As Model of a Future Society

UKRAINE’S DILEMMA: HOPELESS BACKWARDNESS OR ADVANCED MOVEMENT

Both foreign and Ukrainian analysts unanimously claim that the greatest threats to Ukraine’s national security have been caused by internal factors. External threats derive from those internal which, unfortunately, do not diminish but, instead, become more acute as time passes. And this applies not only to overall macroeconomic indices, such as GDP, for example.

The greatest danger lies in the extremely unfavorable dynamics of structural changes in Ukraine’s economy, the constantly reducing share of high-tech products in the GDP structure, the catastrophic aging of the fixed assets as s result them being eaten, a big foreign debt, and a huge, multifaceted and ever-growing domestic debt.

Restoring the fixed assets in the critical industries alone requires tens of billions of dollars in annual investments, which is unrealistic. (For example, upgrading the main facilities of Ukraine’s fuel-and-energy complex to the minimal acceptable level needs an investment of at least $40 billion). But there also is rail, air, river, and sea transport, highways, the military-industrial complex, research, agriculture, public utilities, the Chornobyl power plant problem, a series of urgent measures to protect and improve the environment, and such. Moreover, there is no reason thus far to expect the necessary investment to materialize in the next few years.

Simultaneously we witness (unfortunately, only witness rather than participating in on an equal basis) a new intellectual technological revolution which needs huge investment resources. In their geopolitical strategies, the world’s leading countries, striving to maintain and increase the lead over other states, are beginning to assign a decisive role to scientific and technological dominance achieved by a purposeful official policy. We see, concurrently, an ongoing process of private company mergers in aircraft, automotive, pharmacological, Internet technologies, the mass media, etc. This creates supercompanies with capital running to hundreds of billions of dollars. What prompts them to do so is the necessity to channel their capital into the most promising directions of the scientific and technological progress.

Comparing such financial resources with those available in Ukraine naturally raises a question: given this correlation of forces in the world survival race, are we really doomed to landing on the fringe of the European, let alone world, civilization?

If we are to preserve some optimism, we must have quite a clear and, moreover, realistic idea of how exactly Ukraine should develop, so that its citizens could some day see their country among the economically and socially prosperous states, an equal member of the European and world community, not on the fringe of world progress.

Simple calculations show that it is impossible to fulfill this managerial task by means of traditional approaches. Even if we assume Ukraine’s GDP growth rate will reach a fantastic 20% a year, it will take at least twenty years to catch up with Poland, not to speak of Germany, France, Great Britain, and the other developed countries of Europe whose economies, incidentally, are not marking time either.

In other words, lagging behind has no perspective.

The only alternative to hopeless backwardness is priority development of the economy and the social sphere.

No doubt, it is impossible to trigger the advanced movement of society as a whole in a chronic crisis situation. But it is possible to create certain growth sectors, which would organically concentrate the most effective potential - economic, social, humanitarian - of society in education, technology, the industry, and investment.

It is the idea of setting up the structures of advanced development that can help build a concept of Ukraine’s development fundamentally different from the currently existing economic strategies.

HISTORICAL FORMS OF PRIORITY DEVELOPMENT STRUCTURES

It worth noting that humanity has applied the idea of concentrated social potential, in various forms, for at least the past couple of thousand years for the solution of certain problems.

At first, the function of concentrating and safeguarding the greatest achievements of civilization was performed by monasteries.

In many monasteries, the monks not only developed the spiritual capacities of man but also did purely scholarly work, writing historical and philosophical works, collecting, keeping and copying manuscripts, printing books, and painting pictures.

Monasteries also experimented with the most progressive forms of social organization based on the ethics of nonviolence, mutual love, respect, and help (suffice it to recall hospitals and rest homes in monasteries).

In various countries, monasteries set themselves highly specific tasks. For example, Chinese monasteries presented the world with outstanding philosophy and fiction, many engineering inventions, a perfect martial arts system called Kung-Fu, traditional Chinese medicine, and many other achievements of human civilization.

Indian monasteries (ashrams) were founded, as a rule, for prominent philosophers to enable them to put into practice their ideas of an ideal man and ideal society. Many of them are influencing the culture even of today’s world.

