The Digital Revolution and Governance

Xiudian Dai

• Publisher: Routledge
• Year: 2018
• Print ISBN:
  9781138742123
• eBook ISBN:
  9781351724326
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This title was first published in 2000. This text examines the politics of the digital age, looking at topics including new industrial policies, the implications of the Internet and global governance of innovation.

1 The Politics of the Digital Age: An Introduction

The Digital Revolution and the Network Society

In the late 16^th Century William Shakespeare wrote in A Midsummer Night's Dream, Til put a girdle round about the earth in 40 minutes.'¹ Five hundred years on, the 'Midsummer Night's Dream' has been turned into a reality for an increasingly large number of human beings living on Planet Earth. Land-based fixed line telecommunications networks, satellite transponders above the earth, terrestrial transmission off the air and submarine fibre optical cables, etc., have been put into place to provide multidimensional and complementary means of real-time communication at any distance. Nowadays, it is a matter of time needed for striking a key on the computer keyboard or dialling destination number through the telephone handset, rather than '40 minutes' for electronic information and communication to 'girdle' round about the earth. With reliable networks, high-speeds make the entire globe immediately accessible and the notion of time and space has changed (Bakis, 1997). If Shakespeare lived today to witness the arrival of the digital age, he might have reconsidered the wording for his play.

It is a quantum leap forward from Shakespeare's age to the 21^st Century in terms of advancement in communications technologies. However, this change did not happy over night. Rather, it represents a new milestone in the ceaseless pursuit of new means of communication by human beings.

The first major breakthrough in modern communications technologies is telegraphy. Using different combinations of dots and dashes to represent letters and numbers, the Morse Code, developed by Samuel Morse in the United States (US) in 1937, has led to the development of modern communications networks throughout the world. This was followed by a long list of information and communications technologies (ICTs) over the last two centuries. Among others, the invention of the Bell telephone system in 1876, the Marconi radio system in 1896 (patented in Britain), the beginning of television broadcasting in the 1920s, the success in building electronic computers in Germany, the US and Britain in the 1940s and the birth of the Internet in the late 1960s are some of the major milestones in the history of electronic and electronic communications technologies.

The digital revolution began with the digitisation² of the information and communications technologies and the wide application of digital techniques in other industrial sectors. The process of the digital revolution is in part manifested in the introduction of a variety of new information and communications systems. Among others, electronic mail (e-mail), the World Wide Web (WWW), multi-channel digital TV broadcasting, Digital Versatile Disc (DVD), Integrated Services Digital Network (ISDN), Asynchronous Digital Subscriber Line (ADSL) and the 3^rd Generation (3G) mobile communications, etc., are typical examples. New acronyms representing a newer generation or of digital technologies and services are being invented at a much faster pace than the general public could digest what they actually standard for. In short, we now live in a world that has become digital (Negroponte, 1995).

The social impact of the digital revolution is profound and, to a certain extent, the contemporary society is heading towards total reliance upon digital technologies. In politics, the American Democratic Party in Arizona successfully held its online local election - voters used the computer keyboard to cast their votes in March 2000. The forthcoming London Mayor election in May 2000 was said to be assisted by computerised vote counting. An increasingly large number of governments - both democratic regimes and the totalitarian alike - are quick to recognise the potential of the Internet in enhancing their governance by launching 'government online' programmes. In economic policymaking, the British government recently claimed in its last 'Competitiveness White Paper'³ that it would make Britain the best environment for electronic commerce (e-commerce) in the world. At the last European Union (EU) summit in Lisbon in March 2000, heads of the Member States reached a consensus over a new vision, which confirmed the 'Internet economy' would enable the EU to become the most competitive economy in the world. The Singaporean government has been endeavouring to turn the city-state into the 'IT (Information Technology) Hub' in South East Asia.

In the commercial world, the revolutionary role played by new ICTs is even more evident. First of all, it is the mushrooming phenomenon of the so-called 'dot-com' companies - the rapid increase of Internet companies throughout the world. The online bookseller Amazon, for instance, has become the largest bookstore in the world within a short space of time and is poised to render the conventional chains of outlets the dinosaurs of the printing age. Yahoo!, eBay, Freeserve, T-Online, World Online, etc, are just a few examples of a new breed of commercial Internet establishments, which are the recipients of large sums of venture capital investment. Time Warner, one of the largest media conglomerates in the world, could not resist the commercial power of the Internet and hence subjected itself to a merger deal with America Online (AOL) - a young Internet company.

