Preface by Sam pitroda (to be confirmed)








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A knowledge market


Drucker explains his view further.

“The economy will, to be sure, remain a market economy, and a worldwide one. It will reach even further than did the world market economy before World War I, when there were no “planned economies” and no “Socialist” countries. Criticism of the market as organizer of economic activity goes back all the way to Aristotle. Most of the charges against it are well founded36. But as no less than Karl Marx pointed out more than hundred years ago, the market, for all its imperfections, is still vastly superior to all other ways of organizing economic activity—something that the last forty years have amply proven. What makes the market superior is precisely that it organizes economic activity around information. But while the world economy will remain a market economy and retain the market institutions, its substance has been radically changed. If it is still ’capitalist,’ it is now dominated by ’information capitalism.’” (pp. 181-182)
      1. Looking for knowledge economics


Drucker was also, together with Harlan Cleveland, among the first to ask clearly for a new economic approach of “knowledge economics.”

“How knowledge behaves as an economic resource, we do not yet fully understand; we have not had enough experience to formulate a theory and to test it. We can only say so far that we need such a theory. We need an economic theory that puts knowledge into the centre of the wealth-production process. Such a theory alone can explain the present economy. It alone can explain economic growth. It alone can explain innovation… So far, there are no signs of an Adam Smith or a David Ricardo of knowledge.”

For some Silicon Valley observers37, the American economy could already be immersed more than 70% in the knowledge society. Clearly, the knowledge society infiltrates itself more and more to the heart itself of traditional industrial and agricultural activities by being stocked and managed by small computers doing an enormous work.

A recent report done for the European Council of Ministers (Secretaries) shows that a minimum of 40% of the European Union economy already is in the non-material, in the knowledge society38. This estimate might be very low—some believe it is the range of 60–70%.

There we are.

Let us recall that in the agrarian society, power was tied to possession of land. Whoever did not own land was a peasant, a “serf”39, and did not even have a name. The nobility that had land possessions bore the name, and its power arose from the fact that it provided food and livelihood to the population. The problem was that it always needed to acquire more land to maintain its power, leading to wars, invasions, and conquests. The science of economics did not exist, because the management of the land and wealth was assumed by the political or by the religious authorities, when they were in power. It was not left to a class of intellectuals like today.

When the industrial society appeared, power progressively moved toward those who succeeded in assembling capital and innovative technology. The agrarian work force—that is, farmers—was required to adapt, more or less harshly, to the logic of the industrial machine. Those of nobility who did not understand his change of power likely remained in their splendid castles, well-off but marginalised.

Today, a similar phenomenon is occurring. Indeed, the industrial and agricultural machine is still producing, more and more cheaply than ever before, but it requires less and less manpower to do so. At the beginning of the 20th century, agriculture used 87% of the manpower in Europe. Today, that number is about 4%. A similar evolution can be expected for industrial employment. It will shrink as robots replace workers. Even China has recently reduced its workforce by 15% by replacing it with machines.

The trend is the same all over the world—as Jeremy Rifkin showed very well.40

The major political problem accompanying this change is that, if the agrarian and the industrial sectors cannot provide more than 20–30% employment at the most (along with 30% in the services sector), what can be done with the rest of the population, particularly with those who are not qualified for other types of jobs? That is the very difficult question, which confronts the politicians all over the world.

That is why the European Chiefs of States are insisting on implementation of the Lisbon strategy and the entrance in the knowledge society. It is the only hope. But that supposes a rather radical redefinition of our societies. And that is the pinch point.

This change in the production tool contained in the advancement toward the knowledge society leads to fundamental changes in the nature of power, trade, economy, money, and management. But with it also comes mutations in the concepts of patents, work, justice, sustainability, ecologic durability, education, and culture—that is, in society itself.

Finalities themselves are changing, evolving toward something else. An important trend of centring again toward human is developing becoming apparent at all levels. A centring, however, which could easily become perverted by means of sophisticated manipulation, as I shall show in the negative scenario presented in Chapter 8.

To summarise the nature of the transition from the industrial society to the knowledge society, let me first define a few terms.

  1. Data are pieces of raw information, as they arrive in our mailbox in the morning, or on the Internet. The problem with the data we typically receive is that they are too many (overabundant), and they are not sorted.

  2. Information is sorted data. The sorting can be done mechanically—for example, by Google, postal employees, or your secretary (if you are fortunate enough to have one).

  3. Knowledge is data that has been creatively sorted and, by careful reflection, given value or a set of values. The reflection is carried out in the human brain and cannot be mechanised. Knowledge always leads to action.

  4. Wisdom is the ability to make decisions with maximum concern for the common good, including that of future generations, and social cohesion.

Using these terms, I have summarised the transition as shown in Table 1.

Table 1: The transition from industrial to knowledge society




INDUSTRIAL SOCIETY

KNOWLEDGE
SOCIETY







POSITIVE
SCENARIO

NEGATIVE SCENARIO

POWER

Capital +
new technology + patents

Human person is creative if valued and in networks

Subtle manipulation of human brain or possible replacement by computers

PYRAMIDS VS. NETWORKS

Industrial structures are pyramidal

Knowledge can only be created in networks

Tries to maintain pyramids of power at all costs

LEADERSHIP ROLE

Command, control, and conquer

Enable human creativity in networks

Manipulate (subtly)

SECRECY VS. OPENNESS

Business + defence = based on secrecy and patents

Open sources, no patents, free sharing of knowledge

Closed systems capable of controlling in subtle ways

MANAGEMENT

Centred on machines and their logic.
Taylorism: Humans must adapt to machines

Centred on humans = capital

Machines must adapt to Humans

Manipulation of human mind ...or

Humans replaced by computers

TRADE AND COMPETITION

“Free Trade” (existing norm)

“Free sharing of Knowledge” (new norm);

Cooperation and collaboration in networks

Monopolisation of knowledge and information

CREATION OF ECONOMIC VALUE

Value is added to the object (from steel to automobile)

Knowledge is applied to knowledge in order to create new knowledge leading to action

Human mind is manipulated and made submissive

MEASURE OF VALUE

Quantitative measures and tangible assets

Qualitative measures of intangible assets

Reduction of the qualitative to quantitative

DEFINITION OF ECONOMY

Manages the ownership of capital and technology

Manages Human capital and creativity for the common good

Manages humans to make them subservient to machines

DEFINITION OF MONEY

Exclusive and accumulative concept = created by banks

More-and-more symbolic concept

Created by citizens

Manipulation of symbols

DEFINITION OF WORK

One single concept for creativity, social insertion, dignity, feeding family

New organisation of values; everyone creates his/her job; end of industrial jobs

Old employment policies increase the problem of employment

SOCIAL INCLUSION

Social exclusion is unavoidable

Social inclusion increases the level of creativity

Pseudo-inclusion is worsening exclusion

EDUCATION

Decreases creativity and adapts to machine

Increases creativity and mastering of machines; new humanism

Manipulation through school system

NEW ROLE OF CULTURE

Culture has peripheral role

Central role of culture = root of all creativity

Manipulation of the souls of cultures

DEFINITION OF PROGRESS

Quantitative and unsustainable

Sustainable because it is qualitative

Quantitative remains the norm; not sustainable

SOCIETY GOALS

Produce and sell a maximum number of cheap objects

Promote human cultural an spiritual progress

Enhance dualisation of society; not sustainable

SUSTAINBILITY

Unable to achieve a positive footprint

Able to achieve positive footprint

Not really interested by the subject

© copyright Marc Luyckx Ghisi 2008.
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