In the countries of Europe, monasteries also performed the function of education, both religious and secular. In addition, they were influential economic entities. Many technological innovations were invented and first implemented in facilities run by monasteries.

With the passage of time the function of higher education was gradually assumed by universities, which also performed the function of concentrating the nation’s resources and, in accordance with European tradition, were integrated with research centers. European universities always enjoyed economic privileges, which enabled them to develop.

In the Soviet Union of the 1930s and forties, when accelerated development of the industrial type economy and especially the military industrial complex was a high priority, the problem of concentrating human intellect and material resources was solved quite effectively but in a specific manner typical of a totalitarian system.

The so-called high-security design bureaus came into being. The technique of setting them up was simple: researchers and engineers were arrested, convicted, and then gathered together and furnished with adequate living and organizational conditions for highly effective work: they were even allowed to attract practically unlimited material resources. A sizable part of the best items of Soviet World War II military hardware was produced in an extremely short time precisely by this method.

In the 1950s, this form of concentrating the national potential ceased to exist, being replaced by closed cities.

Only during perestroika did the public at large learn about the existence of these towns, and the press revealed their names: Cheliabinsk- 10, Arzamas-16, Krasnoyarsk-26, Zlatoust-36, etc. The only city closed to the outside world had known since 1961 was the so-called stellar township.

The closed cities gathered the leading experts in the nuclear, rocket, and space engineering, who worked on a hired basis, i.e., they were offered such non-coercive motivations for work as high salaries and pensions, good prospects for fast professional promotion, cut-price holidays, opportunities for their children to get good education, better (compared to other places) supplies of food and industrial goods, absence of crime, etc.

Along with the closed cities, large research centers were gradually established in Novosibirsk, Pushchino, Zelenograd, Obninsk, and elsewhere. They recruited the best specialists, created scholarly schools and top higher-education and in-service training systems. These research centers molded specialists of a new quality. Suffice it to give one example: over twenty programmers from such Russian science cities are now holding crucial posts at Microsoft.

The administrative command system created economic advantages for this kind of structures in a centralized way.

Concurrently, the market-economy countries began to set up advanced development structures mostly aimed at economic development. These were the so-called free economic zones (FEZ).

There are about 2000 free economic zones in the world at present.

Under the International Convention on the Simplifications and Harmonization of Customs Procedures (Kyoto, 1973), a free zone (or zone franco) is a part of the territory of a country on which goods are regarded as objects out of bounds of the national customs territory (the principle of customs extraterritoriality) and thus exempt from routine customs examination and taxation. In other words, it is a special-regime part of a national territory.

Special legislation regulates the activity of economic entities in a free economic zone, embracing the following points: customs regulation, taxation, licensing, issue of visas, banking, property and collateral relations (including the right to land ownership), granting of concessions, and free zone management. Acts of labor and social legislation can also be of special nature in a free economic zone.

Free zones are the instrument of a selective reduction of state intervention in economic processes and simultaneously an element of a natural monopoly.

A free zone is not only and not so much an isolated geographic territory as, rather, a part of national economic space with a certain system of privileges and incentives not applicable elsewhere.

As a result of privileges granted, the rate of profit in a FEZ is 30- 35% and sometimes even more: for example, multinational companies in Asian free economic zones reap an average annual profit of 40%. This substantially reduces (two or threefold) the time it takes an investment to return (it is normal for a FEZ when this time does not exceed 3- 3.5 years).

The establishment of FEZs is an effective direction in the economic development of certain territories and regions, oriented, as a rule, toward solving some specific top- priority economic problems and implementing strategic programs and projects. In essence, FEZs are areas of joint entrepreneurship, compact territories with a high concentration of foreign-capital enterprises.

The system of privileges granted to a free zone serves as an instrument for realizing the advantages of a given territory, a powerful incentive for keeping up promising economic trends, but it is by no means a mechanism to compensate for managerial drawbacks or some developmental factors missing on this territory.

THE MAIN DIRECTION OF WORLD ECONOMIC DEVELOPMENT

It should be noted that the philosophy laid in the Ukrainian law on FEZs is typical of an industrial technological era and does not meet the realities of today.

