The digital divide has serious consequences in the information society. If ‘information is power’ why is creativity one of the key focuses concentration areas in the UKs Digital Economy Act? Main points to focus on when reading for this topic: The digital divide – all reading in regards to this point Information society – Castells work in regards to this point UK Digital Economy Act – Read the act and find out more about concentration areas, spefically, Creativity. TOPIC POINT – Internet access plays a vital part in a modern society Networks (Castells) His hypothesis: the historical superiority of vertical/hierarchical organizations. That non centred networked form of social organization had material limits to overcome. Fundamentally linked to available technologies. Networks have strength in their flexibility, adaptability and capacity to self configure Global Networks · Digital networks are global, as they have the capacity to reconfigure themselves, as directed by their programmers, transcending territorial and institutional boundaries through telecommunicated computer networks (pp 24) · The global society is a networked society and exclusion from these networks is ‘tantamount to structural marginalisation in the global network society’ (Castells, 2009: 25) Limitations of materials. Benefits from global networks: access to bigger markets and a variety of producers. Breaking down the value chain. States – the network state · State have sovereignty in specific territories; has ultimate legislative powers; the power of force (police/army); and have citizens. They are the ones who have an existent power relationships. They are very powerful: control the material form of power (guns, armies, war, police, army) and they have power over the citizens. · With globalisation and networks these powers affect the sovereignty of the state which has to alter/transform to adapt to these dynamic situations A. They associate together – ASEAN; EU; NATO; etc. – G20 at the ‘top of the pecking order’ B. Dense networks of international organisations to deal with international issues (UN; WTO; IMF; World Bank etc.) C. Nation states devolve powers to regional bodies and sometimes NGOs to overcome a crisis of political legitimacy. The material we discussed in last weeks lecture details the role of the State in the UK Organisations – the network organization · Castells points to the rise of the network enterprise as a response to the needs to increased flexibility and autonomy. · Large organisations are divided internally into networks; small ones are parts of larger networks. · These networks are dynamic and not stable and may (re)form around specific projects as alliances and partnerships. · The unit of production is the business project not the firm though it is still the ‘legal unit of capital accumulation.’ · Financial valuation remains key and global financial markets are key in a network economy. He also talks about the rise of the network ente ...

1. The digital divide has serious consequences in the information
society. If ‘information is power’ why is creativity one of the
key focuses concentration areas in the UKs Digital Economy
Act?
Main points to focus on when reading for this topic:
The digital divide – all reading in regards to this point
Information society – Castells work in regards to this point
UK Digital Economy Act – Read the act and find out more
about concentration areas, spefically, Creativity.
TOPIC POINT – Internet access plays a vital part in a modern
society
Networks (Castells)
His hypothesis: the historical superiority of vertical/hierarchical
organizations. That non centred networked form of social
organization had material limits to overcome. Fundamentally
linked to available technologies.
Networks have strength in their flexibility, adaptability and
capacity to self configure
Global Networks
· Digital networks are global, as they have the capacity to
reconfigure themselves, as directed by their programmers,
transcending territorial and institutional boundaries through
telecommunicated computer networks (pp 24)
· The global society is a networked society and exclusion from
these networks is ‘tantamount to structural marginalisation in
the global network society’ (Castells, 2009: 25)

2. Limitations of materials. Benefits from global networks: access
to bigger markets and a variety of producers. Breaking down the
value chain.
States – the network state
· State have sovereignty in specific territories; has ultimate
legislative powers; the power of force (police/army); and have
citizens. They are the ones who have an existent power
relationships. They are very powerful: control the material form
of power (guns, armies, war, police, army) and they have power
over the citizens.
· With globalisation and networks these powers affect the
sovereignty of the state which has to alter/transform to adapt to
these dynamic situations
A. They associate together – ASEAN; EU; NATO; etc. – G20 at
the ‘top of the pecking order’
B. Dense networks of international organisations to deal with
international issues (UN; WTO; IMF; World Bank etc.)
C. Nation states devolve powers to regional bodies and
sometimes NGOs to overcome a crisis of political legitimacy.
The material we discussed in last weeks lecture details the role
of the State in the UK
Organisations – the network organization
· Castells points to the rise of the network enterprise as a
response to the needs to increased flexibility and autonomy.
· Large organisations are divided internally into networks; small
ones are parts of larger networks.
· These networks are dynamic and not stable and may (re)form
around specific projects as alliances and partnerships.
· The unit of production is the business project not the firm
though it is still the ‘legal unit of capital accumulation.’
· Financial valuation remains key and global financial markets
are key in a network economy.
He also talks about the rise of the network enterprise: these

