
redundant manpower, of searching for new employees to replace the
unqualified or unqualifiable, of installing new hardware, software and
of training new people in all levels of the corporation are enormous.
They must never exceed the added benefits of the newly introduced
technology in the long run. Hence the crux of the debate. Is IT more
expensive to introduce, run and maintain than the technologies that it
so confidently aims to replace? Will new technologies be spun off the
core IT in a pace sufficient to compensate for the disappearance of old
ones? As the technology mature, will it overcome its childhood maladies
(lack of operational reliability, bad design, non-specificity,
immaturity of the first generation of computer users, absence of user
friendliness and so on)?
Moreover, is IT an evolution or a veritable revolution? Does it merely
allow us to do more of the same only in a different way - or does it
open up hitherto unheard of vistas for human imagination and
creativity? The signals are mixed. IT did NOT succeed to do to human
endeavour what electricity, the internal combustion engine or even the
telegraph have done. It is also not clear at all that IT is a UNIVERSAL
phenomenon suitable to all climes and mentalities. The penetration of
both IT and the medium it gave rise to (the internet) is not uniform
throughout the world even where the purchasing power is similar and
even among the corporate class. Countries post communism should take
all this into consideration. Their economies may be too obsolete and
hidebound, poor and badly managed to absorb yet another critical change
in the form of IT. The introduction of IT into an ill-prepared market
or corporation can be and often is counter-productive and
growth-retarding.
The Cycle of the Internet
Then, of course, there is the Internet.
The Internet runs on computers but it is related to them in the same
way that a TV show is related to a TV set. To bundle to two, as is
often done today, obscures the true picture and can often be very
misleading. For instance: it is close to impossible to measure
productivity in the services sector, let alone is something as wildly
informal and dynamic as the internet. It is clear by now that the
Internet is a medium and, as such, is subject to the evolutionary cycle
of its predecessors. Central and Eastern Europe has just entered this
cycle while the USA is the most advanced.
The Internet is simply the latest in a series of networks, which
revolutionized our lives. A century before the Internet, the telegraph
and the telephone have been similarly heralded as "global" and
transforming.
So, what should the CEE countries expect to happen to the Internet
globally and, later, within their own territories? The issue here
cannot be cast in terms of productivity. It is better to apply to it
the imagery of the business cycle.
As we said, every medium of communications goes through the same
evolutionary cycle:
It starts with Anarchy - or The Public Phase.
At this stage, the medium and the resources attached to it are very
cheap, accessible, under no regulatory constraints. The public sector
steps in: higher education institutions, religious institutions,
government, not for profit organizations, non-governmental
organizations (NGOs), trade unions, etc. Bedevilled by limited
financial resources, they regard the new medium as a cost effective way
of disseminating their messages.
The Internet was not exempt from this phase, which is at its death
throes. It started with a complete computer anarchy manifested in ad
hoc networks, local networks, networks of organizations (mainly
universities and organs of the government such as DARPA, a part of the
defence establishment, in the USA). Non-commercial entities jumped on
the bandwagon and started sewing these networks together (an activity
fully subsidized by government funds). The result was a
globe-encompassing network of academic institutions. The American
Pentagon established the network of all networks, the ARPANET. Other
government departments joined the fray, headed by the National Science
Foundation (NSF) which withdrew only lately from the Internet.
The Internet (with a different name) became public property - with
access granted to the chosen few.
Radio took precisely this course. Radio transmissions started in the
USA in 1920. Those were anarchic broadcasts with no discernible
regularity. Non commercial organizations and not for profit
organizations began their own broadcasts and even created radio
broadcasting infrastructure (albeit of the cheap and local kind)
dedicated to their audiences. Trade unions, certain educational
institutions and religious groups commenced "public radio" broadcasts.
This is followed by the Commercial Phase.
When the users (e.g., listeners in the case of the radio, or owners of
PCs and modems in the example of the Internet) reach a critical mass -
the business sector is alerted. In the name of capitalist ideology
(another religion, really) it demands "privatisation" of the medium.
This harps on very sensitive strings in every Western soul: the
efficient allocation of resources which is the result of competition;
corruption and inefficiency which are naturally associated with the
public sector ("Other People's Money" - OPM); the ulterior motives of
members of the ruling political echelons (the infamous American
Paranoia); a lack of variety and of catering to the tastes and
interests of certain audiences; the equation private enterprise =
democracy and more.
The end result is the same: the private sector takes over the medium
from "below" (makes offers to the owners or operators of the medium -
that they cannot possibly refuse) - or from "above" (successful
lobbying in the corridors of power leads to the appropriate legislation
and the medium is "privatised").
