The Coming of Post-Industrial Society

by Daniel Bell

  Let me emphasize this argument, for it is crucial to understanding the capacities of different societies. In telecommunications and computers, Japan has moved quickly into the extension technology. But there are few niche enterprises in Japan. In these spheres, the United States is heavily into the extension and niche sectors. Two statistics may be relevant to highlight these points. In Japan today, subscriptions for cellular phones are in excess of 30 million, which is about half the 60 million total subscriptions for ordinary NTT hard-wired lines. Cellular phones are no longer just a business necessity; they have become a gadget for young people and ordinary citizens everywhere. Cellular phones, as an extension device, have remade the telephone business in recent years. The second statistic, in relation to computers, is that in the United States there are now 15,000 different (shrink-wrapped) application products for stand-alone computers; these programs are for every kind of use imaginable. They are niche technologies.

  Let me draw some economic and sociological implications from these changes. Extension devices are created and marketed by large-sized firms, such as in the telephone and communications industries. But niches—mostly software programs—are developed by engineers and entrepreneurs and are produced by small businesses. In California’s Silicon Valley alone, there are about 7,000 companies, employing between 50 and 500 persons, that make these niche products. Netscape may pioneer the Java software program for browsing on the Internet. And Microsoft may dominate the operating systems for PCs. But the applications are made by small businesses. The United States today has expanded the small-business niche sector in the areas of computers and telecommunications. And it has been able to do so because it has combined an entrepreneurial culture (and venture capital to finance it) with a highly skilled group of educated persons. (Ironically, some of these developments are the residue of the hippie culture of the late 1960s and 1970s. Rebelling against the constraints of organizational life, young entrepreneurs found an economic outlet, and independence, in writing software programs and codes for computers.)

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  GRID 5

  Technology: The Underlying Trajectories

  We need to specify the exact nature and scope of technology in order to track the relevant changes.

  In the information revolution, there are three phases to the trajectory, or the path of technological changes:

  1. Transformation Technologies

  2. Extension Technologies

  3. Niches

  A transformation technology effects a revolutionary change in society. An extension technology, as the word implies, provides additional scope for an existing technology. Niches are specialized applications of an existing technology for particular tasks.

  We can illustrate these trajectories by the major examples in information technology:

  Telephone: The telephone itself is a transformation technology. It changes the way we communicate with one another, replacing postal and telegraph systems, giving us a new sense of time and space.

  The cellular phone is an extension technology. It “breaks” the cord that ties the phone into the system and replaces the wires through which we talk. Cellular messages travel by relay or microwave.

  The private-branch exchange (PBX) or local area networks (LANs) are niches. The PBX is a common system for internal communication within a firm, using a common number for the firm’s code.

  Television: Television is a transformation technology, emphasizing visual rather than audio transmission, as with radio.

  Broadband is an extension technology, multiplying the number of channels as high-definition television increases the clarity of the image.

  Niches—with the multiplication of cable channels—are specialized segments, such as home-shopping channels, the creation of ail-hours news stations, and the like. This is the process of segmentation.

  Computer: The computer itself is the transformation technology. It allows us to do computation, record keeping, simulation, modeling, computer-aided design (CAD) for architecture or graphics, computer-aided manufacturing (CAM) for production, etc.

  Networking is an extension technology, as against stand-alone computers, be they mainframe, minis, or PCs. We have infra-firm and inter-firm networks, and now the Internet with thousands of Web sites.

  Program applications: financial spreadsheets, games, health programs, and literally thousands of programs for specific needs. These are usually niches.

  The technological “engines” for computers are parallel processing for large-scale tasks and software for the programming.

  There are broad economic changes that derive from these technological changes. In general, “transformation technologies,” requiring large capital outlays and huge organizations, are usually developed by large corporations.

  Niches, because they are specialized applications, are usually conducted by small firms, led by an engineer or entrepreneur who has seen the opportunity created by the niche. In the U.S. today, the major expansion in the information sector has been in niches and in small business. Niche development depends on an entrepreneurial culture.

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  This emphasis on niche development points out the difference between the United States and Japan in their economic performance. Japan is largely a communal society that looks askance at individual initiatives and which is age-graded in the rankings of people in enterprises and in universities. They are fine in cooperative enterprises, and that has been their strength in innovations in the fields of computers and telecommunications, and the manufacturing of electronic products in the 1970s and 1980s. But Japan does not encourage entrepreneurial risk-taking individuals and lacks a support system of venture capital or a tax system (which is highly egalitarian) that rewards individual enterprise. For these reasons, while Japan was easily able to move into extension technologies, it has fared badly in the niche sectors, which has been one of the flowers of American performance.

  In respect to globalization and the new international division of labor, the issue for many economies (and societies) is whether they initiate products, qualitatively improve products, or make standardized products. This is not to say that technology alone determines their economic fate. There are many other sectors and dimensions that may be foundational for societies—natural resources such as oil and natural gas and forest products, agriculture, fishing, tourism, entertainment, services, and the like. In many respects, of course, all such sectors depend on technological instruments, but if an economy is to move into post-industrial phases, the trajectory of information technologies becomes central to their existence.

