Ideas and concepts on the Hungarian information economy

lnjormsrion Processing & Managemenl Vol. 24, No. 2. pp. 183-198. 1988

Printed in Great Bnfain. 0306.4573/a $3.00 + .Ml

Copyright 0 1988 Pergamon Press plc

IDEAS AND CONCEPTS ON THE HUNGARIAN INFORMATION ECONOMY*

J&SEF SZAB~ and ISWAN DIENES+ Hungarian Central Statistical Office, I525 Budapest II, Keleti KBroIy u. 5-7, Hungary

(Received 1 May 1987; accepted in final form 24 Seprember 1987)

Abstract -The authors discuss in comparable terms the labor and capital resources and

production of the information economy in Hungary-a centrally planned country. The data indicate that Hungary, with her growing information economy, follows the general trends experienced earlier in a number of market-oriented countries. Since 1980, those with information occupation have constituted the largest group within the economically active. Contribution of information activities to value added (GDP) amounted to almost 32%) half of which was produced in the secondary information sector. Figures are also given in natural units (bits) for Hungarian information production, export, and import. To explain the secular sectoral changes, the authors draft a logical flow model that considers regional differences in the demand, supply, and life cycle of goods and the changes of productivity during the life cycle. They point out that if no satis- factory capital were invested into the information economy, it would become a ballast rather than the engine of the country. Since the state budget is incapable of raising investments to the necessary extent, it is of great importance that as many economic units as possible would get an opportunity for and become interested in making up the missing amounts.

1. INTRODUCTION

The automation and mechanization of activities relating to the production, processing and

transfer of information, as well as the development of an information economy with com-

mon criteria on this basis, has become one of the most important processes taking place

both in the world economy and in the economic and social life of individual c0untries.S

In the course of the research into this phenomenon, there were several studies published

in the international economic literature following the pioneering work by Machlup [7];

these studies were intended to explore the scope and peculiarities of the “information sec-

tor,” of “informatics,” of “information industry,” of “knowledge industry,” and so on-

concepts similar to the “information economy.”

The development of a comprehensive concept of information activities, each of which

can be investigated in itself, further the economic analysis of such activities is justified by

the following circumstances:

1. Along with the progress made in the field of labor division, there is an ever increas-

ing quantity of information products and services demanded by the maintaining

and widening of social production.

2. The production of information goods demands more and more similar technolo-

gies and methodology based on computer techniques and information activities

have been merging into a new sector called information economy. At the same

time, information activities are the future scenes of computerization.

3. In the course of labor division, a great number of productive units separated both

*This article was originally published in a longer version in Kkguzdusdgi Szemfe, No. XxX11.1985/7-8, pp. 856472.

tJ. Szab6 is head of the section and I. Dienes is deputy head of the section of the Dept. for Computer Application of the Hungarian CSO. The authors used the data and certain methods of the research work in the field of information economy in progress in the CSO.

$For certain international aspects about this article, see Ervin C%mbGs, The new information and communication order and its economic aspects. Ktizguzdusdgi Szemle, No. 1985/4 (note by the editor).

183

184 J. SZAB~ and I. DIEN~S

from the organizational and economic aspects were established to meet the demand for information activities; their operation was continued on a large-scale basis in several cases. Sectors covering information activities represent a considerable weight in industrially developed countries and their development dynamics exceed that of other sectors.

4. Information products and services play an ever increasing role in the productive consumption and in stock-accumulating processes, exerting in this way powerful influence on the performance and efficiency of other industries. As a result of a higher development rate, they have become one of the most significant factors of economic and social restructuring processes.

5. Finally, the production and sales of information goods demand an appropriate legal and institutional system that regulate various rights relating them, such as copyright, right of disposal, access, and utilization. These legal rules seem to be similar for various information goods and their integration seems to have begun as well.

The recognition that information activities and information economy is of great importance when considering it from the operational aspect of the national economy as a whole is new neither in the Hungarian economic literature, similarly to the recognition that its assessment and handling in an actually economic approach is one of the key issues of the future. And& Brady, in his book Lrtssuld Idij [3] emphasized the importance of education and training; Ferenc Kozma [S] considers the economic role of education- similarly to T. W. Schultz [l l] -as an investment, the result of which is national wealth embodied by the working capabilities of the people. Gyorgy Marosan Jr. [S] and Tibor Vamos [13] considered information economy as a whole. Several part studies were published that dealt with economic issues of individual information sectors [6]. One realizes that “there is something wrong” in the field of education, scientific research, and technical development. Others again recognize that in our days the developing sectors are actually those of the information economy. All these ideas and notions form slowly a continuous texture that-as the clothes of Wells’ invisible man-draft the new, increasing, and independent part and our objectives in the economic structure. In this article, we intend to outline a draft picture on the new, great “branch” of the economy, which is deal-

ing with the production of such articles as books, newspapers, records, files, manuscripts, magnetic tapes, diskettes and such nondurable symbols as those of broadcasting or tele- cast, creating and reproducing this way in a wider sense and scope the knowledge embed- ded in the population.

