A focus on intellectual capital within a 21st century American information society shifts power and control from business owners and capitalists to individuals and entrepreneurs. Capitalists and corporations no longer own the means of production; individuals are now the owners of the means of production in an information society with a knowledge-based economy.
Such a drastic change has enormous implications for current monetary policies within the U.S. Current U.S. monetary policies are set by the Federal Reserve whose function and mandate is to maintain maximum sustainable employment and price stability within America writes John M. Berry in his article Fed Not in It to Back a `Strong Dollar' Policy. Here’s where America’s current economic problems really begin – monetary policy.
As I discussed yesterday, current social policies are based on macroeconomic theories developed during America’s industrialization period. These assumptions are outdated and do not apply to an information society with a knowledge-based economy. Monetary policies are no different.
Powerful banking interests in the U.S established the Federal Reserve in 1913. To fully comprehend how America arrived at this point, you must examine the history that lead us here – major people, events, decisions, politics, etc. Such a description is too long for this post, but it is worthwhile to read. An excellent resource is Murray N. Rothbard’s work The Case Against the Fed.
The Federal Reserve is nothing more than a central bank. Banking institutions do not create anything. Their sole purpose is to warehouse paper money, yet they control all the U.S. money supply through the Federal Reserve System of banks. The Federal Reserve actually creates money from thin air through a printing press. As I have already established in my previous post, money itself has no value. The real wealth of a nation is based on its productivity. However, if you’re a bank and you only have paper money, then somehow value must be created, whether real or perceived is immaterial, in order to make more money. Money, then, becomes the commodity. Unfortunately, this commodity has no real value – in the end it’s just worthless paper. Banks have self-interest, and that interest is in creating more money. However, when our government allowed the Federal Reserve to decouple the American dollar from the real value it was supposed to represent, that was the beginning of the end.
I don’t want to push conspiracy theories as explanations for why we are here, but there seems to be a certain truth to some of their ideas. People have self-interest as their motivation. It’s commonplace for government and business leaders to shroud self-interest with public interest. The result is to serve the public interest through the invisible hand; a term created by the classical economists Adam Smith in The Wealth of Nations in 1776. Smith demonstrated that, in a free market, an individual pursuing his own self-interest tends to also promote the good of his community as a whole through a principle that he called “the invisible hand”. He argued that each individual maximizing revenue for himself maximizes the total revenue of society as a whole, as this is identical with the sum total of individual revenues.
Smith's Wealth of Nations represents the first serious attempt in the history of economic thought to divorce the study of political economy from the related fields of political science, ethics, and jurisprudence. Here’s the problem – the U.S. economy is not divorced from politics and government. The U.S. political economy is tightly integrated through a marriage of business and government. In its current condition, it simply doesn’t work. It’s broken and it must be fixed.
Stay tuned.
Gary
Thursday, June 12, 2008
Wednesday, June 11, 2008
The American Dollar as a Commodity and Its Decline
Unfortunately, most people see the American dollar as the representation of this country’s wealth. This is not only true of lay people, but it’s also true of business people, financiers, bankers, and even economists. This idea is tied to the basic notion of the more dollars I have the wealthier I am. What these people don’t realize is that the American dollar is nothing more than a piece of paper used to represent the value of a person’s work.
The American dollar itself has no value – it’s nothing more than a piece of paper. The dollar is simply a means of exchange of goods and services, i.e. commodities. This translates into an individual’s productivity (your work) being represented by the American dollar, so that your work can be easily exchanged for other people’s work (goods and services) that you need. So, the real value is the work/productivity of the person, not the dollar itself.
This idea can be easily demonstrated by a simple example. Suppose the American dollar is the medium that actually contains value. What then is an ATM card? The ATM card is a piece of plastic, and we have already established that the value is the money. If the value is in the money, what happens when dollars disappear as a result of the paperless society trend? My main point here is that the real value is in an individual’s productivity, and not in a currency. A currency can take different forms such as the physical representation of a dollar or the digits in a computer. If the true value is in the money, then when it’s destroyed the value disappears with it.
I call the movement of money to a paperless society paradigm the digitization of money, and I expect to see banks and banking institutions disappear as a result. I discuss this in more detail in Inert America – Chapter 6. I also will address it more in detail in a later post.
The true wealth of a nation is the productivity of its citizens. Within the information society, that productivity can only be measured through intellectual capital development and the use of macroeconomic models that take into account such changes. As I discussed in yesterday’s post, America’s current macroeconomic models are based on assumptions of capitalism and industrialism. These assumptions are outdated, and have contributed to the decline of the American dollar. Here’s how.
