Development

UNITED NATIONS RESEARCH INSTITUTE FOR SOCIAL DEVELOPMENT

Information Technology, Globalization
and Social Development
Manuel Castells

UNRISD Discussion Paper No. 114, September 1999

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u Contents
u Summary/Résumé/Resumen iv

INTRODUCTION 1

THE NEW SOCIO-ECONOMIC SYSTEM: INFORMATION
TECHNOLOGY, NETWORKING, GLOBALIZATION 2

INFORMATION AND COMMUNICATION TECHNOLOGY
AS A STRATEGIC TOOL 2

GLOBALIZATION 4

NETWORKING 6

THE OTHER SIDE OF THE INFORMATION AGE:
INEQUALITY, POVERTY, MISERY AND SOCIAL EXCLUSION 7

u Links Between Informational Capitalism and the Growing Social Crisis 9

THE FOURTH WORLD 10

REDEFINING SOCIAL DEVELOPMENT IN THE INFORMATION AGE 11

REFERENCES 14

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u Summary/Résumé/Resumen
Summary
For the first time in history the entire planet is capitalist. 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.

In the following paper, presented at the UNRISD conference on Information
Technologies and Social Development (Geneva, June 1998), Manuel Castells
examines the profile of this new world, centred around multinational corporations,
global financial markets and a highly concentrated system of technological
research and development. He stresses the extreme flexibility of the system, which
allows it to link up everything that is valuable according to dominant values and
interests, while disconnecting everything that is not valuable, or becomes
devalued. This simultaneous capacity to include and exclude people, territories and
activities is based upon a capacity to network.

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 not stability,
but inclusion or exclusion. Networks change relentlessly: they move along, form
and re-form, in endless variation. Those who remain inside have the opportunity to
share and, over time, to increase their chances. Those who drop out, or become
switched off, will see their chances vanish.

In other words, networks—all networks—ultimately 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. In a
downgraded region, capital disinvests, software engineers migrate, tourists find
another fashionable spot, and global media close down. 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 devalued, or wasted. And this leads to social underdevelopment,
precisely at the threshold of the potentially most promising era of human
fulfilment.

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

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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 currently being wasted can be reinvested.

Manuel Castells is a professor of sociology, and of city and regional planning, at
the University of California, Berkeley.

Résumé
Pour la première fois dans l'histoire, toute la planète est capitaliste. Même les rares
économies dirigées qui restent subsistent ou se développent grâce à leurs liens
avec les marchés capitalistes mondiaux. Pourtant, c'est un capitalisme à la fois très
ancien et fondamentalement nouveau. Ancien parce qu'il fait appel à une
concurrence acharnée dans la poursuite du profit et parce que la satisfaction
individuelle (différée ou immédiate) en est la force motrice. Mais
fondamentalement nouveau parce qu'il a pour outils de nouvelles techniques de
l'information et de la communication qui sont à la base de nouvelles sources de
productivité, de nouvelles formes d'organisation et de la construction d'une
économie mondiale.

Dans le document suivant, présenté à la conférence de l'UNRISD sur les
techniques de l'information et le développement social (Genève, juin 1998),
Manuel Castells examine le profil de ce monde nouveau, centré sur les sociétés
multinationales, les marchés financiers mondiaux et un système très concentré de
recherche-développement hautement technique. Il souligne l'extrême flexibilité du
système, qui peut établir des connexions avec tout ce qui est précieux au regard
des valeurs et des intérêts dominants et se déconnecter de tout ce qui ne l'est pas ou
qui est dévalué. Cette capacité d'inclure et d'exclure simultanément à la fois
personnes, territoires et activités repose sur la capacité de travailler en réseau.

Un réseau n'est qu'un ensemble de noeuds connectés entre eux. Il peut avoir une
hiérarchie, mais il n'a pas de centre. Les relations entre les noeuds sont
asymétriques mais elles sont toutes nécessaires au fonctionnement du réseau - à la
circulation de l'argent, de l'information, des techniques, des images, des biens, des
services ou des personnes sur tout le réseau. La distinction essentielle dans cette
logique organisationnelle, ce n'est pas la stabilité mais l'inclusion ou l'exclusion.
Les réseaux changent inlassablement : ils se déplacent, se forment et se reforment
dans des variations infinies. Ceux qui restent à l'intérieur ont la possibilité de
partager, d'échanger et, avec le temps, d'accroître leurs chances. Ceux qui
abandonnent ou sont déconnectés les voient au contraire s'amenuiser.

En d'autres termes, les réseaux - tous les réseaux - progressent en se restructurant,
qu'ils modifient leur composition, leurs membres ou même leurs tâches. Le
problème, c'est que les êtres humains, et les territoires, dont les moyens d'existence
et le sort dépendent de leur positionnement dans ces réseaux, ne peuvent pas
s'adapter aussi facilement. Une région déclassée voient fuir les capitaux, émigrer
les ingénieurs de logiciel, les touristes trouver d'autres coins à la mode et les
médias planétaires la déserter. Les réseaux s'adaptent, contournent la région (ou
certaines personnes) et se reforment ailleurs, ou avec quelqu'un d'autre. Mais les
mutations ne sont pas aussi faciles pour le matériel humain dont vivait le réseau. Il
est pris au piège, déclassé ou mis au rebut. Il en résulte un sous-développement

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social, et cela au seuil d'une ère qui pourrait être annonciatrice d'un fantastique
épanouissement pour l'être humain.

