By Umberto Sulpasso
India is a country with unique opportunity of economic growth in what I call the 5KR (Fifth Knowledge Revolution) of modern times. But to assert this peculiar and historically most congruent role for one of most populated countries in the world, that is a country that always had a driving vision of the role of knowledge (let’s not forget Veda means knowledge), we need to set up a new specific statistical instrument that I have called GDKP – Gross Domestic Knowledge Product. In the age of 5KR that we are living in, GDKP-INDIA is not only a most modern notion of wealth of nation, based on the most precious man-made raw material, namely, Knowledge, but also the key tool to assure a higher growth of physical wealth of nation captured by GDP.
But in order to achieve those goals through new metrics there is a peculiarity connected to such a man-made raw material that we have first to properly appreciate: Knowledge in Cyber Space. This is the most revolutionary modification of knowledge in human history ever since the invention of writing. Writing changed forever human history, 5KR will do the same in a few decades. 5KR is such a revolutionary change in knowledge, that as it happened with the invention of writing, will produce radical changes in politics, security and economy and as consequence of 5KR human life will not be the same.
Of those radical changes we will focus on economy and on the needed elaboration of this new measure of wealth of nation – GDKP INDIA – that will provide to nation’s and state’s Government, to Business and to individuals, a very powerful reference tool for increasing nation’s wealth in 5KR times, and assuring a more balanced distribution of chances of individual wealth production. In order to achieve those goals , GDKP-INDIA, will serve:
a) To identify a most dynamic generator of GDP. Thus helping Gov’t budgeting;
b) To promote optimal private capital investment decision. Thus improving capital spending benefits for companies;
c) To provide additional support for individual security analysis. Thus supporting portfolio selection for investors. And finally,
d) To act on modifying cost of learning. Thus favouring a much better social balance improving future individual income opportunities
CAVEAT: GDKP-INDIA, assuring proper support for achieving those goals, is to be viewed not as an alternative index to GDP, but as a key modern statistical tool to increase GDP in terms of planning and economy policy formulation.
Success and crises of GDP
Gross Domestic Product, or GDP, was born in late 1930s without the approval of major economic schools, but thanks to the US Secretary of State for Commerce – a great business visionary – who sustained Kutznets’ proposal, even against the negative report to the House of Representatives made by the famous schools of economics. Kutznets became a Nobel Laureate and in the 1990s, a poll among politicians and economists judged GDP to be the major theoretical achievement of the twentieth century and Proof Paul Samuelson declared that if it had been adopted a decade earlier, the Great Depression and the Wall Street disaster could have been prevented.2
At the turn of the last century, however, GDP was greatly criticized to the point that OECD established a Sarkozy-Stieglitz Committee to replace it. There were many criticisms about the GDP measure but the following two of its shortcomings were considered the most negative:
It was not a very reliable measure to understand the growth of economies (it favored some relevant financial problems for instance in Ireland)
It did not provide adequate information on the distribution of wealth (Check out YouTube Robert Kennedy Is GDP the real wealth of America?)3
Anyway the Sarkozy-Stieglitz Committee produced many alternative indices but none of them succeeded.
GDKP – INDIA, a totally different approach
When I decided to work on the matter, I took a totally different approach from that of OECD. GDP was not to be abolished just because it did not provide the information whose absence made it reprehensible, simply because GDP was not constructed to provide that information. GDP was only intended to provide value of PHYSICAL production of a country (with services connected), and with modification and adaptation of the initial model, it did provide that notion. What to do with that notion for appraising growth of proper distribution of wealth was a different matter. Key information were clearly missing (critics were correct) but rather then substitute GDP, one needed to complement it. How? It was time to provide a wealth of nation based on IMMATERIAL production of a country, with services connected. But which one of IMMATERIAL goods had to chosen?
Birth of KNOWLEDGE IN CYBER SPACE and its relation to in economy
An Economy grows for many reasons but at some specific times there is always one key element that acts as engine, a driving force that carries the other activities and pushes up the wealth of nations. Those engines change over time, and eventually lose their key dynamic role to be substituted by other motors. But there is one engine which has always dominated the modern times and has acted in different ways: KNOWLEDGE.
