May 27, 2024

Lukmaan IAS

A Blog for IAS Examination

TOPIC : THE JOURNEY OF KNOWLEDGE IN CREATING MONOPOLY AND INEQUALITY

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THE CONTEXT: Knowledge is a critical determinant of economic growth, social development, and overall well-being. In today’s global economy, knowledge is a key driver of innovation, competitiveness, and productivity. Access to knowledge, however, is unequally distributed around the world. The gap between developed and developing countries in terms of knowledge resources is vast. Developed countries have well-established educational systems, research institutions, and technological infrastructure that enable them to generate, disseminate, and apply knowledge more effectively. In contrast, developing countries often lack the resources and infrastructure to produce and utilize knowledge effectively, which hinders their economic and social development.

HOW KNOWLEDGE INDUCES INEQUALITY

  • Education inequality: Access to quality education is a key factor in reducing global inequality. However, education inequality exists globally, with some populations lacking access to basic education, let alone higher education.
  • Digital divide: In the digital age, access to information technology and the internet is crucial for access to knowledge. However, the digital divide remains a significant issue, with many low-income communities lacking access to these resources.
  • Language barriers: Knowledge production is often concentrated in English, limiting access to knowledge for non-English speaking populations and perpetuating global inequality.
  • Research and development (R&D) inequality: Research and development activities are primarily concentrated in developed countries, creating disparities in the types of knowledge produced and accessible to different populations.
  • Scientific infrastructure: The scientific infrastructure necessary for knowledge production is also concentrated in developed countries, creating disparities in access to scientific research and data.
  • Patent laws: Patent laws and intellectual property rights can limit access to knowledge and technology, particularly for low-income populations.
  • Brain drain: Highly skilled individuals often migrate from low-income countries to high-income countries, creating a brain drain that can limit knowledge production and perpetuate global inequality.
  • Knowledge production bias: Knowledge production is often biased towards the interests of developed countries, limiting the types of knowledge produced and accessible to different populations.
  • Access to healthcare knowledge: Access to healthcare knowledge is crucial for improving global health outcomes. However, healthcare knowledge is often concentrated in developed countries and limited in availability for low-income populations.
  • Cultural barriers: Cultural differences can create barriers to the transfer of knowledge across populations, limiting access to knowledge and perpetuating global inequality.
  • Access to financial knowledge: Financial knowledge is critical for economic empowerment and improving global economic outcomes. However, financial knowledge is often limited in availability for low-income populations.
  • Access to legal knowledge: Access to legal knowledge is important for promoting human rights and justice. However, legal knowledge is often concentrated in developed countries, limiting access for low-income populations.
  • Access to environmental knowledge: Access to environmental knowledge is crucial for promoting sustainability and mitigating the impacts of climate change. However, environmental knowledge is often limited in availability for low-income populations.
  • Gender bias: Gender bias in knowledge production and access can limit the participation of women and girls in the global economy, perpetuating global inequality.
  • Access to cultural knowledge: Access to cultural knowledge is important for promoting cultural diversity and understanding. However, cultural knowledge is often limited in availability for populations outside of their cultural heritage.

GEOGRAPHY AS DESTINY:  THE DOMINANCE OF GLOBAL NORTH

  • The Global North has been able to invest more in research and development (R&D) than the Global South, which has resulted in the creation of new technologies and products that have given them a competitive edge. For example, in 2018, the US spent $581 billion on R&D, while the entire continent of Africa spent only $20.8 billion on R&D.
  • The Global North has been able to develop and control essential technologies, such as those related to communication, transportation, and energy, which has given them a significant advantage over the Global South. For instance, the US controls a significant portion of the global internet infrastructure, including key domain name systems and routing technologies, which has enabled them to dominate the digital economy.
  • The Global North’s technological superiority has enabled them to dominate global markets and extract resources from the Global South. For instance, many multinational corporations based in the Global North have outsourced production to the Global South, where labor costs are cheaper. This has resulted in the exploitation of workers in the Global South and the extraction of resources from these countries without fair compensation.
  • The Global North’s technological superiority has enabled them to maintain their dominance in international institutions such as the World Trade Organization (WTO) and the World Intellectual Property Organization (WIPO), which have helped to perpetuate global inequality. For example, the TRIPS agreement of the WTO grants monopolies to pharmaceutical companies, making essential medicines unaffordable to many people in the Global South.
  • The Global North’s technological superiority has enabled them to maintain their military dominance, which has allowed them to exert political influence and control over the Global South. For instance, the US spends more on defence than the next ten countries combined, which has allowed them to intervene in the affairs of other countries and maintain global hegemony.

TRENDS OF CONVERGENCE AND DIVERGENCE IN GLOBAL ECONOMY AS A RESULT OF KNOWLEDGE

The role of knowledge has been a critical factor in shaping the trends of convergence and divergence in the global economy over time. Knowledge encompasses various aspects, including technological advancements, innovation, education, and human capital development.

CONVERGENCE AND KNOWLEDGE

  • The period from 1870 to 1913 saw a trend of convergence in the global economy, and knowledge played a critical role in this process. The spread of knowledge, particularly technological advancements, transportation and communication networks, and education, helped other regions, particularly North America and parts of Europe, to catch up with Western Europe in terms of economic growth and development. “The diffusion of knowledge was a key factor behind convergence, as regions that were able to adopt new technologies and ideas from more advanced regions experienced higher levels of economic growth and development.”
  • Similarly, the period from 1945 to 1980 saw another trend of convergence, which was driven by the spread of knowledge, particularly in East Asia. The governments of many East Asian countries invested heavily in education and human capital development, and this helped to build a highly skilled workforce and support the development of new technologies and innovations. As a result, these countries experienced rapid economic growth and development, narrowing the gap with more advanced Western economies.