Second, conventional companies, large and small, are either willingly or forced to reshape their corporate strategy with the Internet as a core element. Shortly after commenting on the 'dot-com' phenomenon as a 'hype', Rupert Murdoch, Chairman of News Corp., launched a new strategy to reform his global corporate empire with focus on the Internet. Food retailing stores, such as Tesco and ASDA in Britain, are finding the Internet an important and complementary channel for their business. Having been initially concerned with the possibility that online publishing could wipe out their paper-based news selling, newspapers (both national and local ones) are now among the fast movers to digitally duplicate themselves and most of their Web versions are free to access.

Undoubtedly, for some, the digital revolution produces enormous benefits. Among others, barriers, such as geographical distance, to human communication is being removed; 'paperless office' has been promised; transparent and more efficient government could be created; global democratisation and capitalist mode of production could be promoted in the digital age. Further, the digital revolution even comes to the rescue when politicians in many industrialised countries are bewildered by the thorny issues of unemployment and poverty relief. Seemingly, digital information and communications technologies provide powerful solutions to many social and economic problems. During a visit to the recent Comdex computer trade show, US President Bill Clinton expressed his belief that the information economy holds the key to solving his country's problems:

I came here today to ask you to set another trend - to devote more time and technology, more ideas and energy, to closing the digital divide. I honestly believe that the new information economy has the potential, at home and around the world, to lift more people out of poverty more quickly than at any previous period in all of human history - and that tapping that potential is actually in our enlightened self-interest.⁴

However, the digital revolution is rolling out at a price. Whilst new ICTs are creating new businesses and new jobs, they are also 'deleting' jobs. The restructuring of the banking sector in Britain is a typical example of this dilemma. On a single day, April 7, 2000, the Barclays Bank closed 171 branches in the rural areas of Britain, representing a downsizing by one tenth of its branch network. In a comparable scale, the National Westminster Bank has cut the size of its network from 3,086 in 1988 to about 1,712 and the Midland Bank, now part of the Hong Kong and Shanghai Bank Corporation (HSBC), has seen its branch network shrink from 2,090 in 1988 to about 1,622. In answering questions during recent media interviews, the Barclays management repeatedly cited the fast growth in telephone banking and Internet-based online banking as the primary reasons for the branch closure:

Five years ago we had no telephone banking. Two years ago we had no online banking. Can I imagine a future where customers are using the telephone and the internet much more[?] Yes. ... If that continues to gather pace then I can't sit there and ignore it. It would be irresponsible of me to close my eyes to evidence of customer change and shut off the possibility of further closures.⁵

The Barclays affair coincided with the widely discussed Rover case. When BMW, the German parent company of Rover, disclosed its plan in March 2000 to sell off its loss-making Rover branch, the Department of Trade and Industry showed deep concern and exercised direct intervention in an attempt to 'save' the unfortunate Rover business. It is still too early to say whether the government intervention is effective or not. In contrast, in the case of the Barclays branch closure and, indeed, the radical restructuring of the overall banking sector, the British government appeared to be powerless to do anything. In the end of the day, the downsizing of the banking sector in Britain is a child born from the marriage between the new ICTs and market forces. There is perhaps hardly any role which the government could play in this marriage.

The world in which we live today is becoming increasingly reliant upon the normal functioning of digital technologies. Prior to the last change of millennium, literally every part of the world and every aspect of life, from western industrialised countries to developing nations with hardly any exception, had been subject to a common threat: the 'millennium bug' or the 'year 2000 (Y2K)' problem.⁶ Fortunately, the world entered into the 21^st Century without experiencing widespread disasters caused by the 'millennium bug'. However, the 'Y2K' scare does demonstrate the great extent to which our society relies upon information and communications technologies. As a matter of fact, in addition to the wide use of computers, silicon chips nowadays have been almost universally 'embedded' into other machines and equipment. Children's toys, consumer audiovisual machines, domestic appliances, cars, aircraft, mobile telephone handsets and telephone switches, nuclear weapon control systems and so forth, are all built with computer chips inside them.