Il est urgent de renverser la spirale de l'exclusion qui entraîne vers le bas et de se
servir des techniques de l'information et de la communication pour donner des
moyens aux êtres humains. Pour que l'ère de l'informatique renoue avec le
développement social et la croissance économique, il faudra une modernisation
technologique massive des pays, des entreprises et des ménages dans le monde
entier, stratégie du plus haut intérêt pour chacun, y compris pour l'industrie. La
révision des systèmes d'éducation partout dans le monde nécessitera d'énormes
investissements. Il faudra créer un réseau mondial, de nature technico-scientifique,
dans lequel les universités les plus avancées seront prêtes à partager leur savoir et
leur expérience pour le bien commun. Le but doit être de renverser, lentement mais
sûrement, la tendance à la marginalisation de pays entiers, de villes et de quartiers,
afin que le potentiel humain actuellement gaspillé puisse être réinvesti.

Manuel Castells est professeur de sociologie, d'urbanisme et d'aménagement
régional à l'Université de Californie, Berkeley.

Resumen
Por primera vez en la historia el mundo entero es capitalista. Incluso algunas de las
pocas economías dirigentes que van quedando están sobreviviendo o
desarrollándose mediante sus enlaces con los mercados globales capitalistas. No
obstante, éste es un capitalismo que es a la vez muy antiguo y fundamentalmente
nuevo. Antiguo porque atrae a la competencia sin tregua en persecución de
ganancias, y porque la satisfacción individual (diferida o inmediata) constituye su
aparato motor. Pero es fundamentalmente nuevo porque las herramientas que lo
movilizan son las nuevas tecnologías de la información y la comunicación, que
constituyen las raíces de las nuevas fuentes de productividad, nuevas formas de
organización, y el montaje de una economía mundial.

En este documento que presentó en la conferencia del UNRISD sobre Tecnologías
de Información y Desarrollo Social (Ginebra, junio de 1998), Manuel Castells
examina el perfil de este nuevo mundo, centrado en torno a las corporaciones
multinacionales, los mercados financieros mundiales y un sistema altamente
concentrado de investigación y desarrollo tecnológicos. Enfatiza la extrema
flexibilidad del sistema, que le permite conectarse con todo lo valioso según los
valores e intereses dominantes, mientras desconectan todo lo que no sea valioso, o
pierda su valor. Esta capacidad simultánea de incluir y excluir a las personas,
territorios y actividades se fundamenta en la capacidad de formar redes de
comunicación.

Una red de comunicación es simplemente un conjunto de nodos. Puede tener una
jerarquía, pero no un centro. Las relaciones entre los nodos son asimétricas, pero
todas son necesarias para el funcionamiento de la red –para la circulación de
dinero, información, tecnología, imágenes, productos, servicios, o personas por
toda la red. El punto distintivo más crucial en esta lógica de organización no es la
estabilidad, sino la inclusión o exclusión. Las redes cambian de modo implacable:
se trasladan, forman y vuelven a formar, en variedades infinitas. Aquellos que
permanecen en su interior tienen la oportunidad de compartir y, con el tiempo,
aumentar sus oportunidades. Aquellos que la abandonan o se desconectan, verán
desaparecer sus oportunidades.

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En otras palabras, las redes –todas las redes- en última instancia salen adelante
reestructurándose, bien cambian su composición, sus afiliados, o incluso sus
tareas. El problema yace en que la gente, y los territorios, cuyo sustento y destino
depende de que ocupen un lugar en estas redes, no pueden adaptarse tan
fácilmente. En una región de categoría más baja, se reduce o se para la inversión
de capital, los ingenieros especializados en software emigran, los turistas
encuentran otra comarca de moda y los medios de comunicación mundiales se
cierran. Las redes se adaptan, evitan pasar por ciertas áreas (o pasan por encima de
la gente), y se vuelven a formar en otra parte o con otra gente. Pero la materia
humana en la cual vivía la red no puede sufrir fácil mutación. Queda atrapada, se
devalúa, o se desperdicia, lo que conduce al subdesarrollo, precisamente en el
umbral de la era potencialmente más prometedora de realización humana.

Es urgentemente necesario invertir esta espiral descendente de exclusión y utilizar
las tecnologías de información y comunicación para potenciar a la humanidad. La
reintegración del desarrollo social y crecimiento económico en la era de la
información necesitará una mejora tecnológica masiva de los países, empresas y
hogares alrededor del mundo –una estrategia del más alto interés para todos,
incluyendo el mundo de los negocios. Habrá que invertir de modo espectacular
para hacer una revisión del sistema educacional en todas partes. Será necesario
establecer una red mundial de ciencia y tecnología, en la que las universidades más
avanzadas estarán dispuestas a compartir sus conocimientos y experiencia para el
beneficio de todos. El objetivo debe ser invertir, de manera lenta pero segura, la
marginalización de países o ciudades o vecindades en su totalidad, de modo que el
potencial humano que hoy se desperdicia pueda volver a invertirse.