3. have emerges because they have to respond to increased
flexibility and the autonomy of being abe the create in a
globalized manner.
Its information now, its not material based. The firms that
understand this have to go through an organizational change.
Businesses need to understand their business process can be
informationaized.
A new capitalism?
The new economy is of a new brand:
· It depends on innovation as the source of productivity
· On computer networked global financial markets
· The networking of production and management
Information society
· Posits that we are witnessing the emergence of a new type of
society based on changes in information, knowledge and
technology
· It can be a rationalisation of society and the importance of
codified knowledge (Bell 1993)
· Organised knowledge can lead to greater economic
productivity.
· Does it suggest that power relations have shifted from capital
owners to knowledge producers? (Garnham 2000)
· And a change to a different type of economy?
· Is it an epochal change, for example, Castells refers to an
‘information age’?
Digital divide
The ability to use and manipulate digital technology is very
important. Which is why it is ideal for everyone to have a share

4. of technology. The digital divide describes the problem we are
faced with.
Strover “the digital divide has been a symbolic banner of
politicians and corporate largesse insofar as it substituted for
more direct action against inequalities of income, education,
and race.”
Technology isn’t the best option to tackle some issues. But
coupled with some of the other solutions. Strover suggests that
all this is just a blanket and its not really addressing the
situation (being these deep social issues)
Mercedes Divide - it seems the status and prestige. The more
immersed and the more we engage, the divide has this social
political layer, level of status associated with the more we
engage, seen as more knowledge and the people who are falling
behind will feel inadiquite and excluded.
“An uneven distribution between those individuals who are able
to access computers and the internet and those who cannot.
(Harris, 2004 pp8)
Definitions:
The digital divide represents the unequal access of information
and communication technologies (ICTs) between different
groups of society, and the knowledge of skills required to use
technology.
An uneven distribution between those individuals who are able
to access computers (and other ICTs) and the internet and those
who cannot. Tends to divide everyone in haves and have nots.
Social inclusion – Not only a matter of an adequate share of
resources but also of ‘participation in the determination of both

5. individual and collective life chances’.
Overlapping with the concept of socioeconomic equality but not
equivalent to it. Does not ignore class and even the wealthy can
face discrimination.
People who are most affected by this are:
Low socio-economic areas
Developing countries
Rural women
Children
The reasons for this divide varies and there are multiple issues.
Some examples include:
Access to internet (different speeds: dialup, broadband,
superfast broadband, mobile 3G, 4G)
Access to computer skills
Control of access
Content
The idea of a digital divide isn’t necessarily a new concept. As
characteristics could be seen in earlier forms such as social
inclusion/exclusion.
Social Inclusion and Exclusion
Refers to the extent that individuals, families, and communities
are able to fully participate in society and control their own
destinies, taking into account a variety of factors related to
technological resources, economic resources, employment,
health, education, housing, recreation, culture and civic
engagement (Warcheuer, 2003)

6. Definitions
Warschauer 2003 – influence policy
Effective use of ICTs to access, adapt, and create knowledge –
Physical resources, digital resources, human resources, social
resources. These are all the factors that needs to be focused on
to improve across the board.
For businesses – IT jobs are growing. Small-medium size
companies are having a lot of trouble: “those that are more old
and stuck in their ways then its difficult for them to progress.
Social Inclusion – act of making all groups of people within a
society feel valued and important
Social Exclusion – the process in which individuals or groups
are systematically blocked or denied full access to various
rights, oppurtunities, and resources that are normally available
to memebrs of a different group, and which are fundamental to
social intergration and observance of human rights within that
particular group (society). Anyone who appears to deviate in
any way from perceived norms of a population may thereby
become subject to coarse or subtle forms of social exclusion.
“many governments around the world are stressing the
importance of ICT for social inclusion.” The shift from a focus
on a digital divide to social inclusion rests on three main
premises:
1. A new information economy and network society have
emerged
2. ICT plays a critical role in all aspects of this new economy
and society
3. Access to ICT, broadly defined, can help determine the
difference between marginalization and inclusion in this new

7. socioeconomic era.
Harris A Multi-dimensional issue
It should be clearly understood that alleviating the digital
divide requires more than the provision of access to
technologies.
The digital divide is a multi-dimensional issue with significant
societal concerns relating to education and capacity building,
social equity including gender in equity and the appropriateness
of technology and information within its socio-technical
context. (Harris, 2004 11)
Factors/ dimensions to consider in policy development
At the beginning of the 21st Century, concerns about digital
exclusion centred on the observation that access to these
technologies was not distributed equally (creating a divide) and
that thus, certain groups were missing out on the opportunities
that ICTs offered. Divide between groups reflected inequalities
observed in societies in general.
A solution to a disengaged public is not just to provide more
access to ICTs, nor is it enough to increase their digital skills or
shed a positive light on what ICTs can do for people. The latest
findings imply that the best digital inclusion policy is likely to
be a social inclusion policy.
Second Digital Divide Research
This work (in parallel with access research) looks at how users
engage with technologies; the skills they use; and the outcomes.
· Operational internet skills. These are derived from concepts