The consideration of information activities within a unified frame offers opportunities for the medium- and long-term planning, for structural transformation, for labor policy, further for structuring the economy, not only within the primary and secondary industries but also in all sectors of the national economy, for modernization and for the reviewing and unifying the state management of information economy.

In this article we discuss the labor and capital resources of information economy and its annual production; we estimate the order of magnitude as measured in natural units of information production and information capital; finally, we outline the trends of development of the information economy.

For the purposes of the analysis, we have extended the three-sector model of the economy (agriculture, industry, and services) to four sectors following Porat’s [9] method by selecting information activities from the former three and aggregating them in the fourth, information sector. We are studying the information activities altogether of the information economy. Information activities cover the production of information products and services.

Under information product, we understand all such things that durably and function- ally carry symbols. It was printed material that appeared first and was sold as goods; gramophone records and films have only some few decades’ past, magnetic tapes even less. In Hungary, software and database products have been accepted as products since 1982. Other products are still to be recognized as products (e.g., technical design and documentation) or their qualification as products is not timely in our days, out of conceptual or

Ideas and Concepts on the Hungarian Information Economy 185

aspectual reasons (bills, letters, business records, medical documentation, etc.). In oppo- sition to Porat’s approach, information machines and devices (office machines, TV and

radio sets, etc.) will not be included into information products. Under information services we understand the production of nondurable visual sym-

bols or the information transfer. The main activity of information industries is information activity, R&D, printing trades, telecommunications, data processing, education, culture, financial institutions, medical diagnosis, state administration, and legal security

are ranked under this concept.

2. THE INFORMATION LABOR

The economically active person, who is in most of his or her worktime engaged in information activities, has been considered as a person engaging in information occupation.

As proved by Fig. 1, elaborated on the basis of internal and foreign data [IO], the rate of information-occupation has been developing in Hungary at a similar rate and direction, as observed in developed market-oriented countries.

Although the number of information employees increased in each sector in absolute figures, a more rapid increase is to be seen in the noninformation sectors than in the information sectors [12]. One main reason of this phenomenon can be found in the development policy of economic organizations. The organizations automate all their main activity representing mass work, and the labor engaged in the main activity and released this way will decrease. Another result of such development policy is that in organizations specialized for the information sectors, the productivity of information activities is improving bet- ter than in other sectors.

In Fig. 2, plotted on basis of data provided by Tibor Sebestytn [12], we indicated the actual and prognostized data of occupational structure corresponding to the four-sector model, together with time series relating to the United States in order to demonstrate the trends.

On the figure it is obvious that the shares of the main occupational groups in Hun- gary show similar changes to those experienced in the United States. The very similar run of the curves is worth mentioning. In the case of Hungary, however, there is a phase delay of more than 20 years to be seen: moreover, Hungarian occupational curves are “flatter,”

United States

Canada

United Kingdom

Sweden

Federal Republic

Austria

Japan

Hungary

Finland

of Germany

0 ’ I I I I I I I 1950 1980 1970

Fig. I. Information occupations as a percentage of the economically active.

186 J. SZAB~ and I. DENES

%

45

\ -b Prognostics !

25

20

15

10 ‘..

‘\

-b Prognostics !

I 1990 1950 1960 1970 19I

Information economy

- United States - Hungary Services

.....* United States

-----Hungary Agriculture

- - - United States

---Hungary Industry

Fig. 2. Sectoral distribution of labor. Occupational groups as a percentage of the economically active.

that is, as a result of the delayed specialization it cannot be the same extent as in the United States where the extra bonds of both early and high volume specialization are gathered.

The high rate of information occupations in the United States is also justified by the fact that in possessing the most developed information techniques, spatial telecommunication systems (satellites), and databases, the United States is the most important information exporting country, as well.

Similar structural change can be observed in the case of labor structure of the United Kingdom and Austria [lo]. In order to demonstrate the development progress of the four- sector occupational structure, the structural state valid in Hungary for 1970 and 1980 were considered as starting points in Fig. 3. Then the Euclidean distances to states in various dates in other countries and in Hungary were led from the starting points on scale of the base period until the points indicating the structure of individual countries as measured at various years could be obtained. This representation is suitable for displaying those periods in which the development of a given country converged with the Hungarian development between 1970 and 1980 (i.e., when the similarity between the Hungarian and the foreign country’s occupational structure increased) and also such periods when this similarity decreased (i.e., when the development trends were diverging).

The slope of curves also demonstrates that the development has been taking place toward the same direction but not on the same path. Nevertheless, retardation of the Hun- garian occupational structure behind technically developed Western countries is worth considering (expressed in years). The similarity between the slopes of curves supports the prognostics made for the occupational structure (Fig. 2), too.