Manuel Castells es profesor de sociología, y de planificación urbana y regional, en
la Universidad de California, Berkeley.

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INTRODUCTION
The world is in the midst of a historical transformation at the turn of the
millennium. Like all major transformations in history, it is multidimensional:
technological, economic, social, cultural, political, geopolitical. Yet, in the end,
what is the real meaning of this extraordinary mutation for social development, for
people’s lives and well-being? And is there a shared meaning for everyone, or
must we differentiate people in terms of their specific relationship to the process of
social change? If so, what are the criteria for such a differentiation?

There is a raging debate in the world on the mixed record of the information
technology revolution, and of globalization—especially when we consider their
social dimensions on a planetary scale. As is always the case with a fundamental
debate, it is most often framed ideologically and cast in simplistic terms. For the
prophets of technology, for the true believers in the magic of the market,
everything will be just fine, as long as ingenuity and competition are set free. All
we need are a few regulatory fixes, to prevent corruption and to remove
bureaucratic impediments in the path of our flight to hyper-modernity. For those
around the world who are not ecstatic about surfing on the Internet, but who are
affected by layoffs, lack of basic social services, crime, poverty and disruption of
their lives, globalization is nothing more than a warmed up version of traditional
capitalist ideology. In their view, information technology is a tool for renewed
exploitation, destruction of jobs, environmental degradation and the invasion of
privacy. Techno-elites versus neo-luddites.

Of course, the real issues are not in-between, but elsewhere. Social development
today is determined by the ability to establish a synergistic interaction between
technological innovation and human values, leading to a new set of organizations
and institutions that create positive feedback loops between productivity,
flexibility, solidarity, safety, participation and accountability, in a new model of
development that could be socially and environmentally sustainable.

It is easy to agree on these goals, but difficult to develop the policies and strategies
that could lead to them. Some of the disagreement comes, certainly, from
conflicting interests, values and priorities. But a considerable source of current
disarray in social and economic policies stems from the lack of a common
understanding of the processes of transformation under way, of their origins and
their implications. This paper aims to clarify the meaning of this transformation,
particularly by focusing on the processes that are usually considered to be its
triggers: the information technology revolution and the process of globalization.
As we shall see, in fact, these two processes interact with others, in a very complex
set of actions and reactions. But they offer a fruitful entry point to discuss the
connection between the new socio-economic system and the generation of
inequality and social exclusion on an unprecedented, planetary scale.

Thus, after having characterized technological innovation, organizational change
and globalization, I will analyse the various dimensions of inequality and social
exclusion, showing the depth of our social crisis, and I will provide some
hypotheses on the reasons for its accentuation in the last decade. I will conclude by
proposing a redefinition of the field of social development, appropriate to tackle
the issues that condition our capacity to live together in the new context of the

Information Technology, Globalization and Social Development

“information age”. In proceeding along the lines of this argument, I have in mind a
variety of data, from reliable sources, that make somewhat plausible the analysis
presented here. However, since I have just published a book that brings together
many of these data, I take the liberty of referring the reader to it, in order to
concentrate here on the schematic presentation (and expanded elaboration) of my
argument without repeating the presentation of data sources (see Castells, 1996,
1997 and 1998 as well as the synthesis of data on world poverty presented in
UNDP, 1997).

THE NEW SOCIO-ECONOMIC SYSTEM:
INFORMATION TECHNOLOGY,
NETWORKING, GLOBALIZATION
In the last quarter of this century, a new form of socio-economic organization has
emerged. 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 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 roots of new productivity sources, of new
organizational forms, and of the formation of a global economy. Let us briefly
examine the profile of this new world we are living in, which in fact is shared by
all countries despite the diversity of their cultures and institutions.

INFORMATION AND COMMUNICATION
TECHNOLOGY AS A STRATEGIC TOOL
Information technology is not the cause of the changes we are living through. But
without new information and communication technologies none of what is
changing our lives would be possible. In the 1990s the entire planet is organized
around telecommunicated networks of computers at the heart of information
systems and communication processes. The entire realm of human activity depends
on the power of information, in a sequence of technological innovation that
accelerates its pace by month. Genetic engineering, benefiting from this wealth of
information processing capacity, is progressing by leaps and bounds, and is
enabling us, for the first time, to unveil the secrets of living matter and to
manipulate life, with extraordinary potential consequences. Software development
is making possible user-friendly computing, so that millions of children, when
provided with adequate education, can progress in their knowledge, and in their
ability to create wealth and enjoy it wisely, much faster than any previous
generation. Internet—today used by about 100 million people, and doubling this
number every year—is a channel of universal communication where interests and

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UNRISD Discussion Paper No. 114

values of all sorts coexist, in a creative cacophony. Certainly, the diffusion of
information and communication technology is extremely uneven. Most of Africa is
being left in a technological apartheid, and the same could be said of many other
regions of the world. The situation is difficult to remedy when one third of the
world’s population still has to survive on the equivalent of one dollar per day.