  V

  SOCIETAL GEOGRAPHY,

  THE MATERIALS REVOLUTION, AND GLOBALIZATION

  Historically, every society has been tied together by three kinds of infrastructure, the nodes and highways of trade and transactions between peoples. The first is transportation: rivers, roads, canals, and, in modern times, railroads, highways, and airplanes. The second is energy systems: hydropower, electricity grids, oil and gas pipelines, and the like. The third is communications: postal systems (which moved along highways), then telegraph (the first break in that linkage), telephone, radio, and now the entire panoply of new technological means from microwaves to satellites.

  The oldest system is transportation. The breakdown between isolated segments of a society arose when roads were built to connect them so that trade and exchange could commence. Human habitats were located at the crossing of roads or the merging of rivers and arms of lakes: Traders would stop with their wares, farmers brought their food, artisans settled down to provide services, markets developed, and towns and cities took root.

  Within the system of transport, the most important has been water routes. They were the easiest means for carrying bulk items; waterways weave around natural obstacles, and tides and currents provide means of additional motion. It is striking that almost every major city in the world in this millennium (leaving aside the fortified hill towns that arose during the breakdown of commerce and
provided a means of protection against marauders) is located on water: Rome on the Tiber, Paris on the Seine, London on the Thames, not to mention the other great cities located on the oceans, seas, and great lakes.

  If one looks at industrial societies, the location of cities and hubs of production are determined by the interplay of water and resources. Consider a map of the United States and look at the north-central areas of the country. In the Mesabi Range of Minnesota there was iron ore; in sections of southern Illinois and western Pennsylvania there was coal. And these areas were tied together by a Great Lakes and river-valley system that connected them with ports on the oceans: Lakes Superior, Michigan, Huron, Erie, and Ontario flowed out to the Atlantic through the St. Lawrence waterway; the Erie Canal reached across New York down to the Hudson River; and the Ohio River wound its way down to the Mississippi and the Gulf of Mexico.

  The relation of iron ore and coal led to a steel industry and with it, an automobile industry, a machine and tool industry, a rubber industry, and the like. And the water-transport system tying these together is the locational reason for the great industrial heartland cities of the United States—Chicago, Detroit, Cleveland, Buffalo, and Pittsburgh. Thus we see the imprint of economic geography.

  Now all this is changing as industrial society begins to give way. Water and natural resources become less important as locational factors for cities, particularly because with the newer technology, the size of manufacturing plants begins to shrink and production begins to be located nearer to markets. Proximity to universities and culture becomes more important as a locational factor. Consider the four major concentrations of high-tech development in the United States—Silicon Valley in relation to Stanford University and San Francisco; the circumferential Route 128 around Boston in relation to MIT and Harvard; Route 1 in New Jersey, from New Brunswick to Trenton, with Princeton University as its hub; and Minneapolis St. Paul in Minnesota clustering around the large state university.

  Communications begins to replace transportation as the major mode of connection between people and as the mode of transaction. What we see, equally, with communication networks becoming so cheap is a great pull toward decentralization. In the past, the headquarters of large enterprises were concentrated in central business districts because of the huge “external economies” available through the bunching of auxiliary services. One could “walk across the street” and have easily available legal services, financial services, advertising services, printing and publishing, and the like. Today with the progressively lower cost of communication and the high cost of land, density and external economies become less critical. Dozens of major U.S. corporations, in the past decade or so, have moved their basic headquarters from New York to the suburban areas, where land is cheaper, and transport to and from work easier: They have moved northeast to Fairfield County in Connecticut, north to Westchester County in New York, and west and southwest to Mercer County in New Jersey.

  As geography is no longer the controller of costs, distance becomes a function not of space but of time; and the costs of time and the rapidity of communication become the decisive variables. And with the spread of mini- and microcomputers, the ability to “download” databases and memories to small computers (as well as give these small computers access to the large mainframes) means that fixed sites for work are less meaningful.

  As with habitats, so with markets. What is a market? In the past it was a point where roads crossed and rivers merged, so individuals settled down to buy and sell their wares. Markets were places. No longer. Take the Rotterdam spot market for oil. It was the place where tankers carrying surplus oil would come so that oil could be sold “on the spot.” They came to Rotterdam because it was a large, protected port close to the markets of Western Europe; it had large storage capacity and a concentration of brokers who would go around and make their deals. It is still called the Rotterdam spot market for oil, but it is no longer in Rotterdam. But if not in Rotterdam, where? Everywhere. It is a telex-and-radio system whereby brokers in different parts of the world can make their deals and redirect the ships on the high seas to different ports. In effect, markets are no longer places but networks.

