SABF 2007

Sustainable Development, Knowledge Economies: an agenda for developing countries?

Emiliano Kargieman
ek@aconcaguaventures.com

http://www.aconcaguaventures.com/blog

About me
• I spent the last 15 years of my life building and thinking about building innovative technology • I co-founded , a global information security software company doing great • I recently launched ,a mix of incubator+early stage fund, to help others build successful high-growth, global

*more* About me
• Diaspora Networks
– ECODAR – RAICES

• LATIPNET • Spend my free time thinking about how to help Argentina become a greater, better place

Methodology
• Today we will be entering the realms of pure speculative thought • We will be supported there by a lifetime of eclectic readings and wikipedia • And we will hope to emerge on the other side of this 1 ½ hours with some insight

Fairy Tales

Sustainable Development:
development that meets the needs of the present without compromising the ability of future generations to meet their needs

The Knowledge Economy:
The perception that Physical resources can be stretched “infinitely” by a certain “substitution” with informational resources (aka knowledge)

Trying to be more specific…

It is claimed that

Knowledge economy #1:
the rules of success in the industrial economy need rewriting: know-how, expertise, intellectual property are more important than land, natural resources or man-power

An idea closely knitted with that of

Post-Industrialism

Post-Industrialism:
A post-industrial society is a society in which an economic transition has occurred from a manufacturing based economy to a service based economy, a diffusion of national and global capital, and mass privatization.

This, of course, is made very clear once we look at …

The relative significance of current struggles to control oilproducing countries and barrel prices

All Photos made © by David Leeson, SPC Ben Ballad, Columbus Ledger & Romeo Gacad

Or, put more aseptically…

If one looks at the biggest publicly traded company in the world

With a market cap of 429.5 Billion USD (Clearly dealing in knowledge)

But I may be pushing It a little

We could look at the top 15
Revenue Rank   1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Name   Exxon Mobil General Electric Microsoft Citigroup AT&T Gazprom Headquarters   United States United States United States United States United States Russia Industry   Oil and gas Conglomerate Software industry Banking Market value (USD million)   429,567 363,611 272,912 252,857 (2006, USD billion)   377.6 163.4 51.1 120.3 63.1 83.6 (~) 196 (~) 117.0 17.6 (~) 318.8 274.3 70.1 68.2 351.1 101.4

Telecommunications 246,206 Oil and gas Automotive Banking Banking Oil and gas Oil and gas Banking Consumer goods Retail Tobacco, Food 245,911 230,832 228,177 224,788 214,018 208,844 202,146 199,294 193,643 184,277

Toyota Motor Corporation Japan Bank of America United States

Industrial and Commercial Bank of China China Royal Dutch Shell BP HSBC Procter & Gamble Wal-Mart Altria Netherlands United Kingdom United Kingdom United States United States United States

So we will pause here

to take a little detour into…

The Division of Labor
the rise of trade, and capitalism

"Well then, how will our state supply these needs? It will need a farmer, a builder, and a weaver, and also, I think, a shoemaker and one or two others to provide for our bodily needs. So that the minimum state would consist of four or five men...." (Plato - The Republic, 360BC)

”One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three distinct operations: to put it on is a particular business, to whiten the pins is another ...”* (Adam Smith – An Inquiry into the Nature and Causes of the Wealth of Nations, 1776)

”With this division of labour on the one hand and the accumulation of capital on the other, the worker becomes ever more exclusively dependent on labour, and on a particular, very one-sided, machine-like labour at that. just as he is thus depressed spiritually and physically to the condition of a machine” (Karl Marx – Wages of Labour, 1844)
He also made a distinction between Technical and Social reasons for the division of Labor (ie: who

As the rise of capitalism and trade was accompanied by the division of labor
(and the concept of value chain )

Industrialization was accompanied by an international division of labor

Primary and Secondary Exports

worldmapper.c

And the corresponding value chain brought a natural distinction of rich (industrialized) and poor countries

And then came TransNational Companies

And Globalization

And Post-Industrialism is, in a sense, making a strange sense:

As countries become service providers for TransNationals

And advanced capitalist countries are undergoing an industrial devolution

While newly industrialized countries precipitate in debt crisis

A new, Trans-National division of labor rises accompanied by its own value chains

OK

But what exactly is Sustainable Development?

What exactly is Sustainable Development?

A Global ecology and economy with very specific local/regional problems

gives rise to a fallacy of local optimization

Allow me a very brief second detour

into Thermodynamics
• Economy and Thermodynamics
– Complex systems where mechanical state is replaced by a “statistical” dynamic state

• • • •

System / Work Thermodynamic processes Equilibrium Efficiency

But we might be getting too esoteric

So lets go back to an example

The Kyoto Protocol
• The Kyoto protocol (1997) mandatory limitations for the reduction of greenhouse gas emissions of the signatory nations
– ANNEX 1 Countries – Obligations to reduce or trade – ANNEX 2 Countries – No obligations, can participate in CDM

• The Byrd-Hagel Resolution
On July 25, 1997 the U.S. Senate unanimously passed by a 95–0 vote the Byrd-Hagel Resolution : the Senate was that the United States should not be a signatory to any protocol that did not include binding targets and timetables for developing as well as industrialized nations or "would result in serious harm to the economy of the United States"

At this point I want to reach two conclusions

1) We have to be very careful of doubletalk

2) The complexity of world economics is mindboggling

OK

I read a paper a month ago

Written in 1971 by Marcelo Diamand, Argentine Engineer and Industrial Businessman
Marcelo Diamand. La Estructura Productiva Desequilibrada Argentina y el Tipo de Cambio; Desarrollo Económico Vol. 12 N° 45. 1972.

In a very simple language he explained Argentina’s cyclic crisis based on a simple structural distinction

Of two unbalanced productive structures

Some things have change since ’71
(not precisely the cyclic crisis in .ar)

Industrialization is no longer part of the “development agenda”

As it is not consistent with free-trade, and thus Globalization

But Sustainable Economic Development is always some kind of Virtuous Circle

Development as a virtuous cycle
Outside demand

So, where to?

I said at the beginning that I work on trying to get Argentina to change its productive profile towards knowledge-based industries. Why?

Knowledge economy #2:
The use of knowledge to produce economic benefits; innovation as the premium source of value-added production; This are not radically-new ideas

The question should be

How to create value from knowledge and surf the globe?

This is what I’m working on

Ecosystems for value creation in the knowledge economy
• Development of Human Capital
– Basic Science – Science and Technology – Management skills

• Jumping from knowledge to value creation
– – – – Intellectual Property Company Formation Financing layers Services value-chain 

• FOCUS on high value-add: high growth!
– The orders of magnitude law

Ecosystems for value creation in the knowledge economy

OK

What Sustainable Development can be
• A fairy tale • A sweet-sounding excuse for yet another hidden post-industrialist, imperialistic agenda • An imperative for a moral development schedule on a global basis The ball is in our court.

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