Zogam Vision 1: A Service-Based Market Economy

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[…continued…The Zogam Vision Series…]
Zogam Vision 1: A Service-Based Market Economy ~ Haulianlal Guite, IAS
HLLal-Guite[note:
here, in this article and what follows, I use the word “Zogam” as a synecdoche for all highland non-Naga tribes of Manipur in a completely non-political sense, although the visions are relevant for Nagas just as well. Whereas the broader neologism “Zomia” coined by historian Wilhem Van Schendel in 2002, popularized by James C. Scott in his classic “The Art of Not Being Governed”, and experimentally employed here now and then, may denote all highland tribes whatsoever, Naga and non-Naga. Since this use of “Zomia” has become commonplace in the academic community worldwide to denote the cultural and geographical, yet non-political, landscape of all highlands above 600m from sea level, we may start extensively using it too. For the word is here to stay]

Zogam Vision 1:
A Service-Based Market Economy:

“…to provide quality services and get rich in doing, we now live in a world where all we need are brains, not brawns; ideas, not minerals; skills, not muscles; knowledge, not steel; creativity, not factory; man, not land… true gold is to be mined in the endless field of our thoughts…”

I. An Introduction

“A very large percentage of economic activity is shifting online...
with lower start-up costs and a vastly expanded market for online services, the result is a global economy that for the first time will be fully digitally wired – the dream of every cyber-visionary of the early 1990s, finally delivered, a full generation later”.
 ~ Marc Andreessen, American entrepreneur, software engineer, multimillionaire.

What are services? Simply put, they are intangible, abstract “goods” primarily based on knowledge and/or skill rather than manual labor or muscular activity; not storable in real space (consumed on sale) and so, cannot be owned by any.

An example of a service is when a responsible citizen helps an old man cross a road. The nature of this service is intangible (cannot be seen, sensed or touched), cannot be owned by anybody, and is immediately “consumed” (used).
When a monetary cost is charged – that is, the helper charges a certain amount (say, Rupees 10) to aid the elderly man in crossing - that service becomes a part of the economy, because there is a certain monetary transaction involved.

Another example of a “service” is playing music. If a certain musician strums his guitar to a song – say, the Beatles’ “Let it Be” – he is providing a service, in the sense that what he does is intangible, and cannot be stored or owned.
If the musician puts a certain charge to that service (say, Rs 100 per song), it enters the economy, thus becoming part of the service sector under the sub-sector “Music”.
[One may object that the musician’s voice can be recorded and so, “stored” in a sense. But this type of storage is very different from storing apples in a room. The digital space is very different from the real space. Because nobody owns the digital space and because this storage is only abstract rather than real, it is not considered “storage”.]

An example from cyberspace may further illustrate this. If a software engineer creates a program that enables users to watch movies in 3D online, and each are willing to pay Rs 300 for this, that program he creates, becomes a service. Because the program is a written code of instructions which provides information in intangible, invisible cyberspace – not the actual tangible space we move around and dance about in.

It is services of such kinds, not just in the examples above, but also in:
- financing, banking, marketing;
- education, sports, entertainment;
- real estate, retail, advertisement;
- media, internet, publication;
- software, information technology, telecommunications;
- accountancy, consultancy and legal services;
- state (politicians, civil servants, soldiers, and other government employees);
- and many others…
which make up what we call the “Service Sector” (also known as tertiary sector).

The service sector contrasts favorably against the primary-secondary sectors (grouped together here as one for our own purpose). The latter group of economic activity includes the following:
    - hunting and gathering, fishing and looting;
    - agriculture, horticulture and animal husbandry;
    - logging, mining, drilling;
    - manufacturing (based on the mined natural resources); etc.
All products of these economic activities are goods – visible, tangible goods which can be stored and owned. Hunting produces a good, meat; gathering produces another tangible good, fruits; fishing, fishes; looting, coins. Agriculture gives crops for eating; horticulture produces silk for clothing; animal husbandry results in milk production, among other things.
From logging we get timber – something quite visible; from mining, metals and precious stones. And our oil, quite visibly shiny at times, comes from drilling.
We get steel bars, iron cages, copper plating, cable fibers and other such stuffs after the raw materials called minerals are processed in the manufacturing industries; and all these are tangible goods as opposed to intangible services.  