Unfortunately, America’s leaders have allowed the American dollar to become a commodity, and they have convinced the rest of the world that it is a commodity with value. As a result, the American dollar has become America’s number one export, and it’s in high demand. Such moves have seen a marked depreciation in the dollar that is permanent according to Harvard professor Kenneth Frost and quoted in American Gangster's Wad of Euros Signals U.S. Decline in November of 2007. Dr. Frost further states, “There is no doubt that the dollar must sink against periphery currencies to reflect their increase in competitiveness and productivity.”
In this article, the authors further suggest, “One of the main U.S. exports since then has been the dollar itself, in exchange for foreign capital to finance trade deficits and a national debt of more than $9 trillion. While the current- account deficit is narrowing from last year's record $811.5 billion, the U.S. still requires $2.1 billion a day of other people's money.”
We’re no longer exporting goods and services, i.e. our productivity, in America. We are now only exporting a worthless piece of paper. We must stop this disastrous practice. The American dollar must be based on the productivity of the American people. In the information society of the 21st century, that productivity must be based on intellectual capital created through the use of human capital and supported by a strong education system. This intellectual capital can then be commoditized and commercialized for export.
Stay tuned.
Gary
The American dollar itself has no value – it’s nothing more than a piece of paper. The dollar is simply a means of exchange of goods and services, i.e. commodities. This translates into an individual’s productivity (your work) being represented by the American dollar, so that your work can be easily exchanged for other people’s work (goods and services) that you need. So, the real value is the work/productivity of the person, not the dollar itself.
This idea can be easily demonstrated by a simple example. Suppose the American dollar is the medium that actually contains value. What then is an ATM card? The ATM card is a piece of plastic, and we have already established that the value is the money. If the value is in the money, what happens when dollars disappear as a result of the paperless society trend? My main point here is that the real value is in an individual’s productivity, and not in a currency. A currency can take different forms such as the physical representation of a dollar or the digits in a computer. If the true value is in the money, then when it’s destroyed the value disappears with it.
I call the movement of money to a paperless society paradigm the digitization of money, and I expect to see banks and banking institutions disappear as a result. I discuss this in more detail in Inert America – Chapter 6. I also will address it more in detail in a later post.
The true wealth of a nation is the productivity of its citizens. Within the information society, that productivity can only be measured through intellectual capital development and the use of macroeconomic models that take into account such changes. As I discussed in yesterday’s post, America’s current macroeconomic models are based on assumptions of capitalism and industrialism. These assumptions are outdated, and have contributed to the decline of the American dollar. Here’s how.
Unfortunately, America’s leaders have allowed the American dollar to become a commodity, and they have convinced the rest of the world that it is a commodity with value. As a result, the American dollar has become America’s number one export, and it’s in high demand. Such moves have seen a marked depreciation in the dollar that is permanent according to Harvard professor Kenneth Frost and quoted in American Gangster's Wad of Euros Signals U.S. Decline in November of 2007. Dr. Frost further states, “There is no doubt that the dollar must sink against periphery currencies to reflect their increase in competitiveness and productivity.”
In this article, the authors further suggest, “One of the main U.S. exports since then has been the dollar itself, in exchange for foreign capital to finance trade deficits and a national debt of more than $9 trillion. While the current- account deficit is narrowing from last year's record $811.5 billion, the U.S. still requires $2.1 billion a day of other people's money.”
We’re no longer exporting goods and services, i.e. our productivity, in America. We are now only exporting a worthless piece of paper. We must stop this disastrous practice. The American dollar must be based on the productivity of the American people. In the information society of the 21st century, that productivity must be based on intellectual capital created through the use of human capital and supported by a strong education system. This intellectual capital can then be commoditized and commercialized for export.
Stay tuned.
Gary
Tuesday, June 10, 2008
More on the Lisbon Strategy and the Importance of Intellectual Capital
Yesterday, I described the Lisbon Strategy set forth in 2000 to accomplish the European Union’s strategic goal of leading the world in creating an information society based on a dynamic knowledge-based economy. To accomplish their goal, three objectives were formulated. Andriessen and Stam (2005) define these as:
· Preparing the transition to a competitive, dynamic and knowledge-based economy;
· Modernizing the European social model by investing in people and building an active welfare state;
· Sustaining the healthy economic outlook and favorable growth prospects by applying an appropriate macroeconomic policy mix.