If we look at great economy changes, we can identify in modern times Five Knowledge Revolutions — the last one, Knowledge as common goods traded by all people across national boundaries is what I synthetically call KNOWLEDGE IN CYBER SPACE and is the most radical of the five Knowledge revolutions of human history. This is because it is not anymore Knowledge applied to specific sectors, but concerns the nature of knowledge itself. It is exactly because of this radical change that 5KR through production, circulation, and the selling of it, affects Politics, Security and Economy so that in less then two decades it has already produced devastating change. This radical knowledge revolution which we call 5KR, the one in we are living in, is changing everything from business to politics to security because of the daily interaction of four billion people. The World’s society will never be the same because of the birth of Knowledge in Cyber Space. Quantification of the economic value of this new notion of knowledge is the basis of GDKP.
GDKP-INDIA AS DEFINING ELEMENT OF GROWTH OF GDP
If Knowledge has been playing in disguised forms a key role in GDP growth, then the best way to solve the growing criticism of GDP is to IDENTIFY THE ROLE OF KNOWLEDGE WITHIN THE GDP. That is what I call GDKP.
Let us assume that we are able to calculate it, then the ratio GDP/GDKP will provide the K factor of a nation. That is to say, the multiplier on general GDP wealth, for country and also for selected private sectors, of the most relevant modern man made raw material. A sort of modern Keynesian multiplier that is not spread on all spending – with known parasite damages that have nullified the impact of Keynes economic theory – but on specific selected sectors of economy, the ones that are reacting most significantly in growth with selected public spending. We’ll see from the capitalization of Companies stock exchange, that this approach is not a marginal scholar consideration, but it is exactly what the market thinks of what I call Knowledge in Cyber Space in terms of company’s value. (Amazon, Facebook, Google, but also Tenecent, Alibaba from China, however, I am sorry to say there is no Indian company)
But let’s go back for a moment to focus our attention on K factor in a way that it will shed light over real GDP engines. Please notice that the big impact of China’s GDP overtaking that of USA would be seen in a totally different way if we calculated the GDKP of the two countries, because the GDKP of USA would be immensely superior to that of China. And that calculation would be remarkably relevant if we look at the GDP of China in its historical evolution. Let us remember that the GDP of China at the beginning of XIX century was the highest in the world, and it was much higher then the sum total of the GDPs of all Western countries. And it precipitated dramatically. Why? Because of First Knowledge Revolutions (England).
In 1972, for instance, Germany, France, UK, Italy and of course the USA had much higher GDPs. But China’s started moving up from 1972 onward, exactly after Nixon’s meeting with Mao, because of the imported Second Knowledge Revolution (USA). In other words, China’s GDP growth, for the best and for the worst, is largely Western Knowledge-dependent4 as it appears clearly also from the $25 billion that USA pays monthly to produce its own goods in China. In some way, the same could be asserted of all Asian countries playing the game of cheap labour able to attract Western assembly line production (Second Knowledge Revolution), and it is true in some respect also for India: they still are Western knowledge countries dependent (not so much may be only for South Korea). And that is why GDKP-INDIA will play a special role: to identify the role of K factor of this country, in total, and by sectors to express a proper autonomous role in modern K.
The Model
Since we wanted to calculate the ratio GDP/GDKP, we have to be strictly scientifically consistent with the vision and treatment of knowledge, similar to that of physical goods and services of GDP.
In GDP, we consider production of any type of goods, hospital or prison, pharmaceutical or weapons (Search the internet for the excellent speech on YouTube of Bob Kennedy, Is GDP the real wealth of America?). Similarly, in GDKP we have to consider production of any type of knowledge. Google produces knowledge. Amazon produces knowledge. Facebook produces knowledge. Google, Amazon, Facebook do not produce physical things, they produce knowledge-information, which is the modern concept of knowledge in the Cyber Space. Knowledge that comes down from the ivory tower of selected producers becomes a common market traded goods. It, of course, doesn’t exclude the traditional knowledge, almost secret, activity of past times which will obviously still play a very important role in GDP – Knowledge Economy is historically largely based on selection and discrimination of providers and users – but it adds to the traditional and well established concept of Knowledge Economy, the modern notion of Knowledge, which has not only created new markets, changed business and political communication, but has also created companies with highest stock exchange valuations. To use a metaphor Knowledge has dismissed the dinner jacket to wear T-shirt and jeans.