Whether we like it or not, the way we live today is already significantly characterised by digitisation. Those who wish to retreat into the woods might be surprised to find that the woods are rapidly disappearing. The Far Eastern Economic Review recently reported that the cyberspace⁷ has become the meeting place of choice for growing numbers of Korean youngsters who now can not imagine life without e-mail and mobile phones. They are called the 'N-generation', or 'Net-generation', and there is a whole new business and political culture building up around them.⁸

What seems to be a fundamental dilemma faced by individuals, organisations and government policy makers is the necessity to use new ICTs and the difficulties to keep the same technologies under full control. Whilst digital technologies can be used to improve productivity and create convenience, there is always a possibility that the same technologies could strike back against the will of their users or become uncontrollable. It is a common knowledge that almost all financial markets nowadays exist only on computer screens and stock transactions are executed on computer keyboards. On April 5, 2000, the London Stock Exchange (LSE) experienced the worst meltdown in its history and traders were unable to deal for almost eight hours. The halt of the LSE was caused solely by a computer breakdown. The apparent weakness in London's computerised trading system has led to speculation that the German market authorities will take a lead in the proposed merger between the LSE and the Frankfurt stock exchange, a move that could undermine London's status as Europe's pre-eminent financial centre.⁹

The proliferation of new information and communications technologies and their socio-economic impact have become an important area of academic research over the last few years. Among others, a growing number of political scientists, political economists, sociologists, human geographers, specialists in cultural studies and management studies, etc., are trying to define the nature and impact the digital revolution might have pertinent to their own subject area.

The outcome of the digital revolution, as suggested by some writers (e.g., Castells, 1996; van Dijk, 1999), is the so-called 'network society'. Castells argues that, as a historical trend, 'dominant functions and processes in the information age are increasingly organised around networks' and 'networks constitute the new social morphology of our societies' (1996, p. 469). However, 'the basic elements of the network society are not so much networks themselves but individuals, households, groups and organisations linked by these networks' (van Dijk, 1999, p. 24). Meanwhile, a plethora of similar terms have also been used by academics and policymakers to depicted the revolutionary impact of digital technologies. Among others, such concepts as 'information society', 'information economy', 'informational society', 'digital economy', 'post-industrial society', etc., appear often in the literature. Leonard (1999) argues that, compared with network organisations, hierarchical organisations are ill-equipped to deal with the political and economic demands that globalisation and technological change are forcing upon us.¹⁰

The phenomenon 'networking' can not be said new. Rather, the invention of every new information and communications technology system adds a new layer dimension of technical networking for storing, processing and disseminating information and communications data (e.g., telegraph networks, telephone networks, TV and radio broadcasting networks and the Internet). What seems new is the pervasive networking effect various digital technologies have produced, which is apparently transforming our society in terms of politics and power, economic and business life, education, law, social structure, media and cultural changes. On top of the fast spread of physical and technological networks of digital communications, individuals and organisations are beginning to wake up to the great potential these networks can offer them and the likelihood of being disadvantaged if they were excluded from the emergent network society.

It is worth mentioning that, although participation by individual users and public sector organisations is growing, the emergent network society is already being characterised by commercialisation in terms of building, controlling and large-scale usage of the new communications networks by the private business sector.

In March 2000 three giant American motor companies, General Motors (GM), Ford and DaimlerChrysler (DC) announced plans to join forces to create a single automotive-parts exchange run through the Internet, the Detroit Exchange. It is expected that many other major motor companies, such as Toyota, Honda, Nissan and Renault, will join the online venture. When launched, the GM-Ford-DC Detroit Exchange will create a centralised online marketplace with a global reach. It is anticipated that the Exchange could handle business worth at least $240 billion a year on the millions of parts needed for building a car and as much as $1 trillion if it becomes a global standard.¹¹ Optimists estimate that the enhanced efficiency of the motor industry, thanks to the Detroit Exchange, could reduce the costs of new vehicles to consumers by up to $2000 each vehicle. The Detroit Exch...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Contents
• List of Figures
• List of Tables
• List of Abbreviations
• 1 The Politics of the Digital Age: An Introduction
• Part I The Digital Revolution and Governance
• Part II Governance of the Digital Revolution
• Bibliography
• Index