8. that indicate a set of basic skills in using internet technology.
· Formal internet skills. These relate to the hypermedia
structure of the internet which requires the skills of navigation
and orientation.
· Information internet skills. These are derived from studies that
adopt a staged approach in explaining the actions via which
users try to fulfil their information needs.
· Strategic internet skills. These are the capacity to use the
internet as a means of reaching particular goals and for the
general goal of improving one’s position in society. The
emphasis lies on the procedure through which decision-makers
can reach an optimal solution as efficiently as possible.
(van Duersen and van Dijk 2011)
Reassessing social inclusion and digital divides – Al-Jaghoub,
S. and Westrup, C.
In their paper, they wish to develop the often under-theorised
notion of social inclusion and exclusion to clarify political,
social and cultural issues that are useful in understanding how
policies to address a digital divide operate within specific
nation states.
Data in regards to consequences of digital divide in the
information society – introduction of the information society
(castells):

9. Power relationships are the foundation of social organization in
all societies and throughout history, communication
information, it has been fundamental sources of power and
counter power of domination and social change. This is because,
ultimately the fundamental battle is the battle over the minds of
the people, i.e. the way we think (to a large extent) determines
the way we act. Therefore, the way people think ultimately
determines the fate of the values, norms and institutions on
which socieities are founded.
Castells defines power as the relational capacity that enables a
social actor to influence asymmetrically, the decisions of other
social actors in ways that favor the empowered actor’s will,
interests, and values. Power is exercised by means of coercion
(practice of persuading someone to do something by using force
or threats) or the possibility of it, and/or by the construction of
meaning on the basis of the discourse through which social
actors guide their action. Power relationships are framed by
domination, which is the power that is embedded in the
institutions of society. The relational capacity of power is
conditioned, but not determined, by the structural capacity of
domination. Institutions may engage in power relationships that
rely on the domination they exercise over their subjects.
Castells asserts that where there is power, there is counter
power, because wherever there is domination, there’s resistance
to domination and therefore all societies are constructed on
power relationships which are always conflictive and that are
always in competition. While corrosion and fear are critical
sources of imposing the will of the dominance over the will of
the dominated, few institutional systems can last long if they
are solely based on sheer repression. Torturing the bodies is
less effective than shaping the minds. Ultimately, the capacity
to shape the mind is the fundamental foundation of power. With
saying that, if the shaping of the production of meaning is a
fundamental source of power, the key source of the production

10. of meaning is the process of communication. Castells defines
communication as the process of sharing meaning on the basis
of information transfer. Therefore, the battle over the human
mind (which conditions the battles of power) is largely played
out in the process of communication. This is particularly so in
the network society, the social structure of the Information Age
that he tries to analyze. The social structure that characterizes
the network society is a characterized by the pervasiveness of
communication networks in a multi-modal hypertext. The
ongoing transformation of communication technology in the
digital age, extends the reach of communication media to all
domains of social life in a network that at the same time global
and local, generic and customized in an ever-changing pattern
and as a result, the overt synthesis is that power relationships
are increasingly shaped and decided in the communication field.
And so are the counter power relationships, these dynamics
between power and counter power are fundamentally played out
in the communication field.
The most important communication transformation in recent
years have been the shift of Mass Communication to Mass self-
communication being the process of interactive communication
that can potentially reach a mass audience, but in which the
production of the message is self-generated, the retrieval of
messages is self-directed, and the reception and remixing of
content from electronic communication networks is self-
selected.
Castells tries to analyze the specificity of the relationship
between communication and power in the network society in our
current social structure.
State and Power in the Global Age
He starts with recalling some the key interactions between

11. communication and politics in the most traditional way (the
relationship between mass communication and media politics).
Power making, been based on socialzed communication (capcity
to influence peoples minds), the main channel of
communication between the political system and the political
processes and the citizens is the mass media system. Firstly,
television – The most credible medium because people believe
what they see. In our society, we can actually sustain that
politics is primarily but not only, media politics. The materials
of the political system therefore are state for the media, so as to
obtain the support or at least the lesser hostility of citizens who
have become fundamentally consumers in the political market.
However, this does not mean that power is in the hands of the
media and this is for several reasons. Firstly, media are plural
(containing several diverse elements), there are internal controls
in terms of their capacity to influence the audience, and that
media are fundamentally businesses or political media but in
both cases it is the same, they need to attract the audience.
Media do not have the power, but they have something much
more important which is the space of power; power is played
out in the media and therefore, whoever wants to exist in the
political game has to go through the media which give the
media extraordinary capacity to shape the debate, to influence
the debate but for a plurality of power sources and that capacity
is what keeps them in business. In recent times, we’ve seen the
rise of militant journalism. The main issue is not the shaping of
the minds by explicit messages in the media but the general
shaping of the mind by all messages in the media. The most
important thing is the absence of a given content in the media;
the system works in a binary system, if you do not exist in the
media, you do not exist.
The language of media has its rules, its largely built around
images, not necessarily visuals, but the kind of information that
impacts our brain processes as images in a neuroscientific
sense. The simplest message in politics is a human face and