To create a world economic power, the Lisbon Strategy relies on the formation of intellectual capital in order to become a competitive and dynamic knowledge-based economy.
Andriessen and Stam make these observations about the use of intellectual capital to drive macroeconomics and provide direction to social policies around economic development. “The concept of intellectual capital can be translated to the macro-economic level very easily, because the stories of our societies and of our nations are mirrors of ourselves and our organizations(Edvinsson, 2002). Debra Amidon was among the first to recognize the possibilities of applying intellectual capital on a macro-economic level, but the most rigorous work in this field until now is done by Nick Bontis. In his work he defines IC of Nations as the hidden values of individuals, enterprises, institutions, communities and regions that are the current and potential sources for wealth creation (Bontis, 2004).”
Andriessen and Stam define intellectual capital as intangible resources available to a country or region that give it a relative competitive advantage to produce future benefits. In their paper on intellectual capital, they use this definition to measure the intellectual wealth of a nation and its relative advantage among other countries. Such an approach supports the development of social policies on economic development. Additionally, these policies must take into account human capital, process capital, and market capital.
Human capital is knowledge, education and competencies of individuals in realizing national tasks and goals. Process capital represents the non-human storehouses of knowledge, which are embedded in its technological, information and communications systems. Market capital is the intellectual capital embedded in national intra-relationships. In order to successfully measure intellectual capital, assets, monetary investments, and the results of turning the intellectual capital into a commodity must be considered.
In sum, America should have and implement a strategy like the Lisbon Strategy that focuses on transforming itself into an information society with a knowledge-based economy. Such a strategy would require a redefinition and reinterpretation of macroeconomic models that should be based on America’s intellectual capital as the yardstick to measure our nation’s wealth. Current macroeconomic models are heavily embedded with assumptions based on capitalism and industrialism. Unfortunately, these models, and the social policies based on these models, continue to place greater emphasis on consumption rather than on production. For America to be successful in the 21st century as an information society, these macroeconomic models, their assumptions, and the social policies associated with them must be changed immediately.
Stay tuned.
Gary
· Preparing the transition to a competitive, dynamic and knowledge-based economy;
· Modernizing the European social model by investing in people and building an active welfare state;
· Sustaining the healthy economic outlook and favorable growth prospects by applying an appropriate macroeconomic policy mix.
To create a world economic power, the Lisbon Strategy relies on the formation of intellectual capital in order to become a competitive and dynamic knowledge-based economy.
Andriessen and Stam make these observations about the use of intellectual capital to drive macroeconomics and provide direction to social policies around economic development. “The concept of intellectual capital can be translated to the macro-economic level very easily, because the stories of our societies and of our nations are mirrors of ourselves and our organizations(Edvinsson, 2002). Debra Amidon was among the first to recognize the possibilities of applying intellectual capital on a macro-economic level, but the most rigorous work in this field until now is done by Nick Bontis. In his work he defines IC of Nations as the hidden values of individuals, enterprises, institutions, communities and regions that are the current and potential sources for wealth creation (Bontis, 2004).”
Andriessen and Stam define intellectual capital as intangible resources available to a country or region that give it a relative competitive advantage to produce future benefits. In their paper on intellectual capital, they use this definition to measure the intellectual wealth of a nation and its relative advantage among other countries. Such an approach supports the development of social policies on economic development. Additionally, these policies must take into account human capital, process capital, and market capital.
Human capital is knowledge, education and competencies of individuals in realizing national tasks and goals. Process capital represents the non-human storehouses of knowledge, which are embedded in its technological, information and communications systems. Market capital is the intellectual capital embedded in national intra-relationships. In order to successfully measure intellectual capital, assets, monetary investments, and the results of turning the intellectual capital into a commodity must be considered.
In sum, America should have and implement a strategy like the Lisbon Strategy that focuses on transforming itself into an information society with a knowledge-based economy. Such a strategy would require a redefinition and reinterpretation of macroeconomic models that should be based on America’s intellectual capital as the yardstick to measure our nation’s wealth. Current macroeconomic models are heavily embedded with assumptions based on capitalism and industrialism. Unfortunately, these models, and the social policies based on these models, continue to place greater emphasis on consumption rather than on production. For America to be successful in the 21st century as an information society, these macroeconomic models, their assumptions, and the social policies associated with them must be changed immediately.
Stay tuned.