Every privatisation - especially that of a medium - provokes public
opposition. There are (usually founded) suspicions that the interests
of the public were compromised and sacrificed on the altar of
commercialisation and rating. Fears of monopolization and cartelisation
of the medium are evoked - and justified, in due time. Otherwise, there
is fear of the concentration of control of the medium in a few hands.
All these things do happen - but the pace is so slow that the initial
fears are forgotten and public attention reverts to fresher issues.
A new Communications Act was legislated in the USA in 1934. It was
meant to transform radio frequencies into a national resource to be
sold to the private sector, which will use it to transmit radio signals
to receivers. In other words: the radio was passed on to private and
commercial hands. Public radio was doomed to be marginalized.
The American administration withdrew from its last major involvement in
the Internet in April 1995, when the NSF ceased to finance some of the
networks and, thus, privatised its hitherto heavy involvement in the
net.
A new Communications Act was legislated in 1996. It permitted
"organized anarchy". It allowed media operators to invade each other's
territories.
Phone companies will be allowed to transmit video and cable companies
will be allowed to transmit telephony, for instance. This is all phased
over a long period of time - still, it is a revolution whose magnitude
is difficult to gauge and whose consequences defy imagination. It
carries an equally momentous price tag - official censorship.
"Voluntary censorship", to be sure, somewhat toothless standardization
and enforcement authorities, to be sure - still, a censorship with its
own institutions to boot. The private sector reacted by threatening
litigation - but, beneath the surface it is caving in to pressure and
temptation, constructing its own censorship codes both in the cable and
in the internet media.
The third phase is Institutionalisation.
It is characterized by enhanced activities of legislation. Legislators,
on all levels, discover the medium and lurch at it passionately.
Resources, which were considered "free", suddenly are transformed to
"national treasures not to be dispensed with cheaply, casually and with
frivolity".
It is conceivable that certain parts of the Internet will be
"nationalized" (for instance, in the form of a licensing requirement)
and tendered to the private sector. Legislation will be enacted which
will deal with permitted and disallowed content (obscenity? incitement?
racial or gender bias?).
No medium in the USA (not to mention the wide world) has eschewed such
legislation. There are sure to be demands to allocate time (or space,
or software, or content, or hardware, or bandwidth) to "minorities", to
"public affairs", to "community business". This is a tax that the
business sector will have to pay to fend off the eager legislator and
his nuisance value.
All this is bound to lead to a monopolization of hosts and servers. The
important broadcast channels will diminish in number and be subjected
to severe content restrictions. Sites, which will not succumb to these
requirements - will be deleted or neutralized. Content guidelines
(euphemism for censorship) exist, even as we write, in all major
content providers (CompuServe, AOL, Prodigy).
The last, determining, phase is The Bloodbath.
This is the phase of consolidation. The number of players is severely
reduced. The number of browser types will be limited to 2-3 (Netscape,
Microsoft and which else?). Networks will merge to form privately owned
mega-networks. Servers will merge to form hyper-servers run on
supercomputers. The number of ISPs will be considerably diminished.
50 companies ruled the greater part of the media markets in the USA in
1983. The number in 1995 was 18. At the end of the century they will
number 6.
This is the stage when companies - fighting for financial survival -
strive to acquire as many users/listeners/viewers as possible. The
programming is shallowed to the lowest (and widest) common denominator.
Shallow programming dominates as long as the bloodbath proceeds.
In hindsight, 20 years hence, we might come to understand that
computers improved our capacity to do things differently and more
productively. But one thing is fast becoming clear. The added benefits
of IT are highly sensitive to and dependent upon historical,
psychosocial and economic parameters outside the perimeter of the
technology itself. When it is introduced, how it is introduced, for
which purposes is it put to use and even by who it was introduced -
largely determine the costs of its introduction and, therefore, its
feasibility and contribution to the enhancement of productivity. The
CEE countries better take note.
(Article written on July 26, 1999 and published August 9, 1999
in "Central Europe Review" volume 1, issue 7)
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E P I L O G U E
The Balkans, an eternal crossroad of different civilizations and
cultures even today, is considered to be the "navel of the world" or as
Sam Vaknin puts it in his erratic, eruptive, intellectual volcano of a
book, "After the Rain - How the West Lost the East" - "is the
unconscious of the world" ("The Mind of Darkness") or worse, probably a
navel, but "the Balkan is a body without a brain" ("Homo Balkanus").