12. therefore, media politics leads necessarily to personalization of
politics. The product you sell is the person.
A difficulty in addressing the Digital Divide is its multiplicity
and expansion within the Digital Society. Please explore the
skills difficulties faced by either a UK industry (for example
inadequate numbers, changing technical requirements or a
continuing growth in areas such as the automotive,
entertainment, finance etc. industries) or by UK citizens.
Structure
Introduction:
Brief discussion about the digital divide
· What its meant by a digital divide (providing Theory and
background), listing the multiplicity and its expansion in the
digital society. Make a connection between the divide and
social inclusion
· List the digital divide that I will be explaining in this essay
and introduce the skills difficulties faced by the UK industry
(Food industry) (1. Many small businesses are not able to go
online 2. Lack of personal touch due to digitization 3. Lack on
infrastructure and skills)
· This could be changing consumer base, advancements in
business operations, impact of social media, importance of data,
Body:
Digital Society
· Highlight the characteristics of the digital society
· Explain how the world is moving towards becoming more
connected (ICTs instrumental part of globalization) thus
everyone needs to be connected to be included in this new
society
· Even on an industry level there are challenges of addressing

13. the digital divide
· Present an overview of the specific industry and how
technology has contributed to its growth and development
· Illustrate the differences between skilled and low skilled
workers and the impact of the changes of this new era
· Limitations of the digital society
· What if people don’t know how to use the internet (skills)
The information revolution is often identified as the most
profound driver of change in our world today. Enabling an
ongoing disruptive transformation in the deep structure to our
industrial age social institutions, as we move further into the
21st century. Information technology is unleashing the most
radical force of our time, hyperconnectivity, which is reshaping
all areas of our technology, economy and social institutions
according to a new set of rules. Those of access, network
structure, information and knowledge. Within such a context
many people believe that we are on the cusp of a fundamental
transformation in our political-economy, in how we choose to
organize society in respect to industry, organizations, and
communities. This new form of society that is believed to be
emerging is variously called the information or the network
society.
The concept of a networked society is used to describe a certain
evolution in the development of social organization. In this
respect, societies are social groups that are seen to differ
according to subsistence strategies. Societies depend upon their
economies and available technology, although they may not be
determined by them, widespread and sustained social
transformation can only really happen when new economic and
technological means make it possible. The idea that social
evolution is not determined by technology but enabled by it.
Society shapes technology according to the needs, values and

14. interests of people who use the technology, but at the same
time, technology sets the parameters for what is physically
possible.
Communication is the essence of social organization, in that all
organisations involve the coordination between members and
coordination can only be realized through communications of
some form. Social institutions being the interaction between
people will only ever scale to the level and complexity that
interaction scales to through communications. Since prehistory,
significant changes in communication technologies have
evolved in tandem with shifts in political and economic systems
of organization as they have come to form new specific,
combined overall structures or paradigms of socio-economic
organization.
With the rise of the digital format, microprocessor and global
telecommunication network of the internet, has come a new
communications revolution, what is different about today’s
communication medium is the capacity for information
exchange from many to many over long distances at very low
costs and it is precisely this capacity that forms the foundations
to a new form of networked organization, the network society in
this respect can be understood as this stage in the evolution of
our communications medium, and the new forms of more
complex social institutions that are enabled by this nonlinear
pervasive exchange of information. The power of digital
connectivity makes social interaction all pervasive, anytime,
anyplace, anywhere and to anyone. Access to connectivity is not
hierarchical in the traditional sense, but flows horizontally and
is linked to access technology.
With organizations and individuals then becoming based around
and defined by connectivity and access to these networks. As
the volume and exchange along channels and the number of
channels of exchange a node has have increased, it becomes

15. increasingly defined by that exchange as opposed to any of its
inherent features or boundary. This is the most fundamental
thing we can say about the concept of the network society, that
it represents a move from social systems defined by their
components to one’s defined by connections; as connectivity
increases, the emphasis shifts from ownership by closed
organizations within a context defined by physical constraints
to access through open organizations within a context defined
by one location within a network of connections. Such a
fundamental change in the deep structure to social organization,
then feed through to major disruption and transformation within
existing social institutions.
On the one hand networks are the most adaptable and flexible
organizational forms, working well in situations of informal
organization, on the other hand, in the past that could not
coordinate the resources needed to accomplish large tasks, thus
historically, networks have been the domain of the private
world and informal organization, while the world of production,
power and war was occupied by large vertical organizations
such as states, churches, armies and corporations, that could
marshal vast pools of resources around the purpose defined by a
central authority. However, today digital networking
technologies now enable networks to overcome these historical
limits. Digital networks can at the same time be flexible and
adaptive thanks to their capacity to decentralize performance
along a network of autonomous components, while at the same
time, through automated algorithms running on platforms, they
are now able to coordinate all this decentralized activity toward
a shared purpose.
Connectivity both destroys and creates. It brings down borders,
walls and boundaries and the structures that they support but as
it does so, it also creates the grounds for new structures to
emerge. In a networked world, traditional structures that are
predicated on the flow of information in a linear fashion, and a