In today’s world, information and information technologies are strategically more important than millions of tons of steel produced or dozens of tons of gold extracted, or any number of automobiles, machine-tools, household appliances, or any other postindustrial- age products.

In this respect, the year 2000 is the time when the cost of an intellectual product has become equal to that of the commodity mass in international economic exchange. All this causes radical changes in the very nature of production.

Expenses on information make up an average three fourths of the value of modern products. Today’s economy buys and sells concentrated knowledge, a tiny material enclosure contains a colossal volume of intellectual matter (for example, computer programs, the latest medicines, or state-of-the-art aerospace equipment whose price is based primarily on the expenditures against the item’s research and development).

This becomes evident from the following ratio of prices for industrial items:

— selling one kilogram of crude oil brings a $0.020-0.025 profit,

— one kilogram of durable goods brings a $50 profit,

— selling one kilogram of aviation equipment gives a $1000 average rate of profit, and

— one kilogram of a high technology product in information sciences and electronics allows a profit of up to $5000.

A country that does not carry out priority development of its intellectual capital cannot at all hope to hold a more or less decent place in the world community.

The most successful example of how economic incentives are combined with a concentrated high-productive intellectual capital is Indian Wells (Silicon Valley), the US’s largest scientific and technological area. California’s Silicon Valley is a symbol of the United States’ technological leadership and the world center of computer, software, and dotcom business. This is not only the place of a large number of high tech companies (Silicon Valley accounts for 20% of the world computer production) and a unique concentration of research cadres (now it employs a million people, 400,000 of whom having at least a bachelor’s degree) but above all a complex of the social and managerial technologies of investment success.

It is too early to speak about a speedy formation in this country of structures capable of standing on a par with Silicon Valley, but the world has some positive experience which has very good prospects relevant to Ukraine.

AN INSPIRING EXAMPLE

To work out a new economic strategy, Ukraine could take advantage of the instructive and successful experience of India which was until recently regarded the world over as a Third World country but is now turning (according to some well-known Western analysts) into yet another economic tiger.

India launched a new economic strategy in 1986 by creating the concept of software technology parks (STP) which:

— envisioned a 100% export- oriented scheme;

— implemented the simplest procedure of company launching;

— granted developing firms the right to import goods duty-free and the foreign firms the right to set up Indian branches under their own control;

— exempted the imported software and hardware (including computers, remote sensing and telecommunication systems) development facilities from taxes, duties, and the pledge of return export;

— exempted the developed software from export taxes and duties; and

— exempted the newly-formed companies from corporate taxes for 10 years. These companies received access to all telecommunication lines furnished to them and could be eligible for a privileged customs clearing and export licenses.

STP units are authorized to sell 25% of their products on the domestic market and have been granted VAT and excise-duty privileges should they goods on the domestic market.

The total number of companies working in the software export-oriented industry was 400 in 1994, 550 in 1997, and 860 in 1999.

In 1994, these companies employed a total 8400 people. By the end of 1999, the total number of programmers alone working for these companies had reached 280,000. A programmer’s salary in India is about $800-1200 a month.

At present, there are about 1,300 software developing firms in India, serving both export-oriented and domestic needs.

Indian exports of software rose from $1.75 billion in 1997-1998 to $2.65 in 1998-1999. According to 1998 data, India accounted for 16.7% of world software production.

Among the factors that promote a successful development of intellectual capital concentrated in India’s free economic zones are the following:

1. A high degree of computerization of the population. This factors promotes the growth of overall computer literacy, which in turn enhances the country’s reputation as a supplier of long-term outsourcing decisions.

2. A high scientific and educational level. This especially applies to mathematical, cybernetic, and managerial professions.

3. A large number of programming experts and a relatively low cost of such manpower.

4. Stable legislation in the country.

5. A sufficiently developed computer and telecommunication infrastructure.

6. High proficiency in technical English among professional software developers.

7. The presence in and outside the country of market-studies task forces which help attract orders for developments and investments in this industry.