And if this is the new knowledge that is creating new markets, the question is, why does a country like India, with over a billion people and with such a great tradition of importance given to knowledge, not be playing a greater role in the world’s new modern knowledge markets?
The model of GDKP- India is the proper reference tool to support a proper policy making answer to this Challenge/Opportunity.
Matrices and new set of Indices
1. CKPM, Country Knowledge Producing Matrix) – in our case, IKPM, India Knowledge Producing Matrix5
A. KI (INDIAN KNOWLEDGE ITEMS) The first objective of the model is to represent India as a living texture of modern knowledge produced by all national operators: Government, Private entities and Individuals. In order to do that, we want first to retrieve the production of any type knowledge, traditional and digital, wherever that happens. But since the concept of knowledge in what I call the 5th KR is changed, we need first to Identify the relevant Knowledge Items. The model identifies four groups of Knowledge items, as examples:
i. Knowledge Objects (books, newspapers, cd, dvd, cell phones, tablets, TV set, Radio apparatus, etc.)
ii. Knowledge Diffusors (teachers, consultants, gurus, priests, etc.)
iii. Knowledge Distributors (TV channels, radio stations, platforms, satellites, etc.)
iv. Knowledge Amplifiers (schools, museums, amphitheatres, etc.)
Diffusors, distributors and amplifiers are very important because, in the full structuring of our process, with the intent of providing to the Government a most essential budgeting tool we will have:
IS (international Standard) GDKP, that is to say a GDKP, with defined similar rules that apply to all countries. Those rules will be borrowed by GDP and the result will be GDKP INDIA without specification.
NDA (National Digital Applied) GDKP, where in order to appreciate proper impact of government policies in terms of digital economy we will introduce different specific coefficients for diffusors, distributors and amplifiers. The general model provides the structural setting of those coefficients, that will be decided however on a strictly national basis.
While IS GDKP India will set a standard confrontation with other nation’s calculations NDA – GDKP INDIA will help focus different polices and achievements of digital wealth of India, through specific government’s activity over time and different state’s policy in the matter.
B. KP. (INDIAN KNOWLEDGE PRODUCERS): Since we set the full list of historical and new digital knowledge items, we need to identify now who are the big producers of both of them, traditional and modern knowledge items. The model refers to top three operators: Public administration, Private enterprises, Household (in the specific meaning defined later). Those top producers have obviously many subsets. For instance, Public administration will have schools, research institute, security, welfare, et. Private enterprises will have Research institutes, TV stations, Movie producers, etc. Household will have different small standard dimensions.6
Calculation of GDKP. Once the Indian KI will be defined, and Indian KP will be identified, we will appreciate through statistical tools. SUT here is extremely important and it is fundamental that before our discussion we listen to the role of SUT in India today that will be a key the calculations of values of the relative cells of the Matrix.
Then each row will provide the single Knowledge item production in India through different producers.
Each column instead, will provide the different types of knowledge items produced in India by single producer.
The sum of rows or the sum of columns of the matrix will provide the GDKP-India.7
2. CKUM (Country Knowledge Users Matrix) – in our case, IKUM, India Knowledge Users Matrix
From K factor, National Knowledge Multiplier, to KI’s sector knowledge multipliers. But in order to have a proper vision of the India Knowledge society it is not enough to calculate the modern knowledge production. It is necessary to appreciate also the absorption of knowledge in order to assess the impact of knowledge on growth of wealth. We get deep into the understanding of what role knowledge plays in India’s wealth- making process through the second matrix of the model.