Technology per se does not solve social problems. But the availability and use of
information and communication technologies are a pre-requisite for economic and
social development in our world. They are the functional equivalent of electricity
in the industrial era. Econometric studies show the close statistical relationship
between diffusion of information technology, productivity and competitiveness for
countries, regions, industries and firms (Dosi et al., 1988). They also show that an
adequate level of education in general, and of technical education in particular, is
essential for the design and productive use of new technologies (Foray and
Freeman, 1992). But neither the sheer number of scientists and engineers nor the
acquisition of advanced technology can be a factor of development by itself
(neither was enough for the Soviet Union—see Castells and Kiselyova, 1995),
without an appropriate organizational environment.

The crucial role of information and communication technologies in stimulating
development is a two-edged sword. On the one hand, it allows countries to
leapfrog stages of economic growth by being able to modernize their production
systems and increase their competitiveness faster than in the past. The most critical
example is that of the Asian Pacific economies, and particularly the cases of Hong
Kong, Taiwan, Singapore, Malaysia and South Korea. This is so despite the
current financial crisis, which is unrelated to competitive performance and may be
related, in fact, to the attractiveness of booming Asian economies to global capital
flows. On the other hand, for those economies that are unable to adapt to the new
technological system, their retardation becomes cumulative. Furthermore, the
ability to move into the Information Age depends on the capacity of the whole
society to be educated, and to be able to assimilate and process complex
information. This starts with the education system, from the bottom up, from the
primary school to the university. And it relates, as well, to the overall process of
cultural development, including the level of functional literacy, the content of the
media, and the diffusion of information within the population as a whole.

In this regard, what is happening is that regions and firms that concentrate the most
advanced production and management systems are increasingly attracting talent
from around the world, while leaving aside a significant fraction of their own
population whose educational level and cultural/technical skills do not fit the
requirements of the new production system. A case in point is Silicon Valley, the
most advanced information technology-producing region in the world, which can
only maintain the pace of innovation by recruiting every year thousands of
engineers and scientists from India, China, Taiwan, Singapore, Korea, Israel,
Russia and Western Europe, to jobs that cannot be filled by Americans because
they do not have proper skills (Benner, in progress). Similarly, in Bangalore,
Mumbai, Seoul or Campinas, engineers and scientists concentrate in high-
technology hubs, connected to the “Silicon Valleys” of the world, while a large
share of the population in all countries remains in low-end, low-skill jobs, when
they are lucky enough to be employed at all. (Carnoy, 1999). Thus there is little
chance for a country, or region, to develop in the new economy without its
incorporation into the technological system of the information age. Although this

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does not necessarily imply the need to produce information technology hardware
locally, it does imply the ability to use advanced information and communication
technologies, which in turn requires an entire reorganization of society (Castells
and Tyson, 1988, 1989).

A similar process affects the life chances of individuals. Not everybody should be
a computer programmer or a financial analyst, but only people with enough
education to reprogramme themselves throughout the changing trajectory of their
professional lives will be able to reap the benefits of the new productivity. What
about “the others”? It depends on social organization, the strategies of firms, and
public policies. But left to market forces, there is an undeniable tendency toward a
polarized social structure, between countries and within countries, as I will show
below.

In sum, information and communication technology is the essential tool for
economic development and material well-being in our age; it conditions power,
knowledge and creativity; it is, for the time being, unevenly distributed within
countries and between countries; and it requires, for the full realization of its
developmental value, an inter-related system of flexible organizations and
information-oriented institutions. In a nutshell, cultural and educational
development conditions technological development, which conditions economic
development, which conditions social development, and this stimulates cultural
and educational development once more. This can be a virtuous circle of
development or a downward spiral of underdevelopment. And the direction of the
process will not be decided by technology but by society, through its conflictive
dynamics.

GLOBALIZATION
There is so much ideology surrounding this notion, and its implications, that it is
essential to characterize globalization precisely, and then determine its extent and
evolution in empirical terms (see Hirst and Thompson, 1996). Although
globalization is multidimensional, it can be better understood starting with its
economic dimension. A global economy is an economy whose core activities work
as a unit in real time on a planetary scale. Thus capital markets are interconnected
worldwide, so that savings and investment in all countries, even if most of them
are not globally invested, depend for their performance on the evolution and
behaviour of global financial markets.

In the early 1990s multinational corporations employed directly “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 (Bailey et al.,
1993). Therefore multinational corporations, in manufacturing, services, and
finance, with their ancillary networks of small and medium businesses, constitute
the core of the world economy.