8. A considerable number of well-established companies oriented toward software production.

Ukraine has all the prerequisites for successful application of the Indian experience, but even the fast and effective application of it in the special free economic zones will only boil down to trailing behind, while only going forward can be really effective.

It is possible to draw, in the most general terms, a trajectory for this movement.

SOCIOPOLIS: THE PURPOSE OF FORMATION AND THE SOCIAL TASK

Creating the structures of a new- type of priority development, the so- called sociopolis, should be the basic element of such a movement.

A sociopolis is a territory or an organizational structure that works in a fundamentally new, civilized, economy, enjoys a special legal status, and combines all the economic advantages of an intellectual-type free economic zone with the integrated strategy of an advanced humanitarian and social development.

A sociopolis concentrates the intellectual potential of society applied in the process of economic development and based on the organization of modern highly-effective information technology industry oriented toward participation in the international distribution of labor (the so-called outsourcing).

It is common knowledge that the successful economy of the future will be an economy in which qualitatively new capital dominates, directly connected with the quality of a human being and the effectiveness of a social organization (to which the experience of the developed and fast-developing countries bears witness).

Addressing the meeting dedicated to the tenth anniversary of fall of the Berlin Wall, German Chancellor Gerhard Schroeder said of Germany’s development strategy, “We are not interested in industrial potential. What interests us is the humanitarian potential and intellectual capital of society. It is in this area that we will be making the largest investments, for it is these factors that determine state security in the 21st century.”

The humanitarian potential of a nation is qualitatively different from a simple sum of the human potentials of all citizens and is determined by the level of physical and mental health of a nation, its social well-being, morals and morality, intellectual development (intellectual potential), psychological unity, and humanitarian activity (activity in revealing all the above-said signs).

A nation’s intellectual potential is part of its humanitarian potential and has several components:

— a system of education (including both state-run and independent educational institutions);

— computerization (what matters here is the absolute and relative number of computers, their quality, and the degree to which they embrace the communications network);

— telecommunication systems (of paramount importance here is their linkup speed, reliability, jamming-proof quality, and protection from a unsanctioned access);

— data base (on printed and electronic carriers);

— system of research (including state-run and independent research institutions); and

— intellectual property (like patents, licenses, and know-how).

What is becoming a universal trend is a rapidly closing time gap between the main stages of scientific and technological progress: discovery (invention), bringing this to the level of technology, and putting this into production. The inventor becomes the integral and main component of the development cycle of all manmade systems without any exception. The human intellect thus holds the place of a direct and principal productive force in a new technological era.

Intellectual capital is the intellectual potential applied in the process of economic development. Its value can be determined only approximately. According to expert assessments, the value of the intellectual potential of a modern developed society exceeds that of the fixed assets of traditional industries.

In current conditions of an extremely rigorous competition, only intellectual capital can make both individual enterprises and society as a whole competitive.

It is only in a sociopolis that one can create fast-acting and effective mechanisms for a nation’s intellectual potential to turn into intellectual capital by a maximal temporal reduction of the innovation chain: generation of new ideas — achieving the technology stage — making the consumer product.

From the viewpoint of public administration, the goal of a sociopolis is to comprehensively fulfill a number of tasks:

— to ensure capital flow to the country by attracting foreign investment and exporting high-technology goods;

— to create jobs in the most promising high-tech industries;

— to counter degradation of the nation’s intellectual potential and brain-drain, which threatens Ukraine’s national security;

— to concentrate this country’s intellectual potential on the top-priority directions;

— to encourage scientific development (to form new highly- effective research teams and depositories of intellectual property, to ensure transfer of high technologies to the production sphere);

— to ensure development of the individual (in particular, to practically work out the most effective and advanced technologies of lifelong education in combination with the technologies of a harmonious development of an individual as a whole); and

— to promote social development (to form the most modern and long-term social setup of a qualitatively new type based on the idea of high civil awareness, self-government, civil society, and social partnership).

The worldwide competition in the domain of intellectual dominance is now no less dramatic than those in the Cold War arms race, which means that another function of a sociopolis is to give intellect the chance to realize itself at the upper limit of human capabilities. A decisive role should be played here by a fundamentally new system of education.