In this matrix, we maintain on the rows exactly the same Knowledge items of previous matrix, but on the columns we have a list of all potential consumers of Knowledge. The columns will tell us by economic subjects how much knowledge is absorbed in total and by specific tools. The different rows will tell us instead the distribution of individual knowledge items to the respective economic operators.
The making of this matrix will have to strictly follow the structure of the National Accounting System to help us to calculate the KI’s ratio knowledge multiplier of individual sectors of economy.
KI, knowledge multipliers of each sector of economy, will provide a strong support to public budgeting as well as proper reference to private optimal capital investment. Later when proper K indexes will be elaborated there will be a remarkable impact on Stock Exchange evaluation (K/E ratio in addition to P/E ratio), but also, as we shall see later, the possibility of new risk index based of K factor.
INDEX of Cost of Learning
The last pillar of the GDKP model is a very important index: Index of cost of learning, that soon will become a pillar of India’s national government policy making integrated to index of cost of living. The index is constructed on the basis of same K items identified in previous matrices, and will have four separate basic constituent’s distinctions:
By national geographical areas (States?)
By rural and urban areas
By age brackets
By employment and unemployment situation
The index:
Will provide to the Government the proper vision of what has to be done to make more egalitarian the distribution of opportunities in creating individual wealth vis-a-vis index of cost of living
Will provide the Government basic information of needed initiatives of social equalizing opportunities for individuals in different parts of the country
Will facilitate comparison of different State’s knowledge policies based on state’s individual cost of learning
SOME CONSIDERATIONS on Potential use of GDKP INDIA
We will focus later on uniqueness of India within the 5KR age. It should be immediately noticed that better Gov’t budgeting, and much improved private capital investment decisions as well as balancing social benefits from knowledge, are fundamental benefits in India as in any other country.
It is also important to mention the relevance of factor K to the stock exchange. GDKP will furnish the basis for an integrated Stock value tool (K/E ratio in addition to the P/E ratio) and it will permit the integration of country’s and companies’ classical risk rate Triple A (B), with new Triple K (H) especially useful for assessing future growth.
I hope some important media institutions and relevant software house will be present at the February 13 meeting so we may push them to jointly produce the K INDEX OF INDUSTRIAL STOCK, as K UTILITY INDEX, etc. comparable to DJ INDICES. To Indian financial and stock exchange media, it should be reminded that the Wall Street Journal was founded by Charles Dow author with the statistician Edward Jones of the DJ index. Dow Jones several indexes are now of world side acceptance. The same will happen with K factor indexes.
Cultural, Diplomatic and international benefits from GDKP India, some additional considerations
The focus of this presentation has been to synthetically introduce the discussion of Feb. 13, 2019 meeting. Obviously, this summary introduction of some key issues have been cantered on economic benefits but with the making of GDKP-India as additional very relevant benefits of this statistical innovations, there are other aspects that will benefit the country. In particular, there are three important committees that will have to be set up immediately not only to maintain with proper updating the key aspects of GDKP making, but also to affirm on international level the leading role of India in this new scientific statistical adventure:
1. Knowledge Scientific Committee
To continuously assess the role of scientific knowledge into the GDKP through proper representative scholars and research institutions.
2. International Cultural Knowledge Committee
To assist other countries – as in India – to make in addition to IS-GDKP their NDA-GDKP. This is extremely important as a relevant diplomatic operation.
3. GDKP ISV (international standard validator)
It is of great importance that the CIS, Ministry of Statistic, Planning and Implementation of India should promote an “International standard validator” of GDKP, similar to what has been done for standard validation access to Internet. For the internet, W3C is the extremely important international institution that validates the acceptable access standards.
Since India will be the first country to calculate the GDKP, its GDKP-ISV (International Standard Validator), should set up the important structural reference analogous to W3C.
UNIQUENESS of INDIA
It is clear that benefits of GDKP calculation would accrue to all those countries that will introduce it. Personally, I have no doubt that because of the potential for multiple positive implications, in a very short time GDKP, in its three components, will become world-wide diffused set of indices and UN, World Bank and IMF will promote them to be applied in every country.