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

4


the United States, Western Europe and Japan. Russian, Indian and Chinese
engineers, usually of very high quality, when they reach a certain level of scientific
development, 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 talent, 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 their 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 as a unit on a planetary scale:
telecommunications, information systems, microelectronic-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.

Similar processes of selective, segmented globalization characterize other critical
instrumental dimensions of our society, including the media, science, culture and
information at large.

Globalization and liberalization do not eliminate the nation state, but they
fundamentally redefine its role and affect its operation. Central banks (including
the new European Central Bank) cannot really control the trends of global flows in
financial markets. And these markets are not always shaped by economic rules, but
by information turbulences of various origins. National governments, in order to
maintain some capacity to manage global flows of capital and information, band
together, creating or adapting supranational institutions (such as the International
Monetary Fund, the European Union, NAFTA, or other regional co-operation
agencies), to which they surrender much of their sovereignty. So they survive, but
under a new form of state that links supranational institutions, national states,
regional and local governments, and even NGOs, in a network of interaction and
shared decision making that becomes the prevalent political form of the
information age: the network state.

In sum, globalization is a new historical reality—not simply the one invented by
neo-liberal ideology to convince citizens to surrender to markets, but also the one
inscribed in processes of capitalist restructuring, innovation and competition, and
enacted through the powerful medium of new information and communication
technologies.

5


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 are the appropriate organization for the relentless adaptation and the
extreme flexibility that is required by an interconnected, global economy—by
changing economic demand and constantly innovating technology, and by the
multiple strategies (individual, cultural, political) deployed by various actors,
which create an unstable social system at an increasing level of complexity. To be
sure, networks have always existed in human organization. But only now have they
become the most powerful form for organizing instrumentality, rather than
expressiveness. The reason is fundamentally technological. The strength of
networks is their flexibility, their decentralizing capacity, their variable geometry,
adapting to new tasks and demands without destroying their basic organizational
rules or changing their overarching goals. Nevertheless their fundamental
weakness, throughout history, has been the difficulty of co-ordination towards a
common objective, toward a focused purpose, that requires concentration of
resources in space and time within large organizations, like armies, bureaucracies,
large factories, vertically organized corporations.

With new information and communication technology, the network is, at the same
time, centralized and decentralized. It can be co-ordinated without a centre. Instead
of instructions, we have interactions. Much higher levels of complexity can be
handled without major disruption. It does not follow, however, that large
corporations are being replaced by small and medium businesses, or that
multinationals are obsolete. We observe, in fact, the opposite: there is merger
mania around the world. Bigger appears to be increasingly beautiful, as Citicorp
marries Travelers Insurance, Bank of America leaves its heart in San Francisco but
moves its money to North Carolina, Daimler Benz swallows Chrysler, Volkswagen
upgrades itself to Rolls Royce status, and American banks digest Asian banks and
financial corporations, in a historical revenge of the West against the high-growth
areas of the Pacific.

But the concentration of capital goes hand in hand with the decentralization of
organization. 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; other networks link up with other large

6


corporations, around specific projects and tasks, with specific time and spatial
frames.

Yes, ultimately all this complexity boils down to the need to assure a profit. But
how, and for whom? Once CEOs have served themselves, lavishly, there is still
most of the capital to be distributed among increasing numbers of shareholders.
Earnings do not remain in the firm (whether dedicated primarily to manufacturing,
finance, or services): they are invested in the global casino of inter-related
financial markets, whose fate is ultimately determined by a series of factors. Only
some of those factors have to do with economic fundamentals. Because of this
level of unpredictability and complexity, the networks in which all firms, large or
small, are anchored, move along, readapt, form and reform, in an endless variation.
Firms and organizations that do not follow the networking logic (be it in business,
in 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, even if
they change their composition, their membership, and 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 readapt, bypass the area (or some
people), and reform 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.

THE OTHER SIDE OF THE INFORMATION AGE:
INEQUALITY, POVERTY, MISERY
AND SOCIAL EXCLUSION
To analyse current trends of poverty and inequality in the world, we need to
establish some conceptual clarity by distinguishing, first, between relationships of
consumption and relationships of production; and then by differentiating four
specific processes in both sets of relationships. Relationships of consumption refer
to the appropriation by people of the product of their work. Here, we must
differentiate between inequality, polarization, poverty and misery. Inequality refers
to the unequal appropriation of wealth (income and assets) by individuals or social
groups. Polarization is a specific process of inequality that occurs when both the
top and the bottom of a scale of wealth distribution grow faster than the middle.
Poverty is an institutionally defined norm establishing the level of income that a
society considers necessary to live according to an accepted standard. Misery, or
extreme poverty, is an institutionally defined level that establishes the lowest
material standard of living, making survival problematic.

When we observe the evidence of social trends in the world—within countries and
between countries, and among people—in the last two decades, the following
trends can be detected. There is increasing inequality between countries in the
world at large, while intra-country inequality offers a mixed record, with some

7


countries improving their condition (e.g., India, the Asian Pacific, Spain), while
others have fallen into greater inequality (United States, United Kingdom, Mexico,
Brazil). Polarization is on the rise everywhere. At a global level, the ratio of
income for 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. And the personal assets of
385 billionaires in the world are now higher than the annual income of countries
representing 45 per cent of the population of the planet.