DIVERGENCE AND KNOWLEDGE

  • The period from 1750 to 1870 saw a trend of divergence in the global economy, and the lack of access to knowledge was a critical factor behind this process. Western Europe’s technological advancements and innovations were driven by its scientific and educational institutions, which were more advanced than those in other regions. The lack of access to knowledge and education hindered the growth and development of other regions, particularly Asia and Africa, contributing to the widening economic gap between Europe and the rest of the world.
  • Similarly, the period from 1980 to the present day has seen a trend of divergence, which has been driven by the uneven distribution of knowledge. While some regions, particularly in East Asia, have continued to experience rapid economic growth and development, others, particularly in Africa, have lagged behind. The uneven distribution of knowledge and access to technology has contributed to this divergence, as many African countries have struggled to keep up with more advanced economies.

ANALYSIS OF THE ABOVE FACT

The above illustration discusses the historical context of the Great Divergence, where per capita income in China and India fell relative to Western Europe and its offshoots, accompanied by a decline in their share of world manufacturing, while Western Europe’s share increased dramatically. This led to the Great Specialisation, where Europe and its offshoots specialised in manufacturing and the rest of the world in agriculture and primary raw material production.

However, post-1970, there has been some convergence, particularly in East Asia, with countries like China, South Korea, and Japan increasing their per capita GDP in comparison with industrialised countries. East Asia’s share of world manufactured exports also grew significantly during this period. South Asia, on the other hand, saw slower growth in its per capita GDP relative to industrialised countries. Overall, while there has been some convergence, it has not been significant, and there is still a large gap in per capita income between Western Europe and its offshoots and Asia.

MONOPOLY-CUM-MONOPSONY CAPITALISM

  • The contemporary structure of capitalism is characterized by monopolies, particularly those based on intellectual property rights (IPR) protection. Monopolies aim to capture profits higher than those available in competitive conditions, leading to increased inequality. This monopolization of knowledge exists alongside commoditized knowledge in the commons of manufacturing or production.
  • The global structure of production is reflected in Global Value Chains (GVCs), where there is a separation between conception and execution through outsourcing and offshoring. This leads to a monopsony relationship between lead firms and their suppliers, particularly those in the global South.
  • There are different degrees of monopsony power in these relations. Knowledge monopolies, such as technology and healthcare companies, dominate the world economy, with eight of the world’s 10 largest corporations by market capitalization being knowledge-intensive corporations. GVCs and the platform economy are forms of monopoly–monopsony capitalism that dominate international trade and global economic relations.

WHAT WILL BE IMPACT OF MONOPOLY-CUM-MONOPSONY CAPITALISM: A CASE FOR ANALYSIS

What is the consequence of the structure of world trade and the global economy on the distribution of profits between headquarter firms and supplier firms in GVCs? Provide some examples.

  • The consequence of the structure of world trade and the global economy on the distribution of profits between headquarter firms and supplier firms in GVCs is that headquarter firms with monopolized knowledge earn a high profit while suppliers with commoditized knowledge secure only competitive profits.
  • This is illustrated by the fact that headquarter firms, such as US garment brands (Ralph Lauren and Levi Strauss), electronics enterprises (Apple, Cisco, and Intel), and consultancy leaders (IBM and Accenture), had gross profit margins ranging from 40% to 60%, while suppliers such as Indian garment manufacturers had margins in the range of 10% to 12%.
  • Additionally, European headquarter firms, such as Zara, H&M, Adidas, C&A, and L-V, also had gross margins ranging from 50% to 66%.
  • In electronics manufacture, contract electronics manufacturers have low margins, at or below 5%. In IT services production, the knowledge requirements are more complex than both of the above types, and those in IT services supply with records of delivering and supporting complex IT services have developed reputational assets that would increase their bargaining power. The 30% gross profit margins of Infosys and TCS are at least somewhat comparable with those in the global North. But overall, based on the Annual Survey of Industries (ASI) data, the gross profit margins of the Indian supplier firms (garments, leather, auto-components, pharmaceuticals, and IT services) range from a low of 6% in garments to 14% in IT services.

THE WAY FORWARD

Reducing global inequality in knowledge and information can be a complex task that involves a combination of various strategies, policies, and actions. Here are some possible ways to address this issue:

  • Education: Education is one of the most powerful tools for reducing global inequality. Providing access to quality education and promoting lifelong learning can help to bridge the knowledge gap between different countries and communities.
  • Technology: Advancements in technology have made it easier to share information and knowledge globally. Governments, NGOs, and other organizations can leverage technology to provide access to vital information and resources to communities that lack them.
  • Open access to information: Ensuring open access to information is essential in reducing global inequality in knowledge. Governments and other stakeholders can promote policies that make information available to everyone.
  • Empowering communities: Empowering communities to take charge of their own development can help to reduce global inequality in knowledge. This includes providing resources, tools, and training that enable communities to take advantage of information and knowledge resources.
  • Collaboration: Collaboration between governments, NGOs, and other stakeholders can help to reduce global inequality in knowledge. This includes sharing resources, expertise, and knowledge to address the challenges faced by different communities.

THE CONCLUSION: Overall, reducing global inequality in knowledge and information requires a multi-faceted approach that involves various stakeholders working together to provide access to quality education, technology, and open access to information. By addressing these issues, we can create a more equitable and sustainable future for all.

Questions:

  1. Discuss the impact of knowledge induced global inequality.
  2.  The knowledge divide has created divide historically and it has potential to increase it manyfold. Analyse
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