The distribution of information occupations is observed on basis of the OECD classification in the following groups:

l Information producers l Information processors


LL

/ / /

,__ d 1949 1980 \

\ United States \

\ Hungary

‘\o 2000

Fig. 3. Changes in the occupational structural in Hungary, the United States, and in the United Kingdom. Equidistant plotting as compared to the state of Hungary in 1970 and 1980.

l Information disseminators l Information infrastructure

Information producers make/manufacture new knowledge or formulate it in suitably applicable form. Technical-scientific workers, measurers, data collectors, and advisors

belong to this group. Information processors comprise state and enterprise managers, managers of produc-

tive and administrative processes, executives, and clerks. Information disseminators are teachers, lecturers, and professionals of mass commu-

nication media; employees of the information infrastructure comprise machine operators, maintainers, and wiremen, postal and telecommunication workers, printing machine and computer operators.

The proportion of the main groups developed to a similar extent in Austria and Hun- gary between 1960 and 1980. The greatest share is of information processors in both countries; the second place is occupied by information producers. In Hungary, the share of information disseminators is greater than that of the information infrastructure in Aus- tria. This fact reflects the well-known infrastructural backwardness in Hungary. It is worth mentioning that the share of information processors was smaller and the share of information producers was higher in Hungary in 1980 than those in Austria. In our opinion, this does not mean any kind of overtraining; among information processors we find mainly qualified persons of high-level educational attainment. The point is the occupational structure in Hungary has still shown to a less extent the segregation of the two groups of information occupations, the increase in the number of persons carrying on routine work, and in the mass character of certain information-related occupations. The surplus in information producers, otherwise, should not be considered as a disadvantage, for master-level manufactural information producing will always be needed in certain areas.

The subject-matter area of intellectual professions becoming “blue-white collar” infor-

mation occupations and their devaluation was dealt with recently by And& Br6dy, who presented long time series to prove that this long-term tendency has been observed not only in Hungary [3]. Br6dy is arguing against this process and by doing so, he thinks-even if it is not started- that this process is reversible. In our opinion, along with the mechanization and industrialization of information activities, more and more information occupations become inevitably routinelike; similarly inevitable is the underrating of the labor force that can be replaced, as well as of information activities of a routine nature. Natu- rally, thinking again in international scales, it is by far not all the same, at which rate and to which extent takes this process place in the case of the Hungarian information labor force. The outlined tendency is well demonstrated by the numerical data of Table 1.

188 J. SZAB~ and I. DIE~YES

Table I. The economically active engaged in routine information activities as the percentage of all economically active

.Austria linited State\ United Kingdom

.lapan

Canada Hungal-

Sweden

_ 20.2 16.8 lY.7 24.4 18.‘) 71 .x 23.2 _

12.X 17.5 21.0

17.0 IY.l 17.x __ _ IS.2

19.6 24.6 3.5

The share of managers and supervisors in the two countries show a considerable dis- similarity: in Hungary the share is smaller than in Austria, and the share of executives and clerks-in contrast with our expectations-was not greater in 1980. Finally, we note that all four groups of occupations are widening at the same rate- within the limits of measuring errors-in both countries; that is, for the time being, changes in our relative positions to each other cannot be forecast.

We have also studied the similarity of the information labor structures of various countries at various instants to that of Hungary in 1970 and 1980. The information labor structure of the individual countries was characterized by the percentual proportion of economically active ranked in the OECD information-occupational groups. By making use of the Euclidean distance derived from the difference in the labor structure as indicated by the two countries, we recognized that the information labor structure of Hungary in 1980 was most similar to that of Hungary in 1970 and that of France in 1975. These are suc- ceeded by the United Kingdom’s structure in 1951 and in 1971, and that of the United States in 1950. The Hungarian structure, in general, moves away from the structure observed between 1950 and 1960 in developed capitalist countries and approaches that in the 1970s. The Hungarian information labor structure in the early 1980s resembles that of the 1960s and the 1970s in other developed countries. The structure of the United States deviates from the Hungarian structure for 1970 and 1980; the Swedish structure differs considerably and to an ever increasing extent (see Fig. 4).

Confronting Figures 3 and 4 reveals an interesting fact. Although the lag of labor structure as a whole in Hungary is about 30 years behind the structure of the United States, lag of the information labor structure is only 20 to 25 years. The peculiar adherent nature of the Hungarian development may probably be manifested also in this case.

Information occupations can also be grouped on basis of their ongoing and expect- able automation in the foreseeable future. In our article, we considered their technically possible automation by the year 2000, on basis of forecasts and our own estimations. Con- sequently, in Hungary, the number of information occupations that can be automated by the year 2000 amounts to 180,000 and the number of computer-aided occupations was at least to one million. Telephone operators, typists, land surveyors, technical designers, certain medical and laboratory workers, certain executives, and clerks are covered by this scope. In the international literature, it is debated whether the “information revolution” would create more or less jobs than it liquidates [12,18]. Because of the productivity- increasing effect of automation, the released labor force can be employed probably only if information economy or the other sectors are developed simultaneously in an extensive way.