Gary
Monday, June 9, 2008
An Information Society Strategy For 21st Century America
The world in which we live is actually a very small place in which every human being is connected. The best example I’ve been able to come with is a ball of yarn. The world is a big ball of yarn that is tightly connected. On the outside you can see that pieces of yarn cross each other, but you really don’t know the ball is one long piece of yarn until you unravel it. Once you unravel it, you see that the ball of yarn is really made of only one big piece of yarn – it’s all connected. That’s society in a nutshell. We are all connected, even if we don’t realize it.
Society is a living organism that changes over time, and American society is no different. The social changes we see now in America are dramatic, and they can be very difficult to deal with in our day-to-day lives, unfortunately. In addressing these changes, we must be cognizant of the fact that the decisions we make today have far-reaching implications for our future as a nation. The transformation of America from an industrial society to an information society is no small thing. As I alluded to in the last post, this change has social, political, economic and global implications. America needs a comprehensive strategy for our nation that will support a 21st century information society.
What might this strategy look like and why is it important? Let’s answer the first question by providing an example. In conducting my research for Inert America: Crossroads to the Future, I cam across a site called Europa: Activities of the European Union. This site provides extensive coverage of the European Union’s strategy to transform itself “to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.” This strategy is called the Lisbon Strategy, and in my opinion it’s something America had better wake up and take notice of very soon.
From the website, here’s a brief synopsis. “During the meeting of the European Council in Lisbon (March 2000), the Heads of State or Government launched a "Lisbon Strategy" aimed at making the European Union (EU) the most competitive economy in the world and achieving full employment by 2010. This strategy, developed at subsequent meetings of the European Council, rests on three pillars:
· An economic pillar preparing the ground for the transition to a competitive, dynamic, knowledge-based economy. Emphasis is placed on the need to adapt constantly to changes in the information society and to boost research and development.
· A social pillar designed to modernise the European social model by investing in human resources and combating social exclusion. The Member States are expected to invest in education and training, and to conduct an active policy for employment, making it easier to move to a knowledge economy.
· An environmental pillar, which was added at the Göteborg European Council meeting in June 2001, draws attention to the fact that economic growth must be decoupled from the use of natural resources.
A list of targets has been drawn up with a view to attaining the goals set in 2000. Given that the policies in question fall almost exclusively within the sphere of competence of the Member States, an open method of coordination (OMC) entailing the development of national action plans has been introduced. Besides the broad economic policy guidelines, the Lisbon Strategy provides for the adaptation and strengthening of existing coordination mechanisms: the Luxembourg process for employment, the Cardiff process for the functioning of markets (goods, services and capital) and the Cologne process on macroeconomic dialogue.”
Much more information on this strategy can be found on the website. If this is an area that is of interest, it’s worth the time to review the site.
Answering the second question from above, why is this important? The power of a nation is determined by its economic dominance. That nation’s true wealth lies within the productivity of its people. America has ceased to produce anything of any value, and it shows when we compare the American dollar to the Euro over the past decade.
As I am a quantitative sociologist, I have put together this chart to help illustrate this point. It compares the U.S. dollar to the Euro from 1999 through May of 2008. The chart plots the average difference in the exchange rate for each year. Interpreting this is easy and quite informative. The positive numbers show that the dollar is strong against the Euro; the negative numbers show that it is weak. Starting in 1999 through 2002, the dollar is strong. In 2003 through 2008, the dollar has made a steady spiral downward.
I suppose there are many interpretations of this chart, but here’s mine. In the late 1990s, the Internet-led productivity boom lured investment to the U.S. With the dot com bust of 2000 and 2001 and the subsequent wars of post-911, the United States ceased to focus on domestic policies which directly affected our economy. However, as shown in the chart, the recent years of 2000-2008 reflects a world where the European Union has been very focused on implementing its Lisbon Strategy. The result of the execution of the strategy shows up in the strength of the Euro. Again, this is something America must take notice of right now. We don’t have much time to address the political, economic, and global implications of not having and executing a strategy like the Lisbon Strategy.
Stay tuned.
Gary
Society is a living organism that changes over time, and American society is no different. The social changes we see now in America are dramatic, and they can be very difficult to deal with in our day-to-day lives, unfortunately. In addressing these changes, we must be cognizant of the fact that the decisions we make today have far-reaching implications for our future as a nation. The transformation of America from an industrial society to an information society is no small thing. As I alluded to in the last post, this change has social, political, economic and global implications. America needs a comprehensive strategy for our nation that will support a 21st century information society.