The really staggering reality we want to present here is that in the early 21st century, much of the wealth produced and earned in the world comes from performing the services rather than from the sale of goods.

II. The Great Discovery

What do we mean when we say most of our present riches come from the services?
We mean that wealth and richness do not really mean those things we have in mind. When we think of “getting rich”, for instance, our minds conjure up such images like having countless gold and diamonds, finding a “treasure box” or “rooms full of gold”, owning vast oilfields or plantations, and earning products from their sale; or vast forest lands and felling those trees to become “rich”.
Well, we are wrong.

The really surprising thing about the 21st century’s economic reality is that this “image of wealth” no longer holds true. It is dramatically false. Although this image of diamonds, gold and oil continue to charm our senses and are still synonymously used to symbolize treasure, the fact is, this usage no longer has any real-life validity.

gold diamond

Gold and Diamonds. Sparkling and dazzling, but profoundly wrong images of wealth.

Yes, it was valid for much of human history; it was true in the time of Abraham, in the time of    Jesus and even in the days of Napoleon, Abraham Lincoln and Raja Goukhothang all through the 19th century. In fact its use was still largely valid even in the developed countries up until the Second World War and a little beyond (the early 1950s).

And then, something happened, a really marvelous development, beginning somewhere in the mid-1950s. The “first-world countries” identified as United States, Canada and Western European countries (UK, France and West Germany) started moving away from their status as “industrial economies” (economies predominantly dominated by the manufacturing industries) to become “post-industrial economies”. Because much of the wealth and opulence produced hence, were not from crops or trees, gold or silver, coal or oil, but rather from – yes – the services.

Not just the GDP output, but the profile of employment distribution also shifted. For the first time in human history, there evolved countries like the United States in which the majority of the nation’s workforce become engaged in tertiary (service) sector rather than primary or secondary sectors; and the overwhelming chunk of that nation’s wealth comes from these tertiary services rather than the primary or secondary activities.

As Ronald Reagan said, “entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States”.

This is remarkably becoming increasingly truer even in the context of India’s developing economy, as maybe seen from the following pie chart:

data

[Data taken in May, 2012, it shows that 54% of India’s GDP comes from services, while it is 76.6% in case of America; whereas 46% of India’s GDP are constituted by the primary-secondary sectors combined, and just 23.4% of America’s GDP from the primary-secondary sectors].
In other words, these countries now manage to generate more wealth from education, health, internet and consultancy services, and other such services, than from natural resources like oil, mining and forestry.

There is one particular sub-sector among these services which in recent times surge ahead of its peers in terms of the sheer quanta of wealth it generates: the computer-related services.
Think of the richest and brightest business minds of the world. What names come up? Bill Gates. A man who (monotonously) remains the world’s richest for a very, very long time. And what makes him so wealthy? His co-founding of a software company – the quintessential service – called Microsoft, with his friend Paul Allen, another multi-billionaire.
Want another example? Think, now, of an internet service provider that significantly alters your everyday world. Google? Indeed, an internet service, without whose existence our cyber lives can hardly be imagined. Well, Google happens to be a corporation whose assets are to the tune of a whopping $72 billion. And much of the shares in that corporation are owned by two individuals only – the co-founders Larry Page and Sergey Brin.

Let us take another example.
All of us these days are fond of filming ourselves, things and objects, from the hilarious to the serious, the most significant to the least, from wisdom to folly – be it songs, videos, movies, clips, charts and what not. And yes, not just filming them: we want the world to see. So, for the world to see something we have done in some unknown corner, where do we put up our films? You guess right: YouTube.
What was YouTube worth when Google bought it in 2006? A little over $1 billion. What is its netcomputerage worth estimated at right now, in the autumn of 2012, only 6 years later? Certainly not less than $45billion, says economists. Now think about that!

What all these companies have in common is this: they are internet-based services, which require almost no material asset when they were set up.
Not much infrastructure except a room (could have been a PG), not much capital or investment (the same amount parents send to their child in Delhi in a single month), no land whatsoever (except the rented PG), no gold or silver.
The only really critical thing they needed was: brains…the way to use it and the daringness to use it. And used they did – in a way no one ever had.