3. THE STOCK OF INFORMATION ASSETS

“Intellectual” activities representing the majority of information activities were not as device- and material intensive previously. Other information activities (printing and film production industries) have been device and material intensive since their very beginning. Information activities, altogether, were still characterized by low device and material

f&as and Concepts on the Hungarian Information Economy 189

States

1%

Fig. 4. Development of the internal structure of information occupations in certain Western countries and in Hungary in 1970 and 1980.

demand. This statement is proved by the fact that in 1983 the gross fixed assets per one empIoyee amounted to 374,000 forints in the information industries, whereas gross fixed assets were 522,000 in the “material industries”.*

Along with information activities becoming industrialized and automated, the demand for capital is increasing, The long-term increase in the fixed assets stock of information activities is weli demonstrated, for example, by the data of construction planning, research, and investment enterprises. The gross vafue of fixed assets per one employee increased from 41,000 to 126,000 forints between I970 and 1982 [16f.

On the other hand, the lively investment activity into machines of information des- tination that could alter the economic structure of the entire national economy for the ben- efit of information activities is not visible. It seems to be characteristic that in 1983 the rate of net to gross means value was 69% in enterprises and cooperatives in the “material” sectors, while the rate was only 54% in the sector of electronic data processing [16,17].

The material consumption of information economy-estimated on basis of the mate- ria1 consumption of nonmaterial sectors - does not differ considerably from the national economic average. The domestic consumption per one million forint gross production was 493,000 forints in the material and 456,000 in the nonmaterial branches in 1982 (i.e., nonmaterial branches are material consuming, as well; their import demand was ~29~~ and 79,000 forints, respectively {IGff.

4. ACCOUNT OF THE PRODUCTION OF fNFORMATION ECONOMY

In approaching the production of information economyt vve started off Porat’s modei, which makes a difference between primary and secondary information sectors. The production of primary information sector is composed by outputs manifested in information

*Including industry, agriculture and forestry, building and construction, trade, transport and communica. tion, and data processing.

190 J. SZAB~ and I. DIENES

products and services, regardless of the fact whether or not these will be realized against market prices.

Activities determined this way are considered as “primary information economy” the production and contribution to the Gross Domestic Product (GDP) of which has been examined.

The concept of the “primary information economy” approved by us is of narrower sense* than Porat’s “primary information sector. ” The latter includes also manufacturers and repairers of information machinery (office machines, computers, telecommunication installations, devices, etc.) and installation. For the sake of comparison, we have also calculated the production of the Hungarian primary information sector as well.

The selection of GDP as a production indicator is justified by the fact, that being a seminet indicator it does not comprise multiple items, indicating this way the actual production, on one hand, and facilitates international comparison, on the other. Production of the primary information sector can be determined on basis of the balance reports of economic units, with slight errors.

There is a considerable amount of information activities in the noninformation sectors, the output of which is being consumed for productive purposes within the economic units; and this production remains concealed, not represented in information products or services. The totality of this hidden information activity is called as secondary information economy-or secondary information sector in Porat’s sense.

A5 in this case there are no independent information products released and the production cannot be measured, an assessment method may be the estimation by activities. Production of the secondary information economy in the noninformation sectors was estimated by means of the proportion of information labor force employed by these sectors.

Analysis of the secondary information economy cannot be neglected, despite the calculation difficulties rendering the economic weight of such activities significant. Fur- thermore, there were such autonomous organizations developed within the individual organizations that can become independent as a result of organizational changes, so that their production would be recorded in the primary information sector. Lately we have wit- nessed such changes in the course of decentralization process of the Hungarian enterprises. Computer centers, planning, and research institutions of hidden production within a great enterprise will present themselves on the market in the economic accounts and in statistical surveys as independent units of own output and production.

Thus, by the joint observation of primary and secondary information economy, we have the opportunity to perform activity-oriented analyses that are independent to an extent from organizational changes taking place in the information economy. On basis of the proportions observed between the primary and secondary information economy, conclusions can be drawn also for the labor division of the national economy at the level of

enterprises and institutions. The information production of the Hungarian national economy indicated in value

added terms is demonstrated in Table 2. As for our calculations, the production of the primary and secondary information

economy exceeded 32Vo of the total output measured in value added in 1982. Besides this significant proportion, one has to take into account also the fact that a part of information activities is underestimated in this accounting, as 19% of the production is financed by the state budget.

In Hungary, the dimensions of the information economy and that of Porat’s information sector do not differ essentially from each other. (This difference is 4.1% in the dimensions of primary information economy respective sector and 3.4% in the gross primary and secondary information output. This results from the fact that the secondary information activity of the production of information machines and devices adds to the production value of the secondary information economy.) The foregoing encourages us to use the data calculated according to Porat’s method in the international comparisons.

According to Fig. 5, the contribution of primary information sector to the GDP in

*In rhe iabulation\ and i’igure\ this narrow’er hope is indicated a\ value Aculated without information machine\ and devlcc\.


Table 2. Value added by the information activities in the Hungarian national economy in 1982 (thousand million forints)*

Primary Secondary

Denomination Information activity

Information economy (information activities, without the production of information ma- 92.5 151.4 chines and devices) (12.2%) (19.9%)

Information sector (according to Porat’s method, together with production of information 124.0 145.9 machines and devices) (16.3Q) (19.2%)

*Value calculated without product taxes, at current prices. Source: Our own calculations.