What might this strategy look like and why is it important? Let’s answer the first question by providing an example. In conducting my research for Inert America: Crossroads to the Future, I cam across a site called Europa: Activities of the European Union. This site provides extensive coverage of the European Union’s strategy to transform itself “to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.” This strategy is called the Lisbon Strategy, and in my opinion it’s something America had better wake up and take notice of very soon.
From the website, here’s a brief synopsis. “During the meeting of the European Council in Lisbon (March 2000), the Heads of State or Government launched a "Lisbon Strategy" aimed at making the European Union (EU) the most competitive economy in the world and achieving full employment by 2010. This strategy, developed at subsequent meetings of the European Council, rests on three pillars:
· An economic pillar preparing the ground for the transition to a competitive, dynamic, knowledge-based economy. Emphasis is placed on the need to adapt constantly to changes in the information society and to boost research and development.
· A social pillar designed to modernise the European social model by investing in human resources and combating social exclusion. The Member States are expected to invest in education and training, and to conduct an active policy for employment, making it easier to move to a knowledge economy.
· An environmental pillar, which was added at the Göteborg European Council meeting in June 2001, draws attention to the fact that economic growth must be decoupled from the use of natural resources.
A list of targets has been drawn up with a view to attaining the goals set in 2000. Given that the policies in question fall almost exclusively within the sphere of competence of the Member States, an open method of coordination (OMC) entailing the development of national action plans has been introduced. Besides the broad economic policy guidelines, the Lisbon Strategy provides for the adaptation and strengthening of existing coordination mechanisms: the Luxembourg process for employment, the Cardiff process for the functioning of markets (goods, services and capital) and the Cologne process on macroeconomic dialogue.”
Much more information on this strategy can be found on the website. If this is an area that is of interest, it’s worth the time to review the site.
Answering the second question from above, why is this important? The power of a nation is determined by its economic dominance. That nation’s true wealth lies within the productivity of its people. America has ceased to produce anything of any value, and it shows when we compare the American dollar to the Euro over the past decade.
As I am a quantitative sociologist, I have put together this chart to help illustrate this point. It compares the U.S. dollar to the Euro from 1999 through May of 2008. The chart plots the average difference in the exchange rate for each year. Interpreting this is easy and quite informative. The positive numbers show that the dollar is strong against the Euro; the negative numbers show that it is weak. Starting in 1999 through 2002, the dollar is strong. In 2003 through 2008, the dollar has made a steady spiral downward.
I suppose there are many interpretations of this chart, but here’s mine. In the late 1990s, the Internet-led productivity boom lured investment to the U.S. With the dot com bust of 2000 and 2001 and the subsequent wars of post-911, the United States ceased to focus on domestic policies which directly affected our economy. However, as shown in the chart, the recent years of 2000-2008 reflects a world where the European Union has been very focused on implementing its Lisbon Strategy. The result of the execution of the strategy shows up in the strength of the Euro. Again, this is something America must take notice of right now. We don’t have much time to address the political, economic, and global implications of not having and executing a strategy like the Lisbon Strategy.
Stay tuned.
Gary
Thursday, June 5, 2008
The Information Society and America’s Energy Crisis
There can be no doubt that 21st century America is in crisis. The first decade of this century has been anything and everything but smooth sailing. The current energy crisis is just one area in which the entire country has been plunged headfirst into a troubled situation that seems to be short of answers. There are many others I’ll discuss on future posts – education, for example.
Energy is the foremost emergency, because everyone at every level of society feels the pain of it with each fill up at the gas pump. I read an interesting article yesterday on FoxNews.com where voters in Union County, South Dakota decided to rezone about 3,300 acres to allow the building of an oil refinery – the first one in over 30 years in the United States. The construction would begin in 2010 and last at least four years.
Here’s the upside – one local resident in casting her vote had this to say. “A project of that size would bring not just refinery and construction jobs but also would spawn new positions for teachers, police and other professionals. Teens graduating high school in Union County need good-paying jobs if they're going to settle in the area.”
Here’s the downside – pollution, a lot of pollution. “According to an air quality permit application filed with the state, the center each year would emit nearly 2,000 tons of carbon monoxide, 773 tons of nitrogen oxides, more than 1,000 tons of particulate matter, 863 tons of sulfur dioxide and 473 tons of volatile organic compounds. It would also generate 17.2 million metric tons of carbon dioxide each year.”