The evolution of poverty is complex. Modernization has contributed to reducing
the proportion of poor people in some very large countries, including China, India
and Brazil. Still, the proportion of the poor is growing in most countries. And the
number of people living in poverty has significantly increased everywhere.
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 (see sources cited
by Castells, 1998, pp. 75-82; and UNDP, 1997).

As for relationships of production, they refer to the ways and means through which
people provide for their livelihood. Here I will not go into a full-fledged analysis
of all relationships of production existing in our society, but I will focus on the
four conditions that seem to be decisive in affecting relationships of consumption.
The first process, characterizing the information age as a result of its networking
form of organization, is the growing individualization of labour: I refer to the
process by which labour’s contribution to production is defined specifically for
each individual, with little reference to collective bargaining or regulated
conditions. If the industrial era consisted, in terms of the labour process, of taking
a population of peasants and craftsmen and bringing them into socialized
conditions of labour, the information age is exactly the reversal. It is the de-
socialization of labour and the increasing flexibility and individualization of labour
performance.

This is not necessarily either good or bad. Flexibility of labour can allow people to
organize their lives better, or not. But it does transform the social relationship
between capital and labour, between management and workers, and among
workers themselves. And it has fundamental implications for political action.

A second characteristic of current relationships of production is over-exploitation:
I mean the imposition of unfavourable norms of compensation or labour conditions
on certain categories of workers (e.g., immigrants, women, youth, minorities)
because of their vulnerability to discrimination. Women, in particular, have been
massively incorporated into paid work, but in many cases at miserable wages (see
data in Castells, 1996, chapter 4; and 1997, chapter 4).

A third characteristic is social exclusion, that is the process by which certain
individuals or groups are barred from access to social positions that would entitle
them to provide for themselves adequately, in an autonomous way, within the
context of prevailing institutions and values. Usually, in informational capitalism,
such a position is associated with the possibility of access to relatively regular,
paid labour for at least one member of a stable household; or with the right to
receive sufficient long term benefits from a non-stigmatizing welfare system.
There is currently an extraordinary increase in numbers of people who find
themselves in situations of social exclusion in practically all countries of the

8


world, with the exception of the Scandinavian democracies (for sources, see
Castells, 1998, chapter 2).

Finally, there is a fourth significant type of relationship of production that is
relevant to current trends of social underdevelopment: what I call perverse
integration. This refers to the labour process in the criminal economy—in other
words, to income-generating activities that are normatively declared to be a crime
by the state. As a significant number of people are being excluded from access to
regular jobs, they are moving onto this 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. And in fact, they are increasingly there, because—with the
exception of Russia—many populations now have an increasing life expectancy.
(For more on the explosion of the criminal economy throughout the world—and,
accordingly, a boom in its employment capacity—see Castells, 1998, chapter 3.)

u Links Between Informational Capitalism and
the Growing Social Crisis
These, however, are simply observations of a growing social crisis (and not
exempt from controversy concerning the selection and interpretation of data).
What does the analysis mean? What is the relation of these trends, if any, to the
structure and dynamics of informational, global capitalism?

First, the extreme social unevenness of the process is linked to the flexibility and
global reach of informational capitalism. If everything, and everyone, who can be a
source of value can be easily connected—and as soon as he/she/it ceases to be so,
can be easily disconnected (because of individualization and extreme mobility of
resources)—then the global system of production is populated simultaneously by
extremely valuable and productive individuals and groups, and by people (or
places) who are not, or are not any longer considered valuable, even if they are still
physically there. Because of the dynamism and competitiveness of the dominant
system, most previous forms of production become destructured, and ultimately
phased out, or transformed into subdued tributaries of the highly integrated,
dynamic, globalized system.

Second, education, information, science and technology become critical as sources
of value creation (and reward) in the informational economy. While formal
education has increased throughout the world, the quality of education becomes
essential. Most public schools, both in developing countries and in the United
States, are simply not up to the task of producing the new, informational labour
force. But even in countries with a decent educational system, the overall cultural
and technological environment that is required to exercise informational skills
does not mirror the dynamism of the system. So lack of education, and lack of
informational infrastructure, lead most of the world to be dependent on the
performance of a few globalized segments of their economies, increasingly
vulnerable to the whirlwind of global financial flows.

Third, as new technologies, new production systems and the organization of
international trade eliminate traditional agriculture (still employing two-thirds of
the people in the world in this end of millennium), a rural exodus of gigantic
dimensions is being propelled—particularly in Asia. Rural people are destined to

9


be painfully absorbed into the informal economy of overcrowded megacities on the
edge of ecological catastrophe. Fourth, since states are bypassed by global flows,
disciplined by the enforcers of these flows (such as the IMF), or limited by the
supranational institutions they have initiated to survive somehow in the midst of
globalization, welfare states come under attack, regulations break down, and the
social contract, wherever it has existed, is fundamentally challenged.