Information activity,

total

243.9 (32.1%)

269.9 (35.5%)

National economy,

total

758.5 (100%)

$/ca. 4 9000 - 8000 -

7000 -

6000 -

5000 -

4000 -

3000 -

2000 -

1000 -

Sweden ,

%

975

1970

Australia

, g63G$#1tes

France 1963 United Kingdom

“** ““\ Hungary

, I I I I

5% I )

10% 15% 20% 25% 30%

Fig. 5. Share of the primary information sector as a function of the per capita GDP

the individual countries does not reflect close interrelation with the per capita GDP. As proved by the development of countries where time series have been published, the share of the primary information sectors has been monotonously increasing in the GDP and the tendency, according to which the share of information activities (measured by labor input or by value added) has been, in general, increasing more rapidly than per capita GDP is well visible. This is especially valid for the domains of lower per capita GDP.

On the contrary, the greater the weight of the primary information sector in the GDP of a country, the less depends the increase rate of GDP on the further increase of information sector. In underdeveloped countries, the information sector should be developed to a significant extent in order to achieve that phase when the increase of GDP is already slightly depending on the share of information sector. Formulating the above with other words: surmounting of underdevelopment is an information-consuming process.*

As seen from the examination of information activities by economic forms, budget plays a decisive role in the information output/performance. In 1982, at least 46.1% of

*This process is interrelated by D. Bell [I] with the development of the new infrastructure. According to Bell, from the historical aspect, the infrastructure of transport and communication was the first one and as the second, the energy-network infrastructure was built up. In the present historical period, the development of the third one-the telecommunication and information infrastructure-is in progress.


the output of primary information sector was proved to be covered by the central and municipal council budget; in value added this percentage means 42.7 thousand million forints. This figure indicates at the same time that budget plays a still greater role in the primary information sector-because of the undervaluation of the budgetary production -

as demonstrated by the share in value added. It is to be feared that along with the above phenomenon, economic pressure to meet adequately the demand for information commodities is lacking in too many fields.

Similar conclusions were drawn from the share of primary and secondary information sector. In Hungary, as shown in Table 2, the output of secondary information sector is greater than that of the primary one. On the contrary, according to 1967 data of the United States, the share of primary information sector in the total value added was 25.1070, while that of the secondary 21.1 [9]; the latter has been decreasing also since that time. This fact proves again that in Hungary a far smaller part of information activities is carried out by business-type enterprises than in developed capitalist countries. The efficiency of economically and organizationally independent units developed in the course of labor division and offering information performance is evaluated and governed by market conditions. Direct economic pressure forces such units to adapt their activities according to actual demands. Market evaluates and at the same time selects also economic units, the market conditions run in or dispens- them. In the secondary information sector, this pressure does not operate or is enforced only in an indirect way, thus the efficiency of information activity may be similarly of lower level. Last but not least, the overweighting of the secondary information sector refers to the low degree of labor division-a fact that may be a major constraint to automation in Hungary, since the object area of mechanization and automation within the organizations is mostly their bulk activity.

The industrial distribution of the value added in the primary and secondary information economy has revealed that beyond and over the service branches with a majority information component such like health care or public services, the information contribution is also significant in other sectors. The most important source of information activities is

industry (see Fig. 6).

cl Non-information activities

Secondary information activities

Primary information activities

Fig. 6. The output of information activities in value added, by industries- 1982

ideas and Concepts on the Hungarian Information Economy 193

The main scene of external (primary) information activities is the economic sectors of health care, culture, and social services. Characteristic to the extent of information activities of this field is the fact that the GDP emanating from such activities is more than that of the primary information economy of industries 1 to 3. * The giant information economy of the industry reveals the reserves of the economy in labor division and first of all the way of further-development of the organizational system of engineering activities. It is evident that independent engineering organizations are more promoted -due to their market orientation-for providing high quality, competitive information products and services, on one hand, and that the free representation of their interests contributes to a more realis- tic evaluation of such products and services, on the other.

5. INFORMATION ECONOMY IN NATURAL UNITS OF MEASURE

The history of the information economy exhibits some trends to be recognized even without deeper analyses. The most striking is the increase of the amount of information products both produced yearly and accumulated. Late societies did not possess such means by the help of which they could produce or multiply information commodities effectively. The amount of information products has been significantly increased only since the inven- tion of book printing, rotation machines, photographic and copying techniques, and magnetic recording. Prior to that, the role of direct communication and the role of other objects used as symbols was far greater. The impact of these conditions on the society were the slow information flow, the greater ingenuity, the slower changes of ideas, knowledge, and belief.

In our contemporary development, the suppression of direct practical knowledge by an indirect knowledge can be recognized and seems to be probable regarding the future, along with the increase of direct and abstracted knowledge in the information wealth accumulated in the population. These two processes has been combined with the transformation of the information flow of the communication structure.

In order to follow up all these processes and to study the efficiency of information economy, this latter has to be surveyed also in natural measuring units. Statistical systems apply different measuring units in the different information sectors to survey production, turnover, consumption, and wealth. Measuring units of the products are copy, sheet, character, volume, the byte in computing; measuring units of consuming information services are, for example, volumes lent, the number of attendants of movie, theater, training-course presentations, or of other events.