There are a few other, similarly neuralgic points on Earth, but what
distinguishes the Balkans from the rest is that it is precisely via its
central part - Macedonia - that Christianity and modern literacy
invaded Europe. The Byzantine civilization - traceable in today's
Balkans as a junction of the Hellenic spirit and the wisdom of
Byzantium, deeply rooted in the cultures of Babylon and the old
Mesopotamian civilizations - is still of high interest to modern
scholars of the Balkans.
Dr. Sam Vaknin is one of these contemporary detectors of the
"transitions" in the East, who is trying to discover, understand and
direct the Balkans and the East through his publicist work. In his book
"After the Rain - How the West Lost the East", Dr. Sam Vaknin is a
sincere investigator of the "Homo Balkanus", of the Easterner, his
mind, culture and way of living, defining him "a full fledges
narcissist". Immediately after that, in "The Magla Vocables" he says
that even linguistically "it is impossible to really understand an
Easterner", mocking or more precisely reaching the level of real
offence in portraying the image of the intellectuals of the East ("The
Poets and Eclipse").
Reading this large book of essays, however, one should bear in mind
that the author is limited by the clichés of his framework of values
and thinking given to him by the culture and system of rules from which
he originated. Thus, his articles are provocative, turbulent,
irritating, revolting. The impact of his writing is terrible with the
strength of hurricane. His word often kill, his defeatism nullifies.
Sometimes pretentious, still "After the Rain" represents a serious,
lucid and transcendent effort to make the Balkan closer, to introduce
the East to the West, ignoring for a moment the pessimistic assertion
that the West already lost the East.
But if this were right, it would have meant that the West is lost, had
disappeared in the East. The truth is completely the opposite: The West
has yet to find the East. The East, which provided the foundation of
contemporary Western civilization, literacy and Christianity, still
hibernates within its traditional values as an essential element of the
endurance of the people and perhaps as the unique salvation of mankind.
The West has to burst into the wisdom of the East to keep the very
roots of life, the wisdom to live in peace and in harmony with God and
with nature. If this should not happen, we will all finish like in
Aldous Huxley's "Brave New World".
Consequently, when reading these essays, it will not be asking for much
to have a dose of restraint towards Dr. Vaknin's sometimes lethal
"absolute truths" regarding the Balkans and the East. After you finish
reading this book, you can find out not only what the East is - but
also what the East is, indeed, not. This is because Dr. Vaknin observes
the Balkan and the East only from the dark side, regarding its people
as zombies who do not have any idea at all why they are walking on this
Earth. Unfortunately for him, life, neither in the Balkans in
particular, nor in the East in general, is a pathology as he enjoys
saying. That is why some of his articles contain an overly heavy-handed
personal touch, momentary sensations and impressions too strong,
amounting to exaggeration, or, in other words, he puts things headlong.
In "The MinMaj Rule" his paranoiac fear of the "nation-state" can be
felt. His perversity reaches a climax when he finds a justification for
the West and its three months long NATO bombing of Yugoslavia (an act
without precedent in modern history, which indeed resulted in the same
pitiless kind of bombing in Chechnya) and in the acknowledgment that
for the Albanian residents of Kosovo "it has not protected their right
to self-determination".
Dr. Vaknin likes to see the state as "a community, a majority of
minorities united by common rules, beliefs and aspirations ... no
longer utopian, it is a realistic model to emulate". In "Herzl's
Butlers", he even goes further and in the modern nation state he sees
"a reflection of something more primordial, of human nature itself as
it resonated in the national founding myths (most of them fictitious or
contrived)". Still, he is sufficiently honest to admit that "the Jews
(and Germans) came up with the 'objective', 'genetic', 'racial' and
'organic' nation". Indeed, through the periodically harsh critique of
the West's actions in the East, transferring into its body Western
malignant cells of mafia, drugs, organized crime, corruption etc., the
careful reader will discover the glorification of the subjugation of
the East by the West.
Dr. Sam Vaknin is not the first one to try to put all the books which
deal with the so called "world conspiracy" in the domain of illusion or
man's gullibility ("The Elders of Zion"). That was done before in a
fine literary manner mixed with factography by another Jew (by father),
the writer Danilo Kish from ex-Yugoslavia, in his novel "A Book about
Kings and Fools". But if Danilo Kish was exploring the world archives
to prove that it is only by coincidence or through an accidental knot
of circumstance that "the book of Nillus" about a "world conspiracy"
was created, thus far Dr. Vaknin is not only mocking the intellectuals
and ordinary mortals of the East, but he humiliatingly attributes the
existence of that "conspiracy" to the "paranoiac and schizoid nature"
of their minds.