A new education system is a basic demand in the rapidly changing world of today. It is a standard situation even now, when an educational institution graduate finds himself armed with knowledge for living in a no-longer-existing world.

In the twenty-first century, the traditional system of education will not be able to produce outstanding scientists or superproductive think- tanks.

The system of lifelong education in sociopolises should be a combination of four trends:

— developing physical and mental strength (it is worth applying the best achievements of modern science about a healthy way of life, as well as traditional Occidental and Oriental psychotechnical systems);

— developing the individual as member of society (teaching the technologies of social success and social cooperation based on the idea of social responsibility);

— scientifically-based professional development; and

— spiritual growth on the basis of the people’s deep-seated national roots.

The latter task, paradoxical as it may sound, is bound to come to the foreground in a new economy. The development of individual spiritual qualities should proceed in parallel fashion with the accumulation of economic and intellectual wealth. Otherwise, the process of accumulating wealth would become pointless and even socially dangerous. As the French philosopher Michel de Montaigne said wittily, “Whoever failed to master the science of good will only be impaired by any other science.”

Ideally, all these qualities should be contained in every individual. It may seem practically impossible to solve such a problem, but this is not so.

Intensive research is being done in the world’s advanced countries to create the so-called metatheoretical system of education, i.e., based on a certain universal metatheory. This type of education forms a flexible human psyche capable of combining many diverse and even opposite features, as well as of constantly and adequately changing under the influence of new knowledge. Universal languages of mathematical and linguistic programs, universal psychotechnical systems, etc., are also under development. In this respect, Ukrainian scientists are in some cases on the level of the best world achievements.

It is worth noting that the combination of many components in individual development were successfully made use of even in Soviet times to train people who were to able to show they could make quick and not standard decisions in extreme conditions (undercover agents, nuclear submarine officers, especially commanders of nuclear- powered missile carriers, and some other categories). This experience can also be of benefit.

All these historical forms of the concentration of economic, intellectual, and spiritual resources prescribed various motivations for their participants. Motivation is also one of the decisive questions for a sociopolis to be able to function. A sociopolis is unique in that it allows using a long series of very effective labor incentives.

A sociopolis is, above all, an economic self-financing entity through which powerful financial flows pass creating national wealth. The available financial resources allow meeting the sociopolis residents’ material needs on quite a high level, in particular, paying high-tech specialists wages commensurate with those of similar specialists in India (an average $1000 a month).

Sociopolises will make it possible to provide for living standards comparable to those in the developed countries.

In addition to material stimuli, other, no less effective, stimuli will naturally emerge in a sociopolis, in particular:

— interesting work,

— an intellectual environment for the communication and professional development of the individual,

— the chance to apply the most up-to-date systems to educate and raise children who will grow up in a specific atmosphere of creating the world of future, and

— the absence of many negative non-material factors inherent in our today’s life (arbitrary rule of the administrative apparatus, dogmatism, etc.).

The combination of these motivations is sure to stem the brain drain from Ukraine, even if wages are to be higher abroad, or perhaps even trigger a reverse process. Having the economic resources, sociopolises will be able to finance the most promising research centers and higher educational institutions in this country and to attract the best researchers and teachers not only from Ukraine but also from abroad.

Investing in the country’s intellectual capital will make it possible to activate the potential accumulated in many branches of the economy, such as biotechnology, precision machine-tool-making, etc.

SOCIOPOLIS AS MODEL OF THE FUTURE SOCIETY

In the most general plan, creating a sociopolis implies modeling a future society. Should the desired results be achieved, the new type of a socioeconomic setup can be extended to other regions and, in the long term, to the state as a whole. Sociopolis is the cradle of our future society.

With this strategic approach in view, the achievement of high (7- 9% a year) rates of the gross domestic product growth or a positive balance of foreign trade is not a self- sufficient goal. The main goal is to support and guide the development of those elements of society which will enable us to build a future-oriented Ukrainian socioeconomic model. New-type structures of advanced development must help achieve such a level of productive, informational and intellectual forces which will make it possible to usher in an economically supereffective and socialized society of the new era of humanity.

