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The Twilight of Sovereignty.

Walter Wriston, former chairman of Citicorp, has recently published a short (176 page) treatise on the impending transformation of the world due to the increasing power of information which is spawning a global revolution. Mr. Wriston's book The Twilight of Sovereignty published in 1992 is a seminal work on the impact of the transformation of society resulting from the rapid changes in information technology. The author writes that "information technology is transforming the nature of power." Information, previously closely held, is now widely disseminated due to the pervasive use of computers throughout society. The dissemination of information changes the relationship between managers and employees, companies and governments, also between governments and citizens. Moreover, the balance of power among nations also changes due to the instantaneous and widespread availability of information. The author notes the demise of the command and control structure, so much a part of the organization of industrial nations. Information is considered a new source of wealth. Within most organizations the increasing availability of information through computer access is flattening hierarchies and reducing the power of middle management. In fact, it is eliminating most middle managers. Thousands have recently experienced job discontinuance in many Fortune 500 companies, Information with the application of advanced technology can allow the flow of information from the factory floor, warehouse, sales personnel and related functions directly to senior management for analysis and decision making. This is the basis of Mr. Wriston's argument that the future will be based on an information economy. The author argues strongly that present Western society will further divide into those who are and who are not equipped to participate in the information economy. Those who do not participate in the information economy fall further behind, which will cause even greater strains in the social and economic fabric of the society. Brains triumph over brawn. The revitalization of the modern factory with its maze of computer controlled robotic equipment is evidence of this trend. The skills needed to perform in this transformed environment are more complex than sheer muscle.

Borders are not boundaries as the communists leaders in Eastern Europe recently discovered. Information spirited across their borders by radio, television and video cassettes was a major cause for the collapse of the communist system. The communists' leaders could not hide from western satellites their failures from poor harvests to radiation leaks were known immediately. Leaders of western central banks recently found this axiom to be true also. The September '92 and July '93 turmoil in the foreign exchange markets amply demonstrates how the world wide financial markets move faster that the policies of western central bankers. The 200,000 or so currency traders world wide proved that their combined power can overwhelm the power of governments to control their monetary system. These events were a reminder that the power of governments to control their economics and the relative value of their currencies has eroded. The important point is that virtually instantaneously available information to money mangers and corporations allows these market participants to make judgment to move into and out of currencies irrespective of the wishes of the government. In the 1960's countries and currencies under attack could and did resort to capital controls making it harder to move money into or out of the country in question. Now due to the interlocking networks of computers to move funds instantaneously, such actions by major industrial countries are considered unthinkable. Governments have lost the power to control capital and therefore their own economies. The power of the global financial markets has grown at the expense of governments. The U.S. has acquiesced to accept the fact that markets forces will move the dollar's exchange rate and the Federal Reserve's power has thus diminished.

In addition to the transformation of the manufacturing and financial markets; the information revolution is transforming military power. The ever increasing importance of software to operate military hardware opens new vulnerabilities such as reasonably accurate inexpensive "logic bombs" and computer viruses.

There is an abundance of examples of changes fostered by the information revolution. The challenge for organizations is to exploit the new capabilities. Moreover, intellectual capital is mobile and sensitive to political and social environments which may cause shifts across borders. Mr. Wriston correctly points out that at least within the U.S. we are unequipped to measures gains in productivity which flow from the information economy. Software and other services account for an increasing proportion of the value added to products. Mr. Wriston opines that American productivity may be better than officially reported. He also argues that the U.S. is one of the most competitive nations in a world in which information plays an even larger role. Our current vision of American in decline is misplaces in Mr. Wriston's view. Mr. Wriston's vision of the future confirms the coming to fruition the ideas expressed by Marshall McLuhan three decades ago. The global village is our world and a single global conversation is evolving rapidly.

Mr. Wriston concludes that instant communication does not in itself create understanding. The new electronic infrastructure of the world turns the whole planet into a market for ideas. It has shrunk the world into interdependent economies while also disrupting government authority.

Mr. Wriston's book while very readable, on occasion is repetitive. Missing from his discussion are thoughts about the efficacy of the loss of sovereignty for governments in particular. Mr. Wriston accomplishes his task of fleshing out trends with which organizations must today cope.

IRENE UNTERBERGER Doctoral Candidate, Pace University and VP-Citibank
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Author:Unterberger, Irene
Publication:American Economist
Article Type:Book Review
Date:Sep 22, 1993
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