16. monopoly over the means of production and organization, are
rendered less and less effective with every new horizontal
connection that is made.
The network society is also an information society. While
advances in telecommunication creates networked
organizations, the rise of computation and the move from an
industrial economy to an information economy, makes
information and ideas the primary source of value-added in the
economy and the key differentiator. Socio-economic
organization becomes based around networks where individuals
and organizations process information and knowledge. As such,
we can say that the networked organization is an evolution of
our social structures, that is designed to optimize the processing
of information and ideas within society and economy, as
opposed to social structures based upon the processing of
physical resources. In the same way that the bureaucratic
hierarchical and well bounded organization of the Industrial
Age was optimized for the technologies and economic processes
that were taking place within that society. The network as a
socio-economic structure, that is aligned with the underlying
physical flow of information is one that is optimized for the
processing of information and ideas that take place within post-
industrial economies as a primary activity of value generation.
The new structures that emerge in an information society are
based on the processing of information and knowledge and out
of this a new organization principle emerges, that is no longer
based around space and the processing of physical resources but
one that is based upon the relationship between information and
knowledge processing; what is called the information hierarchy.
The information pyramid defines a purported functional
relationship between information and knowledge where lower
levels comprise the material or building blocks for the higher
levels. Data is the oil of the information economy and value is
in processing it into higher levels of organization, information,

17. knowledge and actionable insight. The value of one’s role in
these networks is in how one processes information and ideas.
While information technology reduces physical limitations and
the structures built around them, new one form based around the
inherent constraints in processing information and increasingly,
knowledge. As information technology becomes connected up to
a high-tech economic base, mass automation commoditizes
physical activity and means that ideas can be realized and
materialzed at an ever-faster pace. Innovation moves to the
forefront of economic activity and the constraining factor
becomes the creation of new innovations and ideas.
Divides within an information network society – divides based
upon one’s value to the network and one’s capacity to process
information and knowledge.
Despite the disintergration of traditional divides around the
physical means of production between capitalists and the
proletariat, differentiation remains based upon access and
processing capabilities. However, the resources have now
changed. While networks breakdown traditional physical
borders around closed organizations, they create a new logic of
inclusion and exclusion based on functionality instead of
physicality; People’s functionality within information
processing networks.
In research by Manuel Castells, he analyzes the new hierarchy
and divides. he sees labour as fundamentally divided into two
types: network labour – which serve the goals of the network,
and switched off labour – which has nothing to offer the
network and in the context of the network economy, is non
labour.
Power in a networked society becomes based on inclusion or
exclusion from access to networks, hence, resistance to the rise
of networks comes from communities oriented physical space

18. and production. Those dislocated or excluded by the networked
society such as the no longer needed industrial labour, naturally
gravitate to identities of communal resistance creating a divide
between local and global, between networks and traditional
insitutions such as the nation state. While the divides created by
the industrial age become eroded, new divides form and become
accentuated through fast-paced transformation.
As we transit into a new form of Global Services and
information economy, the traditional organizational model that
provided the mass of people within advanced economy with
structure and support during the industrial age are
disintergrating. Whether we are talking about stable jobs, a
sense of potential progress for the middle class or sense of
national community and identity, a strong bifurcation forms
between those who are able to avail of the new opportunities
offered by these networks and those who cant. The transition is
expressed in a loss of legitimacy in traditional institutions of
the industrial age, such as the state and civil society, that can no
longer deliver what is required.
New and old political organizations will inevitably use this to
their advatange, presenting simple solutions to complex
challenges, by reatreating to traditionally protected spaces with
strong boerders and identity. While at the same time new IT
enabled networks scale rapidly to create global organiztions.
This transitition, as it unfolds at such a rapid pace leaves
individuals and societies deeply divided in their response.
The evolution of our socio-economic systems of orgnazations
into a network society is an ongoing process of creative
destruction. A massive transformation that is happening at an
extraordinary pace and will affect all areas of social and
economic organization.