It should be noted that the modern sociological thought of the West and East has approached very closely the idea of sociopolis in the version described here. The formation of sociopolises has almost been completed on the basis of some well-known universities.

A comparative analysis of managerial strategies allows us to conclude that the leading states display an approach to the country as a sociopolis competitive on the world arena. This is also the main idea of US president Bill Clinton’s utterance at Davos-2000 that the globalized economy, with the US being its hub, puts human development above all other things.

Since the real socioeconomic conditions of Ukraine and the developed countries are radically different at present, we can only speak about certain limited territories of Ukraine, where such a strategy can be applied.

SOCIOPOLIS AND SOCIETY

Relationships between a sociopolis (as a structure enjoying certain exterritoriality within the limits of a nation state) and the rest of society should resemble those between society and big-time sports.

Society forms the basis of big-time sports, which is deeply interested in increasing the average level of public physical fitness, so it supports mass physical education. Nor can it exist without the system of talented youth selection, starting from childhood, which is being kept afloat owing to various sports schools, sections, young people’s sport clubs, etc., and a standing system of testing in the shape of sports competitions. Big-time sports are interested in making a maximally effective use of the physical potential of man at the ultimate limit of his capacities.

But, taking a dim view of this seemingly pragmatic and purely consumerist approach of big-time sports to society, the latter still tries because it derives a number of indisputable advantages from the realization of the above-mentioned interests: the nation’s overall physical health is improving, a huge number of young people get new chances for self-realization, there appear people whose achievements bring international glory to the nation.

When similar relations are set up between sociopolises and society, sociopolises are sure to strive to shape this society “to their liking.” At the same time, this will promote growth of the economic and intellectual components of the national wealth and will also reveal outstanding personalities and creative collectives that will glorify the mighty national spirit and intellect for centuries to come.

As to the relationship between sociopolises and the outside world, we must note that Ukraine will have to get integrated in the world economic processes exactly via the sociopolises, for only this kind of Ukrainian economic structures will be competitive on the global market.

SOCIOPOLIS FORMATION TECHNOLOGIES

The following three ways of sociopolis formation are realistic at present:

— on the basis of free economic (industrial or financial) zones by earmarking the earned funds for the priority development of the humanitarian and intellectual potential of these zones’ residents in order to turn the zones into the intellectual-type priority development structures;

— on the basis of powerful and promising educational or research establishments by granting them a free economic zone status and enabling them to do commercial activities connected with teaching, software production, and the creation and commercial application of informational technologies;

— on the basis of decentralized highly effective creative teams working in cyberspace and dealing with the state-of-the-art information technologies. These teams should in turn put their activities in line with educational, research and social programs within the limits of a certain economically-privileged territorial unit.

Ukrainian society has all the prerequisites for the early formation and successful performance of a network of new-type priority development structures, namely:

— there is a high educational and intellectual level of the population;

— working within the framework of outsourcing schemes (software development, Internet content, systems analysis, consulting) depends to a very small extent on the fixed assets (structures, equipment, etc.) and also has minimal energy requirements;

— a sufficient number of skilled labor (experts estimate that in Ukraine there are twelve to fifteen thousand highly skilled information-technology specialists);

— a large number of still unused cutting edge technologies always ready for implementation;

— the existence of a number of big and small industrial regions with a well-developed industrial infrastructure;

— an extensive network of powerful research and educational institutions; and

— (and perhaps the main thing) broad understanding by the whole spectrum of society of the role science, technology, and the creative individual play in the survival of Ukraine as a state and in its prospects for the future.

An indisputable condition for sociopolises to function effectively is recruitment of the most highly skilled managers who know how to sell the products of intellectual labor on the world market. Skillfully performed commercialization of a product often plays a more important role than does the scientific value of the most up-to- date project.

Ukraine has all the prerequisites for sociopolises to emerge. Establishing a sociopolis does not need large financial expenses by the state, the only point being the successful combination of a clear theoretical concept, adequate legal coverage, and wise managerial decisions.

The establishment and successful performance in Ukraine of the priority development structures based on the ever-growing consolidated human potential is a new paradigm of our society’s movement toward the future that we deserve.