… We are such stuff
As dreams are made on; and our little life
Is rounded with a sleep.
Shakespeare’s The Tempest
Writing in the Dec 28th, 2003 edition of The Week, President Kalam says, “In the 21st century, knowledge is the primary production resource instead of capital or labour.”
I have been unable to fully comprehend that insight, fundamentally because it does not make any sense. Sounds profound but makes no sense. What is a ‘primary production resource‘? Did Kalam imply that once upon a time capital and labor were primary production resources but knowledge wasn’t? What changed so that labor and capital got displaced and now knowledge holds that position?
We need to understand that production has always required capital and labor primarily, and that knowledge (or know-how) has always been an essential ingredient. The production process ultimately uses these three elements multiplicatively. By that I mean, if even one of those are at a zero level, the product is zero. There is some substitutability among them, of course. You can use more capital and employ less labor to get the same amount produced, for instance. Or you can use more knowledge (ie, better technology or know-how) to use capital and labor more efficiently. Knowledge increases what is called the production possibilities but for that to happen you have to have production in the first place.
The last point bears repetition: you have to have production before you can use technology to increase the efficiency of production. IT (information technology) is an efficiency enhancing technology. It enters the production function multiplicatively, not additively. You have to have something going there before you can obtain gains from IT use.
All this talk of India becoming an IT Superpower is a lot of nonsense because India cannot become an IT superpower without it first becoming a Stuff Superpower. India has to produce stuff that you can lay your hands on — does not matter what it is. It could be food, or it could be manufactured stuff or whatever. But it has to be stuff. The reason is that we exist on stuff — we eat stuff, we wear stuff, we get transported on stuff. We are made of stuff. We cannot exist on ‘knowledge’. We are not dream stuff even though we are such stuff that dreams are made on.
We are poor not because of lack of information — there is tons of it in every conceivable place in the world. You can get all the information you need in a neat little tiny 100 GB harddrive. It would do little to alter the fact that most of us don’t have enough to eat. The hard part is to convert the information into knowledge, and then use the knowledge to convert some stuff (we generically label them land and labor) into more useful stuff (such as food, education, factories, etc.)
Let’s get back to basics. What is poverty? Poverty is lack of income. What is income? Your income is that share of stuff produced that you get to take home for yourself. Let’s not confuse money with income. Income is often denominated in monetary units but in real terms, income is what you get to keep from what is produced overall. Per capita income is therefore a ratio: a ratio of what is produced (the numerator) to the total number of people (the denominator). You can increase income by either producing more or by reducing the number of people. If the rate of growth of production is lower than the rate of growth of the population, you will have a falling per capita income. In time, you would have deepening of poverty.
To repeat that point: we are poor because the amount of stuff we produce is low relative to the number of people we have to distribute the stuff to. Information technology (IT) can help increase the amount of stuff produced but IT can never be a substitute for stuff. So India has to become a STUFF SUPERPOWER because we are a PEOPLE SUPERPOWER. If you divide STUFF INFERIORPOWER with PEOPLE SUPERPOWER, you get poverty-ridden India. On the other hand, if you divide STUFF SUPERPOWER with PEOPLE INFERIOR POWER, you get stuff-rich USA.
I have a little secret that would like to share with everyone tomorrow. It is a secret because no one in India seems to have a clue about this. I scanned the speeches of movers and shakers in India and realized that my secret is safe. But I think, January 1st 2004 would be a good time to get started on revealing the secret.
I wish you a very Happy New Year 2004!