19. We live in a digital society, where we can reach anyone,
anywhere, at any time. Everything is run on the internet, which
is driven by information and innovation. We buy most of our
products online, instead of buying it in a physical store. We
look up information for health issues or research on the
internet, instead of reading books in a library or visiting an
expert. We make social contacts on the internet and build op a
social network on digital platforms, instead of meeting everyone
in the real world. In addition, our jobs have been mostly
digitized. As most companies require their workers to do at
least part of their job on a computer. In this changed world, it’s
important to keep up with the changes. As those that do not get
excluded from society and don’t participate anymore. This
phenomena is described as the “digital divide”, a divide
between people that have access to the internet and people who
do not. Yet it’s more complicated than that, as more factors play
a role in gaining access to the full capabilities than just owning
a computer with a fast internet connection. The UK government
chooses to address the “digital divide” by drafting up policies
that regulate the digital cyberspace and the rights of all the
participants. One key aspect in these policies is “creativity”, but
why? In the first part of this essay I’ll explain what the network
society is and how this ties in with today’s society. In addition,
I’m going to address the “information society” and what this
means for today’s economy and the citizen’s that participate in
this economy. Then, I’m addressing the wicked problem “digital
divide”, and why there’s no simple solution for this problem. In
the second part of this essay I’m addressing on how the UK
government is addressing the “digital divide” within the UK,
and why the choose “creativity” as one of their key aspects.
Even though the “new” economy is driven by information.
Network Society
Castell describes our society as a network society, where
digitalization made it possible for these networks to be global.
Within this network information flows between nodes and
dominant society control how users experience and use the

20. internet, since they control the needed technologies and/or
software. These organizations capture information about all the
users and keep it stored forever. This gives them the power to
use this information to control everyone within the society.
Prior to the internet, society was mainly hierarchical structured.
Hierarchies allowed for faster communication, as the pre-digital
era had a huge time lag. So communicating one-way was faster.
Networks have advantages over hierarchies, because of their
flexibility, speed, adaptability, and resilience. But networks do
lose these advantages once they become too big, which is way
hierarchies remain the preferred large scale organizational
structure. Computer mediated communication allows for a rapid
interaction over large distances, with the additional use of
multimedia. . Castells describes three types of communication
between the networks, which have been made global by
digitization. The first type is interpersonal communication,
which is largely one-to-one. This is the equivalent of sending an
e-mail to someone else, or texting with a friend. The second
type is mass communication, which is largely one-to-many. An
example of this is tv advertisement. And the final type is many-
to-many mass self-communication, which is both mass
communication and self-communication. This one is similar to
mass communication in the aspect that it’s one person
communicating to a large group. Yet, the large group gives
interactive feedback back to the one person, in real-time. It’s
also self-communication because all the relevant content is self-
generated. The people commenting on your content write
everything themselves and choose themselves to interact with
your content. For instance, you post a picture of yourself at a
rugby game on Facebook. Thus becoming the one to
communicate to the masses. Consequently, people post
comments, self-generated content, on your posted picture. You
then react to those comments, after which people react to your
reaction, which goes on and on. Henceforth, the masses interact
with the masses, effectively becoming a many-to-many
communication. There should be referencing here

21. Information Economy
The first industrial revolution happened in the late 18th century
and followed after the invention of the steam engine. The
revolution was characterized by the replacement working tools
within small autonomous workshops with marchinery and an
increase in production (History). This was followed by the
second industrial revolution, that happened in the 19th century
and followed after the invention of electricity. The revolution
was characterized by the start of mass production in large scale
factories and an increase in urban live (US History Scene). And
now we live in the third industrial revolution, where everything
is being produced and consumed in the digital cyberspace (The
Economist, 2012). In other words, the information economy.
Organizations need Information to stay competitive within the
market and to be or stay innovative. In other words
“Information is power”. There are four elements that distinguish
this third revolution from the previous industrial age. The first
distinguishing element is the driving role of science and
technology for economic growth. The productivity and
economic growth of an organization are increasingly dependent
upon the innovation of their science and technology, as this
increases a company’s competitive advantage. And it’s
increasingly dependent on and the quality of their information
and management. Information conveys meaning and knowledge,
used to support the decision-making process. To make sure that
this information is available at the right time, in the right hands
at a low costs, information needs to be managed (Adeoti-
Adekeye, 1997). For example, when a company knows that
customers buy increasingly more chocolate during Christmas
times, they can put them on sale around this time to increase
revenue. The second distinguishing element is a shift form
material processing to information processing. Henceforth,
industries within society increasingly rely on information
processing to be competitive in their respected markets.
Organizations process information into knowledge and use this
newly gained knowledge to set themselves apart from their

22. competition (Warschauer, 2001). As an illustration, a company
can be more cost-effective than their competition by innovating
their supply chain. The third distinguishing element is the
emergence and expansion of new forms of networked industrial
organization. With attention to the rise of flexible and
horizontal organizational networks, which have a more flattened
structure and an emphasis on interaction between different
departments and a more equal power distribution. As opposed to
the integrated and vertical hierarchies, that have a reporting
communication and are focused on control over all the
departments and maximizing efficiency and value creation. As
described in the previous paragraph, the emergence to
digitalization resulted in the integration of powerful networks in
which anyone can be reach anywhere, at any time. And the last
distinguishing element is the rise of a socioeconomic
globalization. This new economy is notable organized across
national borders and affects everyone. For instance, there are
multinational company that produce and sell goods all over the
world. Furthermore, they work with local firms to increase their
customer group and learn more about the local culture. At the
same time, these multinational scare away local competition
with their lower prices and/or technological advantages. Besides
these four distinguishing elements, the information society is
also associated with global economic stratification. Since the
rise of the internet in the late 90’s the rich countries have
become increasingly richer, while the poor countries have
become increasingly poorer. An explanation for this phenomena
is that the exports of poor countries are low-valued within the
information society, as these goods are non-technological and
primary. For instance, the food that is produces in their
agricultural sector. In contrast, the exports of the rich countries
are high in knowledge and technological advances, which gives
them a much higher value within the information society. For
instance, the “iPhone” that was designed by Apple in Silicon
Valley.
As Castell points out however, networks only include nodes that