The standardized common measuring unit of information activities is the bit. This measuring unit is particularly suitable for comparing the recording, processing, or displaying power of the information technologies with the demands on information activities.

Figure 7 elaborates on the account of information economy on basis of our own calculations in natural measuring units. According to this figure, Hungarian information statistics must cover at least 22 orders of magnitude. The figure offers information about the amount of annually produced information products or the amount of information dis- seminated by post services ranked in this scale.

~agnitudinal estimators reveal that the great majority of Hungarian information wealth is embodied in the population, and the information volume supplied in primary and secondary schools is far less than that supplied by mass-communication media. Although it is astonishing, it still seems to be true that the amount of total information within all the books and periodicals stored in libraries-in the form of digital display-does not exceed essentially the nominal information-storing capacity of some few persons.

6. THE LIMITS TO GROWTH: A THEORETICAL MODEL

When regarding the similarity of curves describing the changes of labor structure in the time, we have an impression that the increase in the information economy of the infor-

*According to Hungarian standard industriat classification.

194

tera

giga

mega

kilo

J. SXAB~ and 1. DIENES

.;

i

1. 2. 3. 4. 5. 6. 7. 8. 9. IO. 11. 12. 13. 14. 15. 16.

Fig. 7. The order of magnilud~ of infornla~ion statistics (preliminary data). information volume IOK byte. (Sourw: My own calculations: 2-10, 12-14; Planning Agency of Japan: 1; S. Rose: 9. The conscious brain. Gondoiar, Budapest, Hungary; 1983. G. Visy: I I, 16. The utility of telecommunication from the aspect of national economy. Summa, Budapest, Hungary 9/4. H. Frank- H. Wagner: IS. M&ssung der .4pperzeptionsgeschwindigkeit mit einem Experimentalfilm. Human- kybernetik 23, No. 2.

mation labor is also only a temporary phenomenon that will be followed at some time in the future by the predominance of a new occupational group a new sector. What can con- trol this process? What is the reason that it occurs the same way in Hungary as in developed industrialized countries?

According to Jonscher [4],

in the course of technological development the nature of work carried out by human beings begun to change in two directions. lt became more specialized, on the one hand, and more efficient, on the other. The specialization of individual tasks or the labor division means that the individual contributes to an ever decreasing extent to the production process of finished products. . . . Quite evidently, the introduction of more sophjsticated production methods, the increase in the specialization level and the strengthening of labor division induces an ever more complex alteration within the society and ever more coordination would be needed. On the other hand, besides non-information activities, the powerful automation and labor division is to be observed also in the scope of information-related activities, increasing this way the productivity of information activities.


If we accept Jonscher’s opinion as starting point, it is just the mechanization and productivity-increasing automation of information activities that predicts a more general model that further develops and improves Schumpeter’s and Kgldor’s cycle theory.

In our approach, the economy-aiming at the satisfaction of its recognized demands for the production of predetermined goods-makes the first efforts always by regrouping the most flexible resources the automates capable for accomplishing greatest functional changes: the people. This is the first, runup stage of the new sector aimed at the production of new commodities; this phase is characterized in a given sector by the rapid development of the labor force. The increase in the number of workers facilitates specialization, standardization of activities, and an economic automation in the second stage. Metalevel knowledge that could make mechanization and automation economic on a wide scale is not yet available in the first stage. By the period of the second phase this will have accumulated, and by its help productivity may significantly increase in the given sector-and the process can be started again with other commodities in another new sector.

But this process, naturally, does not take place in the different countries simultaneously. In the leading countries with a developed economic structure, high productivity achieved in sectors consolidated in previous phases facilitates the labor force should flow intensively in great volume to the new sector in the runup phase. Although in these countries the labor force is significantly increasing in the new sectors, underdeveloped countries are still in the first or second stage of the evolution of the former sectors. In this stage, the backward country can profitably export its new sector-labor force into the newcom- ing sector of the developed countries for there is no real demand for it at home. Such a phenomenon was the emigration from mid-European countries during the U.S. industrial

boom in the late nineteenth and early twentieth centuries, the brain drain after World War II, or the exportation of computer programmers nowadays.

Developing countries, on the other hand, cannot realize the products of their newcom- ing sectors with a differential allowance, even because of their backwardness, those aren’t newcomers indeed. That sector of a developing country can realize exports temporarily under acceptable conditions, this sector has already been cut down in developed countries. This circumstance, however, preserves the underdeveloped structure of the former. (Typi- cally, such a phenomenon was probably the temporary export prosperity of vacuum tube manufacture in Hungary when the manufacture of semiconductor wireless has been started in developed countries; or the recent boom of metallurgical products while steel industry faces difficulties in the developed countries all over the world.) When the labor demand in the new sector of structurally leading countries loses intensity and mechanization gets ahead, the demand for labor supply by underdeveloped countries starts losing vigor. The extra profit results in considerable capital accumulation, which offers possibilities for rapid mechanization in the developed countries. In the developing countries, the process to be

observed simultaneously is still the increase in labor stock, but because of transfer of technologies, mechanization and automation is yet started with-and as a result, the increase of labor stock of the developing sector comes to an early standstill.