As I pointed out two days ago in my post on the decline of industrialization, a strategy that addresses the current energy crisis by proposing to leverage America’s oil reserves is flawed. Using such supplies would greatly reduce our dependence on foreign oil. Let me be perfectly clear, we absolutely must reduce our dependence on foreign oil. However, increasing the supply by leveraging America’s oil cannot curtail the energy crisis either immediately or over the long term. First, our oil reserves are finite, so current use levels would quickly exhaust supplies. Second, it takes years to build the infrastructure, and requires human capital that is in short supply. As stated above, we’re at least 6 years away from building one refinery. Third, oil drilling and oil refineries are not environmentally friendly.
In my May 30th post, I suggested a strategy that leveraged solar power to address the energy crisis. This strategy also does nothing to provide immediate relief from the pains of current gas prices. However, it does provide a more viable long-term strategy, and it’s environmentally friendly. While the sun is finite as well, let’s face it, if it goes we’re all gone. Moreover, if we implemented this type of strategy today, then we would also create new industries and new jobs. As with the oil strategy, we still need to create an infrastructure and we still need the human capital. But as I discussed yesterday, the development of this type of intellectual capital around solar energy could then be commercialized and exported as a commodity to other countries.
Why does this strategy work for America in the 21st Century? Simply stated, it works because America is now an information society. For America to completely transform itself into an information society not only has technological and social implications, it also has political, economic, and global implications.
Stay tuned.
Gary
Energy is the foremost emergency, because everyone at every level of society feels the pain of it with each fill up at the gas pump. I read an interesting article yesterday on FoxNews.com where voters in Union County, South Dakota decided to rezone about 3,300 acres to allow the building of an oil refinery – the first one in over 30 years in the United States. The construction would begin in 2010 and last at least four years.
Here’s the upside – one local resident in casting her vote had this to say. “A project of that size would bring not just refinery and construction jobs but also would spawn new positions for teachers, police and other professionals. Teens graduating high school in Union County need good-paying jobs if they're going to settle in the area.”
Here’s the downside – pollution, a lot of pollution. “According to an air quality permit application filed with the state, the center each year would emit nearly 2,000 tons of carbon monoxide, 773 tons of nitrogen oxides, more than 1,000 tons of particulate matter, 863 tons of sulfur dioxide and 473 tons of volatile organic compounds. It would also generate 17.2 million metric tons of carbon dioxide each year.”
As I pointed out two days ago in my post on the decline of industrialization, a strategy that addresses the current energy crisis by proposing to leverage America’s oil reserves is flawed. Using such supplies would greatly reduce our dependence on foreign oil. Let me be perfectly clear, we absolutely must reduce our dependence on foreign oil. However, increasing the supply by leveraging America’s oil cannot curtail the energy crisis either immediately or over the long term. First, our oil reserves are finite, so current use levels would quickly exhaust supplies. Second, it takes years to build the infrastructure, and requires human capital that is in short supply. As stated above, we’re at least 6 years away from building one refinery. Third, oil drilling and oil refineries are not environmentally friendly.
In my May 30th post, I suggested a strategy that leveraged solar power to address the energy crisis. This strategy also does nothing to provide immediate relief from the pains of current gas prices. However, it does provide a more viable long-term strategy, and it’s environmentally friendly. While the sun is finite as well, let’s face it, if it goes we’re all gone. Moreover, if we implemented this type of strategy today, then we would also create new industries and new jobs. As with the oil strategy, we still need to create an infrastructure and we still need the human capital. But as I discussed yesterday, the development of this type of intellectual capital around solar energy could then be commercialized and exported as a commodity to other countries.
Why does this strategy work for America in the 21st Century? Simply stated, it works because America is now an information society. For America to completely transform itself into an information society not only has technological and social implications, it also has political, economic, and global implications.
Stay tuned.
Gary
Wednesday, June 4, 2008
The Key Ingredients of Intellectual and Human Capital
The last fifty years of the 20th century saw great changes. The time period has been aptly termed the post-industrial society. In 2000, the World Bank defined post-industrialization as the decline of industrialism. Within America, this decline of industrialization has been ongoing since the end of World War II – it’s not a new event.
I explain in Inert America – Chapter 3 that the post-industrial society period was not only a decline in the industrial society; it also marked the rise of the information society of 21st century America. If America has now entered a new epoch of human history, then there are a number of questions that beg to be answered. What is an information society? What is the infrastructure needed to support an information society? What are the key ingredients for this type of society? How is this important to the current energy crisis?