23. increase the efficiency and effectiveness of their network and
discard any nodes that do not. In other words, the nodes need to
be valuable to the network. Seeing as networks are global, these
networks no longer care about historical and cultural borders.
These network only look at the added value these nodes
represent for the network. So organization and regions that
possess value are included and the rest is ignored. This process
of inclusion and exclusion causes a digital divide.
Digital Divide
The digital divide is defined as an unequal distribution between
those individuals who are able to access computers and the
internet and those who cannot (Harris, 2004). “access to
computers” is defined as physical access to a physical computer
that has a working internet connection. “Internet access” is
being able to visit the internet. The level of “internet access” is
determined based on three different dimension. The first
dimension is whether the user is able to access the internet
anywhere. The first dimension is whether the user is able to use
the internet from their place of residence. As this gives the user
the chance to use the internet more freely. And the third
dimension is whether the user has access to high speed internet
at their place of residence. Because high speed internet is
needed to gain access to certain graphical content [2]. However,
this definition just addresses the physical access, while digital
divide is actually a multi-dimensional issue. Just solving the
physical aspect of the digital divide, will not improve the
situation as people don’t know what to do on the
internet(Warschauer, 2001). The digital divide is not simply
about the have’s and have not’s, but about the “Never-Betters”
(See the internet and information age as the new utopia, and see
thi as the highest position people can possibly achieve up until
this point), “Better-Nevers” (Think the human race would’ve
been better off without the invention off the internet, and think
that the dominate institutions have too much power and
control), and the “Ever-Wasers” (Think that any moment in
time, some innovation and change takes place. And that society

24. has become an ever-changing thing, and nobody knows where
it’s going) (Gopnick, ….).
Multi-dimensional Issue Digital Divide
There are five dimensions of inequality within the digital
divide, that need to be addressed before the digital divide can
be solved. The first dimension of inequality lies in technical
means. These provide the hardware and software necessary to
gain access to the internet. User that lack the needed hardware
and fast internet connection, are unable to access a large part of
the content available on the internet. The second dimension of
inequality is in autonomy while using the internet. Not all the
users have a computer at home, and are unable to freely make
use of the internet. The third dimension of inequality is the skill
level of different internet users. Van Dijk proposes four
different digital skills needed to make full use of the internet
(Van Dijk, 2010). The first set of skills are operational skills,
which entails being able to make full use of the internet browser
and search engines. The second set of skills are formal internet
skills, that makes the user able to navigate the internet using
links. The third set of skills are Information skills, which make
the user able to find information on a certain topic on the
internet. And the fourth set of skills are Strategic skills, which
enable the user to get value out of using the internet. The fourth
dimension of inequality relates to availability of social support
for users that need help performing certain tasks on the internet.
In the richest area, users can help each other to complete certain
tasks, something rarely possible in other areas. And the fifth
dimension of inequality is in variation of purpose of making use
of the internet, amongst users. Seeing as not everyone possesses
the same skill level on the internet, users that don’t possess the
required information retrieval skills, cannot make full usage of
the possible functionalities the internet offers. So their online
experience is far less gratifying than the experience of seasoned
users [2]. Comment by Don de Lange: Specify the dimensions
DoneComment by Don de Lange:

25. Internet as a social Product
The internet is a social product that is subject to the use and
misuse of its power [1]. As there are spatial inequalities in
access to the cyberspace. This gap reflects the gap between First
and Thirds world countries, because the variation in internet
access in these regions varies immensely, even though you can
gain access to the internet almost everywhere. The global access
is conditioned by density, reliability, and affordability of
telephone systems. So you can say that global access is
economically constrained, as telephone access is more
expensive in economically regulated areas. In addition, global
access is politically constrained, as governments fear the
internet for it emancipatory abilities. To prevent this, they
usually monitor the communication within the country, which
prevents the internet from being inherently emancipatory. It’s
also used to further politically agenda’s and for reactionary
purposes. Furthermore, the content available on the internet
largely contributes to Americanization [1]. Which is the
spreading of the American culture on the internet, while minor
cultures barely get presented. The internet originates from the
U.S., and they still produce a bulk of the displayed content.
Why “Creativity” is a key aspect of Digital Economy Act
“Creativity” refers to the means that innovate or change the way
we do or see things and adds value to the network, through
inspirational contributions. Before the internet, creative outputs
never had any real value, and now we are building an entire
industry around it. The reason the UK uses creativity as a key
aspects, is too secure their future as a powerful player within
the newly emerged information economy.
The first aspect of implementing “creativity” is creating
policies that include every citizen in the digital cyberspace. One
way the UK government tries to reach this, is by connecting
every region and citizen to a fast broadband connection of at
leat 10 mb/s. This is needed to load all the multimedia content
that is available on the internet. This gives these citizens a
change to communicate from anywhere within the UK, to start a