The country that became underdeveloped in the course of one or more significant sectoral cycles loses the majority of its progressive labor force and the information wealth embodied therein because of the multiple contraselection of international extent and will no more to able to enter into competition with others and will be colonialized. Naturally, the validity of the above outlined model has not yet proved, and it can considerably be influenced by demographic processes, wars, natural resources, factors related with the political system, and so on.

More important is, however, the prevention-or at least the decrease of conse- quences-of the contraselection as outlined in the foregoing. In the following, we are going to consider this issue and try to find a solution on this problem.

6. POSSIBILITIES OF ACTION

The outlined model might be applied on information economy. The development of information labor stock is a fact that can hardly be debated. Also, Porat [9] and Jonscher


[4] mention the fact that it is mostly the field of information activities within the entire economy where resources for increasing efficiency are to be found. (Jonscher proves this with numerical data relating to the United States.) And this statement seems to be true also for Hungary now.

Prior to the entry of computer techniques and of electronics, there was no equipment available by the help of which productivity level, the efficiency of live work could have been significantly increased in the information industries, In an indirect way, the reserve in productivity increase of information activities is manifested for example by the fact that in the field of manufacturing, agriculture, building, and construction the productivity level increased more powerfully than in the rest of the economy. So, for example, between 1975 and 1978 productivity increased by 19.3% in the manufacture, by 17.3% in building and construction, and by 10.8% in the agriculture and forestry, whereas in sectors comprising mainly information services (i.e., in the fields of culture and public administration) productivity increased-on the basis of estimations-only by 6.9 to 7.9070 [15]. Socialist organizations* have been purchasing ever less and less telecommunication devices, and instruments in real value terms since 1978, although the proportion of such equipment has been increasing in their investments. This circumstance overshadows the fact that purchase of computer equipment is considerably increasing within this framework, which reflects on the fact that for the time being it is only the restructurization within information machinery and equipment that is to be observed. The productivity of material branches (net production per unit of live-work input) increased annually by 0.7 to 7.8% (i.e., by 3.7%, on the average, between 1976 and 1980). In the socialist industry,* the average increase rate of gross production per one working hour was 5.4% between 1961 and 1965, 6% between 1965 and 1970, and 7% between 1971 and 1975. Gross production value per one employee-considering that for 1970 as loo-increased to 168.7 by 1980, and on basis of product series to 156.3 [15].

The above figures demonstrate that in Hungary-although the growth rate of productivity has not culminated either in the industry-the productivity increase in the information branches, due to the absence of necessary investments, could actually still not begin. If there were no investments in the necessary volume taking place in the field of information economy, it will become a deadweight rather than motor of the national economy.

Regarding the volume of lacking investments in the information industries, a rough estimation can be derived from the indices on fixed assets. As compared to 1970, the gross value of fixed assets of nonmaterial branches was 170.1 in 1980, that of “transport and communication” comprising information-related activities to a considerable extent 154.0, than that of water economy showing the lowest growth was 191.0 whereas that of the sector of building and construction at the head of the poll 405.9! The low rate of automation is reflected by the proportion of gross value of fixed assets in operation as compared to the gross value of real estates, which is 1.6 in the material branches and 1 .O in the non-

material branches [ 161. In the solution, we have to take into account that the present mechanism does not pro-

vide such an amount of free assets in the “productive” branches that could be transferred into the information economy and within that into the “nonproductive” branches. Only certain branches of the information economy have the hope to receive considerable foreign credit (such as telecommunications). Under such conditions there is no other opportunity offered than to open up new opportunities for the information economy and especially to certain “nonproductive” branches to help themselves by the means of active

economic activities. The activity of organizations in the “nonmaterial” sphere (primarily budgetary organi-

zations) exerts influence on the entire national economy. Their partial inclusion in the scope of market mechanism would offer an opportunity for them to become demand oriented. (In Hungary, the nonproductive sector covered more economic organizations than the productive sector of enterprises and cooperatives in 1970!)

There are many doubts about whether or not by the help of the regulatory system eco-

*State-owned companies and cooperatives


nomic activities can be influenced toward the desired direction. As a counterargument we would mention here the leading edge of the information economy: software production and data processing. Prior to October 1982 there were “intellectual” and “machine” services, further “digital recording” recognized by state regulations within the sphere of computer activities. Price should have been based on costs. This regulation neglected the products created in the course of electronic data processing and other computerized activities (including software) and was not output but rather cost oriented. Under such circumstances, software production (the actual market value of which could not be recognized because of the high rate and low cost of live-work input in Hungary) operating in the sales market came to a sudden stop-after the initial boom-after 1978. In the developed countries of the world, software production increased by 10 to 25% annually, while in Hungary, even under the conditions of a more pressing software crisis, it decreased by 1981 to a level lower than that of 1979. There was a disinterest toward the entire data processing to be observed. The sales returns originating from data processing as compared at current prices to the previous years showed the following picture on basis of data on organizations that achieved a sales return exceeding one million forints: 1978:120, 1979:110, 1980:101, 1981:102%.