  And this is true for most commodities, especially for capital and currency markets. Today one can get “real time” quotations for dollars, deutsche marks, Swiss francs, yen, French francs, sterling, and Italian lira in Tokyo, Singapore, Hong Kong, Milan, Frankfurt, Paris, London, New York, Chicago, and San Francisco; money moves swiftly across national borders. Capital flows in response to differential interest rates or in reaction to news of political disturbances.

  The nerves, nodes, and ganglia of this genuinely global economy are tied together in ways the world has never seen before. We have a widening of the arenas, more actors, and an increase in the velocity and volatility of transactions and exchanges. The crucial question is whether the older institutional structures are able to deal with this extraordinary volume of interactions. These are the problems of scale that I shall return to toward the end of this foreword.

  The second instrument of transformation of economic geography and social locations is the new materials revolution, which begins to “redefine” what is a mineral or metal. Historically, every society has been based on natural resources. England is an island “bedded” on coal. When steam pumps were invented, the water in the mines could easily be pumped out, and miners could dig deeper into the coal veins. Imperialism was a means of assuring a nation of raw materials, as well as markets. Japan, when it found itself needing coal in the 1930s, went into Manchuria, in part to assure itself of a supply of coal (as well as to establish defenses against the Soviet Union).

  Today all this is changing. Because of the materials revolution, derived from the understanding of quantum mechanics, one can make entirely new products based on the properties one wants. Thus, one does not ask, say, for tin or zinc or steel but for different properties—ductility, tensility, conductivity—and one gets composites or alloys that demonstrate these properties.

  The basic principle of the materials revolution is technological substitution. We need not run out of any set of materials we need. We can always have technological substitution—at a price. More than twenty years ago, the Club of Rome, an organization of businessmen, predicted the rapid exhaustion of natural resources and gained worldwide attention because of the oil shortages that developed in 1973. But those shortages were not due to the exhaustion of oil but to the actions of the OPEC cartel; still, the idea of “shortages” captured media attention and induced fear in the public.

  Actually, the Club of Rome had first predicted a shortage of copper, based on a rising demand and, presumably, a limited supply of the resource. A number of oil companies bought copper mines as a hedge, and for a short time, the price of copper doubled. Yet for the past fifteen years, there has been a glut of copper on the market, and the commodity prices have been low.

  If one asks where is the largest hoard of copper in the world today, some individuals, knowing some economic geography, might say that the largest hoard in the world today is in Chile or in Zimbabwe in Africa. Yet the largest hoard is probably under New York City—the large amount of copper cable that is being outmoded by fiber optics. Fiber optics, made from spun glass, is cheaper to make, requires less energy to manufacture, and has ten times the capacity of copper cables. Every telecommunications system in the world is replacing its copper cables with fiber optics. So copper is no longer a strategic commodity.

  Neither are most other metals and minerals. During World War II, there were copper cartels, rubber cartels, tin cartels, zinc cartels, based on the control of strategic natural resources. There are no such cartels in the world today. They have been outmoded by technological substitutions. The only cartel left is oil, and this is only because oil is so cheap. There are alternative sources of energy: thermal activity, shale, nuclear plants, the sun, natural gas, methanol, ethanol, and even coal sludge. But they are much more expensive. So oil still has a str
ategic advantage because of price and plenty.

  There are large socioeconomic consequences to the rising materials revolution—namely, those regions that are locked into primary-product production, such as Africa, are in serious trouble. Africa lives primarily on agriculture and metals and minerals. But there are large supplies of farm products, especially grains, throughout the world and particularly in Europe, the United States Canada, and Australia. Fertilizer and the “green revolution” have made the world almost self-sufficient in food.23 And in the case of metals and minerals or rubber, again, technological substitution reduces the export markets for the natural products. In 1990, a basket of exports from sub-Saharan Africa was worth one-half what it was worth in 1980. And if one subtracts oil, which means Nigeria, it was worth one-third. To make the transition to post-industrial sectors, Africa of course needs political stability and the expansion of education—the conditions that allowed Western societies to flourish.

  For two hundred years we had an international economy, regulated mainly throughout the nineteenth century by the gold standard. There were a number of “core” countries and, around them, the “periphery.” The core countries, for the most part, were Great Britain and the United States, and to some extent, Germany and Western Europe. The periphery was Asia, Latin America, and Africa. The core countries did the major share of manufacturing. The peripheral countries provided raw materials; some provided immigration and cheap labor, and some provided a market for cheap goods. There was a division of trade and a division of labor based, in economic theory (though modified by political pressure), on “comparative advantage”: Nations produced what they could produce best based on resources, technology, and skilled labor. Great Britain was the leader in textiles, steel, shipbuilding, and engineering. Germany was the leader in electrical products and chemicals. The United States was premier in automobiles, farm products, and coal. Nations sought to break into the international economy by moving up what I have called “the technological ladder.” Thus, for example, after World War II, Japan moved strongly into shipbuilding and steel, and both industries, especially the former, moved completely out of Great Britain.