As I pointed out in an earlier post entitled Education, The Pathway to Prosperity III, an the information society is defined as one whose infrastructure is closely defined by information technology and characterized by the development of a large service sector that is heavily dependent upon professional and technical occupations denoted by the increasing intellectualized nature of work which can only be performed through ongoing educational endeavors where the knowledge theory of value gets translated into information and treated as commodity.
With the rise of the information society came many technological and social changes. One of those changes was marked by the dot com boom era of the late nineties which made major capital investments in the information society infrastructure such computers, electronics, telecommunications, and most importantly, the Internet. Another change was a shift from an industrial society economy based on natural resources as commodities to an information society knowledge economy that is based on human capital.
The knowledge theory of value translated into information and treated as a commodity can more simply be described as intellectual capital. Intellectual capital is a resource that creates a competitive advantage when that capital is leveraged in the value creation process, i.e. production of an information commodity. In this type of production process, intellectual capital is a key ingredient that requires human capital, organizational and relational resources.
As Andriessen and Stam note in their 2005 paper on intellectual capital, human capital represents anything related to the people within an organization such as employees and their tacit knowledge, skills, experience and attitude. Human capital represents the most important part of intellectual capital. Organizational resources are everything of value created by the production process like codified knowledge, procedures, processes, goodwill, patents, and culture. Relational resources represent the relationship with customers, suppliers and other external stakeholders. These are the ultimate consumers of the information commodity.
Peter Drucker maintained in Post-Capitalist Society in 1993 that human beings are now the owners of the means of production. As the owners, it’s human capital that fuels the production process, i.e. the individual. Human capital is knowledge, education and competencies of individuals in realizing national tasks and goals. Human capital cannot be developed without education; it’s the basic building block. The end product is commercialized intellectual capital that is treated as a commodity and sold in the marketplace.
This brings us to one final question. How are the changes in 21st century America as we transition from an industrial society to an information society related to the current energy crisis? To answer this question is beyond this post. I’ll attack it over the next couple of days. You may be surprised as to the answer.
Stay tuned.
Gary
I explain in Inert America – Chapter 3 that the post-industrial society period was not only a decline in the industrial society; it also marked the rise of the information society of 21st century America. If America has now entered a new epoch of human history, then there are a number of questions that beg to be answered. What is an information society? What is the infrastructure needed to support an information society? What are the key ingredients for this type of society? How is this important to the current energy crisis?
As I pointed out in an earlier post entitled Education, The Pathway to Prosperity III, an the information society is defined as one whose infrastructure is closely defined by information technology and characterized by the development of a large service sector that is heavily dependent upon professional and technical occupations denoted by the increasing intellectualized nature of work which can only be performed through ongoing educational endeavors where the knowledge theory of value gets translated into information and treated as commodity.
With the rise of the information society came many technological and social changes. One of those changes was marked by the dot com boom era of the late nineties which made major capital investments in the information society infrastructure such computers, electronics, telecommunications, and most importantly, the Internet. Another change was a shift from an industrial society economy based on natural resources as commodities to an information society knowledge economy that is based on human capital.
The knowledge theory of value translated into information and treated as a commodity can more simply be described as intellectual capital. Intellectual capital is a resource that creates a competitive advantage when that capital is leveraged in the value creation process, i.e. production of an information commodity. In this type of production process, intellectual capital is a key ingredient that requires human capital, organizational and relational resources.
As Andriessen and Stam note in their 2005 paper on intellectual capital, human capital represents anything related to the people within an organization such as employees and their tacit knowledge, skills, experience and attitude. Human capital represents the most important part of intellectual capital. Organizational resources are everything of value created by the production process like codified knowledge, procedures, processes, goodwill, patents, and culture. Relational resources represent the relationship with customers, suppliers and other external stakeholders. These are the ultimate consumers of the information commodity.
Peter Drucker maintained in Post-Capitalist Society in 1993 that human beings are now the owners of the means of production. As the owners, it’s human capital that fuels the production process, i.e. the individual. Human capital is knowledge, education and competencies of individuals in realizing national tasks and goals. Human capital cannot be developed without education; it’s the basic building block. The end product is commercialized intellectual capital that is treated as a commodity and sold in the marketplace.