In October 1982, software was declared to be a product. Thereafter, a free simplified price calculation was introduced for the majority of electronic data processing services and products, then in 1983 a slight economic pressure of software products was again introduced by declaring software an element of company assets and its accounting was arranged. At the same time, due to governmental measures, small enterprises entered the scene; these small enterprises-in lack of their own equipment at the beginning- were deal- ing primarily with software elaboration on intellectual wage work. A considerable amount of personal computer importation was begun in 1982. Thousands of Commodores, Texas Instruments, and other similar microcomputers flowed into the country.

This way, demand and supply met excellently, similarly to the measures aiming at and resulting in the increase of turnover. The software production index increased to 120 as compared to the previous year and the sales return index of electronic data processing activities amounted to 129 from 1982 to 1983. Today computer-related activities represent one of the most dynamic industries of the national economy. Despite this fact, the price index of data processing activities did not exceed 102%!

The generalization of this example and its application as a model seems to be evident, for example, for the running up engineering activities. If we intended to follow the same way as in the case of software products, the independent product nature of engineering documentation should be recognized. Price calculation should be freed from the present limitations and the false protecting umbrella that has been kept over R&D by regulations initiating no differentiated development should be liquidated. Economic pressure should be introduced also with respect to engineering information products which would mobi- lize frozen “intellectual” products.

7. SUMMARY

In the latter part of the 197Os, along with the approach of material and nonmaterial activities to each other and with the victorious career of information technologies in the developed countries, there has begun the development of a new “sector” of the economy: the information economy and its conscious, selective further development.

Analyses of the Hungarian labor market and GDP show that information activities have been of decisive importance also in the Hungarian economy since 1980. The most numerous groups of labor force is formed by information employees and about one-third of the GDP can be attributed to information activities. Their share has been gradually increasing, exceeding the average. Thus, the increase of the productivity and marketabil- ity of information activities by means of automation is a key issue of the entire national economy.

In our opinion, the information-economic approach highlights such essential struc-

198 .I. SZAB~ and I. DIENES

tural problems the solution of which exerts significant influence on the rate of economic development in Hungary. The majority of the problems enumerated might be solved by transforming the internal structure and by modernizing the motivation and organizational system as well as the external relation of our information economy.

I.

2. 3. 4.

5.

6.

I.

8.

9.

IO. 11.

12.

13. 14.

IS. 16. 17. 18.

REFERENCES

Bell, D. The social framework of the information society. In: The computer age: Twenty-year view. Cam- bridge, Mass.-London; MIT Press 1980. Boucher, E.L. L’impact de I’informatique sur I’emploi en France. Problems economique. 1725 sz; 1981. Brady, A. Lassulo idii (The time slowing down) Kozgazdasagi 6s Jogi Kbnyvkiado; Budapest: 1983. Jonscher, Ch. Information resources and economic productivity. In: Information economics and policy, I. North-Holland Publishing Co.; 1983. Kozma, F. AZ emberi ttnyezd a gazdasagi fejliidcsben. (The human factor in the economic development). Budapest: Kossuth Konyvkiado; 1981. Koncz, G. A miiveltidesgazdasagtan szakirodalma (Professional literature of cultural economics) and Kuti, I?. AZ oktatas gazdasagtan szakirodalma (Professional literature of educational economics). Budapest: KSH Konyvtar es Dokumentacios Kozpont; 1982. Machlup, F. The production and distribution of knowledge in the United States. Princeton, N.J.: Prince- ton University Press; 1962. Marosan, Gy., Jr. Vilaggazdasag, vilagpolitika, tudomanyos technikai fejlodcs (World economy, world pol- itics, technical-scientific development). Valosag; 1981, 8.sz. Porat. M.U. The information economy: Definition and measurement. Washington, D.C.: U.S. Department of Commerce; 1977. Schmoranz, I. Makrookonomische Analyse des lnformationssektors. Wien-Munchen: R. Oldenbourg; 1980. Schultz. T.W. Beruhazas az emberi tktbe (Investment in the human capital). Budapest: Kozgazdasagi es Jogi Konyvkiado; 1983. Sebestyen, T. AZ informaciogazdasag munkaero-szerkezete (Labor-structure of the information economy. Manuscript.). Budapest: Szolgaltatasi Kutato Intezet; 1984. Vdmos, T. Informacio es tarsadalom (Information and society). Magyar Tudomany; 1982. 1 l.sz. Vamos, T. Hazank es a miiszaki haladas (Our country and technical development: Central lecture held at the 141st General Assembly of the Hungarian Academy of Sciences, 1981.) Budapest: Magveto; 1984. Employment and wages rates. Central Statistical Office; 1981. Statisztikai Evkonyv (Statistical yearbook). Budapest: KSH; 1982. Sdmitastechnikai evkonyv. Statistical Yearbook on Computing, Budapest: KSH; 1983. World Labor Report 1. Employment, incomes, social protection, new information technology. International Labor Organization, Genf.

Ideas and concepts on the Hungarian information economy

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