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Essential Matter: Informational Capitalism and Social Exclusion

1 Sep 1998

  • Author(s): Manual Castells

Excerpts from an opening address at the UNRISD conference on Information Technologies and Social Development;

A new form of socio-economic organization has emerged in the last quarter of the twentieth century. After the collapse of statism, in the Soviet Union and throughout the world, it is certainly a capitalist system. Indeed, for the first time in history the entire planet is capitalist, since even the few remaining command economies are surviving or developing through their linkages to global, capitalist markets. Yet this is a brand of capitalism that is at the same time very old and fundamentally new. It is old because it appeals to relentless competition in the pursuit of profit, and because individual satisfaction (deferred or immediate) is its driving engine. But it is fundamentally new because it is tooled by new information and communication technologies that are at the root of new productivity sources, new organizational forms, and the construction of a global economy. Let us briefly examine the profile of this new world, which in fact is shared by all countries despite the diversity of their cultures and institutions.

The global economy
In the 1990s the core activities of the global economy function as a unit in real time, on a planetary scale. Thus capital markets are interconnected worldwide, so that savings and investment in all countries, whether globally invested or not, depend for their performance on the evolution and behaviour of global financial markets. At the same time, multinational corporations, in manufacturing, services, and finance, with their ancillary networks of small and medium businesses, constitute the core of the world economy. These corporations directly employ "only" about 70 million workers, but these workers produced one-third of the world's total private output; and the global value of their sales in 1992 was US$ 5,500 billion, which is 25 per cent more than the total value of world trade in that year.

Furthermore, the highest tier of science and technology, the one that shapes and commands overall technological development, is concentrated in a few dozen research centres and milieus of innovation around the globe — overwhelmingly in the United States, Western Europe and Japan. When they reach a certain level of scientific development, Russian, Indian and Chinese engineers, usually of very high quality, can only pursue their research by linking up with these centres. Thus highly skilled labour is also increasingly globalized, with talent being hired around the globe when firms and governments really need the skills, and are ready to pay for it.

At the same time, the overwhelming proportion of jobs, and thus of people, are not global. In fact, they are local and regional. But people's fate, their jobs, their living standards ultimately depend on the globalized sector of the national economy, or on the direct connection of their economic units to global networks of capital, production and trade. This global economy is historically new, for the simple reason that only in the last two decades have we produced the technological infrastructure required for it to function: telecommunications, information systems, micro-electronic-based manufacturing and processing, information-based air transportation, container cargo transport, high speed trains, and international business services located around the world.

However, if the new global economy reaches out to encompass the entire planet — if all people and all territories are affected by its workings — not every place, or every person, is directly included in it. In fact, most people and most lands are excluded, switched off, either as producers, or consumers, or both. The flexibility of this global economy allows the overall system to link up everything that is valuable according to dominant values and interests, while disconnecting everything that is not valuable, or becomes devalued. It is this simultaneous capacity to include and exclude people, territories and activities, that characterizes the new global economy as constituted in the information age. And the organizational basis for this capacity is networking.

No major historical transformation has taken place in technology, or in the economy, without an interrelated organizational transformation. The large factory, dedicated to mass production, was as critical to the constitution of the industrial age as the development and diffusion of new sources of energy. In the information age, the critical organizational form is networking. A network is simply a set of interconnected nodes. It may have a hierarchy, but it has no centre. Relationships between nodes are asymmetrical, but they are all necessary for the functioning of the network — for the circulation of money, information, technology, images, goods, services, or people throughout the network. The most critical distinction in this organizational logic is to be or not to be — in the network. Be in the network, and you can share and, over time, increase your chances. Be out of the network, or become switched off, and your chances vanish, since everything that counts is organized around a worldwide web of interacting networks.

Networks provide the appropriate medium for an interconnected, global economy based upon relentless adaptation and extreme flexibility. The concentration of capital can go hand in hand with the decentralization of organization. In fact, large multinational corporations function internally as decentralized networks, whose elements are given considerable autonomy. Each element of these networks is usually a part of other networks, some of them formed by ancillary small and medium businesses. Some ties involve collaboration with other large corporations, around specific projects and tasks, with specific time and spatial frames.

In the end, however, the goal is to assure a profit. And most earnings do not remain in the firm, but find their way into the global casino of interrelated financial markets. Because of this level of unpredictability and complexity, the networks in which all firms, large or small, are anchored, move along, form and re-form, in an endless variation. Firms and organizations that do not follow the networking logic (whether in business, in the media, or in politics) are wiped out by competition, since they are not equipped to handle the new model of management.

So, ultimately, networks — all networks — come out ahead by restructuring, whether they change their composition, their membership, or even their tasks. The problem is that people, and territories, whose livelihood and fate depend on their positioning in these networks, cannot adapt so easily. Capital disinvests, software engineers migrate, tourists find another fashionable spot, and global media close down in a downgraded region. Networks adapt, bypass the area (or some people), and re-form elsewhere, or with someone else. But the human matter on which the network was living cannot so easily mutate. It becomes trapped, or downgraded, or wasted. And this leads to social underdevelopment, precisely at the threshold of the potentially most promising era of human fulfilment.

We confront a growing social crisis. Polarization is on the rise everywhere. At a global level, the ratio of the income of the top 20 per cent of the population to the income of the bottom 20 per cent jumped from 30 to 1 in 1960 to 78 to 1 in 1994. Furthermore, extreme poverty, or misery — usually defined as the proportion of people who are below 50 per cent of the poverty line — is the lot of the fastest growing segment of the poor population in almost every country. And as a significant number of people are being excluded from access to regular jobs, they are moving onto the shop floor of crime. One could say that some have little choice. People who are not needed in the information age do not vanish: they are there.

It is urgently necessary to reverse the downward spiral of exclusion and to use information and communication technologies to empower humankind. The reintegration of social development and economic growth in the information age will require massive technological upgrading of countries, firms and households around the world — a strategy of the highest interest for everyone, including business. It will take a dramatic investment in overhauling the educational system everywhere. It will require the establishment of a worldwide network of science and technology, in which the most advanced universities will be willing to share knowledge and expertise for the common good. It must aim at reversing, slowly but surely, the marginalization of entire countries, or cities or neighbourhoods, so that the human potential that is being wasted can be reinvested. Solidarity in a globalized world means global solidarity. And it also means intergenerational solidarity. These are basic, elementary principles of economics and policy making "as if people matter". And they are in full coherence with the productive, creative logic embedded in information technologies. If this sounds like wishful thinking, it is only a measure of how bewildered we have become at this critical moment of historical transition.

Biographical Note
Manuel Castells has been Professor of Sociology, and of City and Regional Planning, at the University of California, Berkeley, since 1979. Prior to that, he was at the University of Paris, the Institute for Sociology of New Technologies (Universidad Autonoma de Madrid) and the Higher Council for Scientific Research (Barcelona). He has been visiting professor at 15 universities in Latin America, Asia, Europe, and North America. He has received the Guggenheim Fellowship and the C. Wright Mills Award and has published 20 books in different languages. His most important, and recent, work is the trilogy The Information Age: Economy, Society and Culture (Blackwell, Oxford, 1996, 1997, 1998).