New technologies do not induce unemployment, as has been repeatedly
demonstrated by empirical research (Carnoy, 1999). Indeed, at the world level
there is a massive creation of jobs but, in most cases, under conditions of over-
exploitation: the most telling development is the employment of about 250 million
children at the time work is supposedly ending. But there is unemployment in
Western Europe when firms facing tight labour rules, high wages, and generous
social benefits refuse to create jobs. Those firms have the possibility of
automating, subcontracting and/or investing elsewhere, while still selling goods
and services in the European market. Thus, under current conditions, markets
overwhelm regulations and worker protection through relying on the increased
mobility of resources made possible in the new technological environment. This is
why, in the midst of the most extraordinary period of human ingenuity, people
around the world are taken by panic. And this is why, together with affluence and
prosperity for a significant minority (about one third of the people in advanced
countries, and probably about one fifth in the world at large, who have
substantially improved their living standards in the last 10 years), there is the
formation of a fourth world, characterized by social exclusion.

THE FOURTH WORLD
This world is composed of people, and territories, that have lost value for the
dominant interests in informational capitalism. Some of them because they offer
little contribution as either producers or consumers. Others because they are
uneducated or functionally illiterate. Others because they become sick or mentally
unfit. Others because they could not afford the rent, became homeless, and were
devoured by life in the streets. Others who, unable to cope with life, became drug
addicts or drunks. Others because, in order to survive, they sold their bodies and
their souls, and went on to be prostitutes of every possible desire. Others because
they entered the criminal economy, were caught, and became inhabitants of the
growing planet of the criminal justice system (almost 3 per cent of adult males in
the United States). Others because they had an incident with a cop, or a boss, or
some authority and got onto the wrong track. And places, entire places become
stigmatized, confined by police, bypassed by networks of communication and
investment. Thus, while valuable people and places have been globally connected,
devalued locales become disconnected and people from all countries and cultures
are socially excluded by the tens of millions. This fourth world of social exclusion,
beyond poverty, exists everywhere, albeit in different proportions—from the South
Bronx to Mantes-la-Jolie, from Kamagasaki to Meseta de Orcasitas, and from the
favelas of Rio to the shanties of Jakarta. And there is, as I have tried to show, a
systemic relationship between the rise of informational, global capitalism, under
current conditions, and the extraordinary growth of social exclusion and human
despair.

10


REDEFINING SOCIAL DEVELOPMENT
IN THE INFORMATION AGE
For millennia, social development was tantamount to social survival: the daily goal
of people, with the exception of a tiny ruling minority, was to get by, make a
family, and steal a few moments of joy out of the harshness of the human
condition. This is still the lot of many. Yet over the last two centuries, with the
advent of the industrial age, social development came to involve the goal of
improving people’s livelihood. Capital accumulation and investment, technological
development geared towards material production, and massive inputs of labour and
natural resources were the generators of wealth, both under capitalism and under
statism. Social struggles and political reform—or revolution—took care of
diffusing the harvest of productivity within society at large, albeit with the
shortcomings of a world divided between North and South, and organized in class
societies that tended to reproduce themselves.

There is something new in the information age. It can be empirically argued that at
the source of productivity and competitiveness (that jointly determine the
generation of wealth and its differential appropriation by economic units), there is
the capacity to generate new knowledge and to process relevant information
efficiently. To be sure, information and knowledge have always been essential
factors in power and production. Yet it is only when new information and
communication technologies empower humankind with the ability incessantly to
feed knowledge back into knowledge, experience into experience, that there is, at
the same time, unprecedented productivity potential, and an especially close link
between the activity of the mind, on the one hand, and material production, be it of
goods or services, on the other. The old school of thought centred around the
notion of human capital is fully vindicated. To invest in education is a productive
investment. An educated labour force is a source of productivity. But to be
educated means nothing if labour does not enjoy good health, decent housing,
psychological stability, cultural fulfilment—in other words, a multidimensional
improvement in the quality of life. Thus welfare states, minus their bureaucratic
underpinnings, should be sources of productivity, and not simply burdens on the
budget.

Yet the interaction between economic growth and social development in the
information age is still more complex. It is the entire social organization that
becomes productive or, on the contrary, an obstacle for innovation, and thus for
productivity growth. Personal freedom (and therefore liberty in its fullest sense) is
a prerequisite for entrepreneurialism. Social solidarity is critical for stability and
thus for predictability in investment. Family safety is essential for the willingness
to take risks. Trust in one’s fellow citizens, and in the institutions of governance, is
the foundation for socializing ingenuity in a given space and time, thus making it
possible for others to enjoy the fruits of such ingenuity. In a word (and continuing
along the seamless circle of change to which reference was made at the outset of
this paper), social development leads to cultural development, which leads to
innovation, which leads to economic development, which fosters institutional
stability and trust; and this underlies a new, synergistic model that integrates
economic growth and the enhancement of quality of life.