While India will benefit like any other country from the establishment of a new powerful statistical tool like GDKP, it was mentioned at the beginning that India, in addition, has a more specific potentiality, it was called, India’s uniqueness, that would enhance the impact on GDP in much more significant manner in India within the world’s scenario.
It would be improper to present here what I consider the uniqueness of India in what I call the 5KR of the modern age, because they are better understood after a full discussion on the making and uses of matrices and the indexes of cost of learning.
I can anticipate to this respect four specific hypothetical projects stemming from that uniqueness
I.D.E.A. – National Digital Educational Board
I.D.E.A. – National Digital Interactive Campus
IK-HIT – India Knowledge – Human Infrastructure Technology
K Rupees. Knowledge Indian Rupees.
WHERE WE GO FROM HERE, STEPS TO GDKP-INDIA
Adaptation of general model to India’s economy. We have a preliminary work that has to be done and it is to define the general framework of the Matrices and Indexes of cost of learning. That work can be done soon.
Calculation of GDKP INDIA 2018
First Step. Extremely useful, it is what I called the Knowledge Skeleton of Knowledge India’s economy. It is what has been done brilliantly by former DG of CSO Ashish Kumar.
Matrices and Indexes will be then the application of selected data to the matrices and to the Indexes of cost of learning.
SOME PERSONAL THANKS, UNIVERSITIES AND PEOPLE
My friends at the universities in California offered me many times to organise a large conference in USA on GDKP concept and model, publishing a proper book, but I had always refused.
First, I didn’t want to publish just a good book but I wanted to see GDKP applied FIRST to a great country. 8
Second, for the FIRST country, I didn’t want it to be GDKP of any country but one of the two: China or India, for the immense political and economic implications of GDKP given their huge populations and possible explosive role in Cyber Knowledge Space.
When thanks to the introduction of Ambassador Fabian to top Indian economists and great cultural people, the first presentation on GDKP was individually done, I decided that India would have been my favoured first choice, because of the commanding scientific and highly regarded quality of people I met personally. Now that we might be close to the positive result of this historical goal, I need to say that a very special recognition for possible GDKP INDIA take off, will need to be given to:
Ambassador K.P. Fabian, that first Indian person that visioned the importance of GDKP for India and introduced me to India’s economists.
Ambassador Bala Shetty, that immediately provided top qualified statistical support and mathematical expertise to the model in order to make it international sensible.
Dr. Ashish Kumar UN Chief Asian Statistician, the very first elaborator of it within CSO of India and natural key reference for any further application of GDKP in India, in Asia and elsewhere.
Dr. Arvind Gupta, Director of Vivekananda foundation, not only because he hosted the first conference on GDKP but even more because of his remarkable reflection, which I fully share, on how India’s contribution on knowledge should be more properly appreciated abroad.
Dr. Sanghamitra Bandyopadhyay, Director Indian Statistic Institute, brilliant co-promoter of this meeting, who is hosting what could be the formal beginning of this historical event.
Prof. Nachiketa Chattopadhyaya, of ISI, for his scientific coordination of content contributions.
And to Dr. Naresh Kumar Sharma, DG of MoSPI, for his very much relevant constructive structural support to the further success of present meeting.
Thanks to them GDKP India is coming along, and I am quite sure that GDKP-India will soon become as popular in the world as GDP-USA was in late 1930s.
However, when hopefully GDKP India 2018 will be calculated, we need to know that it has become a reality thanks to:
CIS, Pravin Srivastava, responsible of Minister of Statistics, Planning and Implementation, who is playing for GDKP India the same historical innovative role that US Secretary of Commerce played for USA when he made possible the calculation of the first GDP.
And thanks to Dr. Rajiv Kumar, Vice-Chairman, NITI Aayog, economist of top world’s level, for his immediate keenest farsightedness of GDKP beneficial support to modernize India’s economy in line with the most relevant international evolution.
If this Country will get the support of GDKP-India to better enter the 5KR age, that is going to happen thanks to their personal modern vision of economy.
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