This brings us to one final question. How are the changes in 21st century America as we transition from an industrial society to an information society related to the current energy crisis? To answer this question is beyond this post. I’ll attack it over the next couple of days. You may be surprised as to the answer.
Stay tuned.
Gary
Tuesday, June 3, 2008
The Decline of Industrialization in America
At the end of March, I received Dr. Stephen Leeb’s Market Forecast Newsletter. I get these regularly through email. This one caught my attention in particular, because the title of it was Final Curtain for the Industrial Age. As this is directly related to the thesis of Inert America, I filed it away for future reference and use.
In this newsletter, Dr. Leeb makes a number of astute observations about the decline of industrialization and the increasing need for commodities such as oil, natural gas, copper, zinc, etc. – natural resources. As he pointed out, it’s not just natural resources we’re in desperate need of; we also need the precious commodities of human capital and time. Unfortunately, it takes years to develop human capital through education and training that can meets the needs of a workforce in 21st century America.
A pertinent point to be made here is industrialization is in decline in America, but industrialization is not dead. In developing countries such as China and India, industrialization is on the upswing. These nations are requiring, and will continue to require, enormous natural resources on a planet that has finite resources. This clearly poses a dilemma for America and all developed nations.
A lack of natural resource, whether real or perceived, leads to competition – i.e. an increase in demand. This demand is exceeding supply. As pointed out in my previous post, global competition/demand has lead to unbearable prices for a barrel of oil that is keenly felt every time we fill our gas tank at $4.00 a gallon. One thought has been to open America’s reserves, thereby increasing supply. Here’s the problem with this solution, it takes years to build an infrastructure that would allow America to take advantage of its oil supply. For example, it can take up to five years to build an oil rig and at least six to lay a pipeline.
Here’s the other problem -- we simply don’t have enough workers, engineers, geologists, miners, scientists, chemists and architects to build this type of infrastructure. Even worse, the engineers and many of the key workers in this area are largely baby-boomers who are getting ready to retire. Timing couldn’t be worse.
Dr. Leeb further notes, “The amount of undergraduates signing up for programs in the natural resource sector began plummeting dramatically. In 1981 we were graduating over 700 mining engineers a year. Today we are graduating a mere hundred. The amount of universities offering mining engineering degrees has dropped from 25 to 15. One school closed in 2001, after graduating only one student.”
What do we do in America? We have neither the infrastructure nor the human resources we need for America in the 21st century. We’re in a pickle, and our leaders don’t seem to have any answers, unfortunately. Where do we go from here?
Stay tuned.
Gary
In this newsletter, Dr. Leeb makes a number of astute observations about the decline of industrialization and the increasing need for commodities such as oil, natural gas, copper, zinc, etc. – natural resources. As he pointed out, it’s not just natural resources we’re in desperate need of; we also need the precious commodities of human capital and time. Unfortunately, it takes years to develop human capital through education and training that can meets the needs of a workforce in 21st century America.
A pertinent point to be made here is industrialization is in decline in America, but industrialization is not dead. In developing countries such as China and India, industrialization is on the upswing. These nations are requiring, and will continue to require, enormous natural resources on a planet that has finite resources. This clearly poses a dilemma for America and all developed nations.
A lack of natural resource, whether real or perceived, leads to competition – i.e. an increase in demand. This demand is exceeding supply. As pointed out in my previous post, global competition/demand has lead to unbearable prices for a barrel of oil that is keenly felt every time we fill our gas tank at $4.00 a gallon. One thought has been to open America’s reserves, thereby increasing supply. Here’s the problem with this solution, it takes years to build an infrastructure that would allow America to take advantage of its oil supply. For example, it can take up to five years to build an oil rig and at least six to lay a pipeline.
Here’s the other problem -- we simply don’t have enough workers, engineers, geologists, miners, scientists, chemists and architects to build this type of infrastructure. Even worse, the engineers and many of the key workers in this area are largely baby-boomers who are getting ready to retire. Timing couldn’t be worse.
Dr. Leeb further notes, “The amount of undergraduates signing up for programs in the natural resource sector began plummeting dramatically. In 1981 we were graduating over 700 mining engineers a year. Today we are graduating a mere hundred. The amount of universities offering mining engineering degrees has dropped from 25 to 15. One school closed in 2001, after graduating only one student.”
What do we do in America? We have neither the infrastructure nor the human resources we need for America in the 21st century. We’re in a pickle, and our leaders don’t seem to have any answers, unfortunately. Where do we go from here?
Stay tuned.
Gary
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