It is interesting that the author uses a tour of the abundant history
of the region just to explain the "darkness" of today's. Or, without
necessity and astonishingly, he is giving a huge treatment only to the
idea of the - in essence illusory and never existing - "Great Albania",
adapting history for his own needs. He even smoothly, in only few
lines, gives "the definite historical truths" about the Illyrians and
their descendents, a subject on which historians composed large tomes
and which they investigated all their lives and about which they still
have dilemmas.
Finally, where does Dr. Vaknin think that the West lost the East? Is it
on its way from Babylon towards some new "promised lands"? Or, is it
maybe - After the Rain - in a Biblical flood?
Although both in the West as well as in the East, it is precisely the
Jewish version of the Bible out of the thirteen existing ones that is
the dominant (a version which is rather a copy of the prehistoric Bible
text of the Sumerians from Mesopotamia) - nevertheless God promised
himself: "Never again will I curse the ground because of man, however
evil his inclinations may be from his youth upwards" and God said:
"This is the sign of the covenant which I establish between myself and
you and every living creature with you, to endless generations:
My bow I set in the cloud,
Sign of the covenant
Between myself and earth.
When I cloud the sky over the earth,
The bow shall be seen in the cloud.
Then will I remember the covenant which I have made between myself and
you and living things of every kind. Never again shall the waters
become a flood to destroy all living creatures. The bow shall be in the
cloud; when I see it, it will remind me of the everlasting covenant
between God and living things on earth of every kind."
In the Balkans, all things aside, this blessing of God - the bow - can
be often felt and enjoyed. Or as one of our proverbs says - After the
Rain always cometh the Sun!
Emilija Geleva
Skopje, February 2000
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T H E A U T H O R
SHMUEL (SAM) VAKNIN
Curriculum Vitae
Born in 1961 in Qiryat-Yam, Israel.
Education
Graduated a few semesters in the Technion - Israel Institute of
Technology, Haifa.
Ph.D. in Philosophy (major: Philosophy of Physics) - Pacific Western
University, California, USA.
Graduate of numerous courses in Finance Theory and International
Trading.
Certified E-Commerce Concepts Analyst.
Certified in Psychological Counselling Techniques.
Full proficiency in Hebrew and in English.
Business Experience
1980 to 1983
Founder and co-owner of a chain of computerised information kiosks in
Tel-Aviv, Israel.
1982 to 1985
Senior positions with the Nessim D. Gaon Group of Companies in Geneva,
Paris and New-York (NOGA and APROFIM SA):
- Chief Analyst of Edible Commodities in the Group's Headquarters in
Switzerland
- Manager of the Research and Analysis Division
- Manager of the Data Processing Division
- Project Manager of the Nigerian Computerised Census
- Vice President in charge of RND and Advanced Technologies
- Vice President in charge of Sovereign Debt Financing
1985 to 1986
Represented Canadian Venture Capital Funds in Israel.
1986 to 1987
General Manager of IPE Ltd. in London. The firm financed international
multi-lateral counter-trade and leasing transactions.
1988 to 1990
Co-founder and Director of "Mikbats-Tesuah", a portfolio management
firm based in Tel-Aviv.
Activities included large-scale portfolio management, underwriting,
forex trading and general financial advisory services.
1990 to Present
Free-lance consultant to many of Israel's Blue-Chip firms, mainly on
issues related to the capital markets in Israel, Canada, the UK and the
USA.
Consultant to foreign RND ventures and to Governments on macro-economic
matters.
President of the Israel chapter of the Professors World Peace Academy
(PWPA) and (briefly) Israel representative of the "Washington Times".
1993 to 1994
Co-owner and Director of many business enterprises:
- The Omega and Energy Air-Conditioning Concern
- AVP Financial Consultants
- Handiman Legal Services - Total annual turnover of the group: 10
million USD.
Co-owner, Director and Finance Manager of COSTI Ltd. - Israel's largest
computerised information vendor and developer.
Raised funds through a series of private placements locally, in the
USA, Canada and London.
1995 on
Publisher and Editor of a Capital Markets Newsletter distributed by
subscription only to dozens of subscribers countrywide.
In a legal precedent - studied in business schools and law faculties
across Israel - was tried for his role in an attempted take-over of
Israel's Agriculture Bank.
Was interned in the State School of Prison Wardens.
Managed the Central School Library, wrote, published and lectured on
various occasions.
Managed the Internet and International News Department of an Israeli
mass media group, "Ha-Tikshoret and Namer".
Assistant in the Law Faculty in Tel-Aviv University (to Prof. S.G.
Shoham).
1996 to 1999
Financial consultant to leading businesses in Macedonia, Russia and the
Czech Republic.
Collaborated with the Agency of Transformation of Business with Social
Capital.