So that this fact may properly sink in, let us remind ourselves again that these richest of men were not owners of vast tracts of land, were not discoverers of some treasures hidden away by Spanish conquistadors; were not men of oil or coal or gold hanging around in the Middle East covered in cloak and tunic. They were rather simple, everyday laymen who dared to think hard. And they have become the world’s richest men just by the sheer fact their thoughts produce a saleable idea nobody has ever thought before.

If there is still a lingering skeptic out there who doubts the wealth software produces, just recall once again that most useless activity consuming your time most. Yes, I’m referring to how all of us get hooked to social networking sites; specifically one site which outcompetes all. Facebook.

facebook

This fellow here doesn’t look too poor.

Facebook, this most useless of online activity requiring no capital whatsoever to run when the founders launched it and still requiring not much infrastructure of its own, showers the creators with riches beyond the wildest dreams of the wildest dreamer – simply because their singularly powerful recreational idea connects a billion people!

Because they require virtually no land, no natural resources, no investments, no capital, no infrastructure, the really charming thing about all these software companies is that they could have been founded, concocted, dreamt up anywhere by anybody. If only somebody had the ingenuity to dream of them before they did.
In other words, they could have been companies starting in our very own Zogam.

What does that mean?
Imagine a villager from Sinzawl, Aristokap, who has no possession except his education, which by dint of his hard-work he advances in, made possible by the scholarships he won (there are plenty of these).
Even after his graduation, he still is as poor as he ever was. But he possessed a passionate interest in computers and software programming. Then, one fine day, an idea struck him, say, in 2000: an idea that he converts into, well, software.
That idea is: connect people in cyberspace (soon to be called a social networking site) where people can write their relationship status, chat, talk, see what each other are up to, and give each other a sense of childish self-importance by writing something wise or funny which “friends” can comment and check out. Sitting somewhere in Upper Lamka, his hands on the borrowed computer of a reasonably well-to-do friend, and with an internet connection, he writes that software into the Google service provider, who gives it a URL. In doing so, what has he accomplished?
That poor, solitary, boorish man sitting in the loneliest, dullest, remotest region of the world called Lamka Town, hooked to an old 4th generation computer, has just applied a single idea which will directly transform the lives of one billion people – one-sixth the population of the earth – and is on his way to becoming one of the world’s richest bachelor. For that man had just invented Facebook, in 2000 – 3 years before Marc Zuckerberg & Co did. Quite possible.

This, in short, is what we mean when we say “true gold is to be mined in the endless field of our thoughts”. Not land, not oil, not iron, not steel; not crops, not plantations, not diamonds, not gold, not coins. It is now ideas expressed in terms of software, digitized, which is the key to richness and prosperity.

III. The Critic

One may interject at this point with a trenchant observation:
“these people come from countries which are post-industrial already;
and the countries became post-industrial only because they first passed through the industrial stage (manufacturing, coal, oil and all that dirt);
and that, if we are to move to the post-industrial service stage, we first have to pass through the nauseating, polluting, destructive industrial stage as well”.
While such men are right in that those countries did indeed passed through the industrial stage first, they are wrong in assuming all societies need to pass through that stage to arrive at the service stage.
This, then, is our big discovery that makes vision 1 achievable: we do not have to first pollute our environment and destroy our forests, or exploit our natural resources like oil to end poverty and become rich in so doing – in order to arrive at the post-industrial stage. The industrial stage can simply be completely bypassed.

How so?

There are certain preconditions a society must satisfy in order for its economy to become service-based, viz.:
a. Efficient line of Communications (transport needed only minimally);
b. Minimal paid-up Infrastructure;
c. Proper supply of Electricity;
d. Availability of talents and skills;
e. Communication, interpersonal, negotiation, business and managerial skills;
f. The will to excel and achieve, endowed with a robust competitive spirit;
g. A reasonably educated middle class; and
h. Political Security (the absence of arbitrary, unpredictable political change).

A society will have a service-based economy as long as these ingredients are in place. The society may be pre-industrial, like ours; it may not be a manufacturing super power like mainland China; and it may lack any natural resource to speak of, as in Switzerland. But, so long as these 8 preconditions hold, services in that society will prosper.

Question is: does Zogam fulfill these preconditions? Is Zomian economy ready for services?

Time to indulge in some factual analysis.

[to be continued…]


Related Link: Zogam 2050: A Vision