11


Without social development, without institutional stability, there may still be a
diffusion of economic development around the world, but it will be based upon a
cost-lowering formula, rather than a productivity-enhancing model. Furthermore,
both spirals (the high road to informational productivity, and the low road to
economic competitiveness through cost cutting) are cumulative and contagious. If
firms, and countries, compete on the basis of worsening the conditions of work,
and concentrating as much as possible of the productivity bonanza in a few hands,
they will kill incentives for most workers to invest their own mental capital in a
collective undertaking, they will slow down the learning curve, and they will
restrict both purchasing power and the drive towards innovation. Silicon Valley
will still thrive on the basis of innovation, and it will still attract a substantial share
of brain power in the field of information technology from around the world. But
the proportion of Silicon Valley’s techno-elite in relation to the population at
large—even the educated population—will become so ridiculously small in
comparison to its share of power and wealth, that this will be socially
unsustainable. Some people’s dream of a shrinking planet, made up of a highly
productive, very affluent, avid consumer minority, floating on a cloud over low-
skilled generic labour and ignoring the black holes into which devalued people and
locales are doomed to sink, is simply untenable. It is a nightmare, shaken by the
rage of fundamentalism and by the fear of desperate terrorist threats. The
disassociation between economic growth and social development in the
information age is not only morally wrong, but also impossible to sustain.

The reintegration of social development and economic growth through
technological innovation, informational management, and shared world
development will not be accomplished by simply relying on unfettered market
forces. Neither will it be born only out of the individual efforts of states, engaging
in defensive strategies. It will require massive technological upgrading of
countries, firms, and households around the world—a strategy of the highest
interest for everyone, including business, and particularly for high technology
companies. (An appropriate use of the Internet is in fact the most important feature
in such an upgrading.) It will take a dramatic investment in overhauling the
educational system everywhere, through co-operation between national and local
governments, international institutions and lending agencies, international and
local business, and families ready to make sacrifices for a tangible improvement of
their children’s future. 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—and particularly
that of children—can be reinvested. All people must become valued producers and
consumers, and they must be recognized as human beings in fora other than the
thirty-second commercials of international organizations.

All this is feasible. We have the technical know how, the technology to do it, and
the economic and institutional strategies to implement it. The obstacles, of course,
are political. In part, they are related to very narrow business strategies. But if we
know what we want, why we want it, and how to do it, we have the basic
groundwork from which to try to convince business and governments. I tend to
think that it is in the interest of the most enlightened business groups to support the
high road of informational development, linking up productivity, quality of life,
and investment in technology and education throughout the world. And if there is a

12


strong pressure of public opinion in the world in favour of this shared development
strategy, with its potentially positive payoff in environmental conservation,
governments may join, ultimately, or else be ousted by their citizens.

Solidarity in a globalized world means global solidarity. And it also means inter-
generational solidarity. Our planet is our only home, and we would not like the
grandchildren of our grandchildren to be homeless. 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 our information-
based society. If this sounds like wishful thinking, it is only a measure of how
bewildered we have become at this critical moment of historical transition.

13


REFERENCES
Bailey, Paul et al. (1993)
Multinationals and Employment: The Global Economy in the 1990s,
Geneva: ILO.

Benner, Chris (in progress)
The Changing Labour Market of Silicon Valley, Ph.D. dissertation,
Department of City and Regional Planning, University of California,
Berkeley.

Carnoy, Martin (1999)
Sustainable Flexibility: Work, Family and Community in the
Information Age, New York: Cambridge University Press.

Castells, Manuel (1996)
The Information Age: Economy, Society, and Culture—Vol. I: The
Rise of the Network Society, Oxford: Blackwell.

_______ (1997)
The Information Age: Economy, Society, and Culture—Vol. II: The
Power of Identity, Oxford: Blackwell.

_______ (1998)
The Information Age: Economy, Society, and Culture—Vol. III: End
of Millennium, Oxford: Blackwell.

Castells, Manuel and Laura d’Andrea Tyson (1988)
“High technology choices ahead: Restructuring interdependence” in John
M. Sewell and Stuart Tucker (eds.), Growth, Exports and Jobs in a
Changing World Economy, New Brunswick: Transaction Books.

_______ (1989)
“High technology and the changing international division of production:
Implications for the U.S. economy”, in Randall Purcell (ed.), The Newly
Industrializing Countries in the World Economy”, Boulder: Lynne
Rienner.

Castells, Manuel and Emma Kiselyova (1995)
The Collapse of Soviet Communism: The View from the Information
Society, Berkeley: University of California, International and Area Studies
Book Series.

Dosi, Giovanni et al. (1988)
Technical Change and Economic Theory, London: Pinter.

Foray, Dominique and Christopher Freeman (1992)
Technologie et richesse des nations, Paris: Economica.

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Hirst, Paul and Grahame Thompson (1996),
Globalization in Question, Cambridge: Polity Press.

United Nations Development Program (UNDP) (1997)
“Human Development Report 1997”, New York: Oxford University
Press.

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