ICT, transaction cost and development: The flip side

Abstract

The main observation is that the connectivity matters if and only if it connects the right way. The danger of being at the flip side looms large, if connected wrong way. 

The conclusion is based on a rigorous theoretical understanding of the role of network technology in general and ICT in particular for augmenting the process of social and economic transformation. The theoretical framework also allows us to discover the danger of flip side of the network technology, and tells us that it is not always hunky-dory between ICT (or any network technology for that matter) and social and economic backwardness. Colonial plundering was possible through the adoption of network technologies in colonies.

ICT is believed to contribute to economic development by reducing the transaction and information cost associated with any economic activities. Transaction cost arises when transactions are made away from the market. There are two streams of arguments here; one, that suggests minimisation of transaction cost as means towards economic efficiency, and the other that considers the act of transactions away from the market is actually the process of value creation of a capitalist enterprise. We argue that both the arguments can be synchronised by partitioning the transaction costs in two broad components of production activities, namely, production (the value creation component, where in lies profit) and procurement. It is in the latter component where transaction cost can be minimised for efficiency, whereas in case of former transaction cost is created by a value creating capitalist enterprise. In reality both the processes are concurrent, and one complements the other.

It is this comprehensive perspective that enables us a fresh look at the ongoing programmes, and, therefore a general observation that ICTisation in less developed economies in effect make market operations friendlier for the capitalist ventures or inroads in the marginal economies, and create new varieties of distortions in the system. We call this distortion – the flip side of ICTisation, because in the absence of factors that enable make use of connectivity for economic and social gains, the marginalised population of a marginal economy runs the risk of falling in to a new dynamics of exploitation. 

Profile of Prof. Pradosh Nath

An economist working on issues related to applications of science and technology for social and economic development. He is a scientist at National Institute of Science Technology and Development Studies (NISTADS), New Delhi. At present affiliated to the Centre for Culture Media and Governance, Jamia Millia University, New Delhi as Senior Research Fellow, ICSSR, New Delhi. His present research interest is in the area of application of ICT for social and economic development of the marginal economies.  He has published widely in both national and international journals. He has co-authored two books and edited another. He has worked as consultant for IDRC, Canada, WAITRO, Copenhagen, Denmark, and ITU, Geneva. He has been the coordinator of the WAITRO sponsored international programme on ‘Knowledge management for R&D organisation’ conducted in different countries in Asia and Africa.

Videos