26. digital business while living in the rural areas, and to reap the
further advantages of the internet. (Commons Debate
Broadband, 2015).
The second aspect of implementing “creativity” is encouraging
the creation of online content amongst all the different
demographics within the UK. By enabling everyone to post their
creative persuits and abilities, we create participation online
between groups of users with similar ideas or interests. Now,
participation is heavily determined by the user’s demographics.
For example, people with a college degree are far more likely to
post their creative ideas online, than people with just a High
School degree.needs reference One way the Act tries to promote
the creation of intellectual content, is by protecting the
intellectual rights of every user on the internet. To illustrate,
the act heavily criminalizes the illegal copying of someone
else’s content. The increased participation is needed in this
“new” economy, where knowledge is the main driver (Tapscott,
1996). Organizations need innovation to keep up with the
market, and human capital and creativity are the main drivers
for this (Hargittai, 2008). In addition, the more wider creation
of content can close the participation gap that is on the internet
right now.
The third aspect of implementing “creativity” is teaching all the
UK citizens digital skills needed to get advantage from the
internet. The Uk expects that within 20 years, 90% of the
existing jobs will require digital skilled workers. In order to
secure their vision and future employment, the UK needs to
make sure that the citizen have the needed digital skills, beside
the physical access. There are four key barriers that they need
to overcome before they can be classified as skilled internet
users. First, there needs to be physical access to the internet
from anywhere within the UK. 82% of UK adult citizens use the
internet daily in 2016. Only 80% of all households in the UK
have access to internet and only 75% has access to the internet
on a mobile device in 2016. The Digital Economy Act solves
this by promising all its citizens a minimal broadband speed of

27. 10 mb/s in all of the UK. Second, all the UK citizens need to be
taught the minimal digital skills. Particularly operational,
formal, information, and strategic digital skills. In 2017 9% of
UK adult citizens lack the digital skills needed to use the
internet to their advantage. And In 2013 only 74% of the UK
adults had complete faith in their digital skills. Simply giving
information about digital skills won’t increase their skill level.
They need to be able to utilize their digital skills in a
meaningful way (Warschauer). Third, UK citizens need to be
confident that they can trust the internet with their personal
information to gain an advantage. In 2013 50% of Uk adults that
access the internet use it to find a job online. In 2015 93% made
use of the email service to communicate online, 73% used social
media to build up a network to improve their social status and
build a career, and 74% of UK adults chatted online. And
fourth, UK citizens need to understand why the internet is
relevant and useful and be motivated to make use of it. They
can only gain this understanding if they can access and use the
internet to it’s full capability and just let their creativity lose.
Simply telling them why it’s useful doesn’t work. Otherwise
everybody would use it by now. Comment by Don de Lange:
Reference: https://www.gov.uk/government/publications/uk-
digital-strategy/2-digital-skills-and-inclusion-giving-everyone-
access-to-the-digital-skills-they-need
Comment by Don de Lange: Reference:
https://www.gov.uk/government/publications/digital-inclusion-
and-skills-policy/digital-skills-and-inclusion-policyComment by
Don de Lange: Reference:
https://www.gov.uk/government/publications/digital-inclusion-
and-skills-policy/digital-skills-and-inclusion-policy
As illustration, the creative industry that thrives on using
knowledge in creative ways. The industry is composed of the
following sectors: Marketing, Architecture, Product design,
Entertainment, Computer services, and Art. The value of this
industry was 91,5 billion pounds in 2016, a 7,6% increase as
opposed to 2015. It created 3,05 million jobs in the UK, as an

28. illustration, 1 out of 11 UK workers, works in the creative
industry. A number that is likely to increase even further. In
2015, the creative services export was worth 21,2 billion
pounds. Which is 9,4% worth of the total worth of services the
UK transports. This export had a 44,3% growth between 2010
and 2015, which shows that it’s likely going to increase even
further. Politicians also agree that the creative industry is
important for the economic growth of the UK. As it increases
the value of the economy and it creates more jobs for UK
citizens. They also agree that the creative industry will increase
the positive reputation of the UK overall. To keep on growing
and thriving further, however, this industry requires its workers
to have digital skills needed to be competitive in the internet. In
addition they are sometimes required to provide creative
content. The creative industry is the perfect example of the new
economy and that it requires a new kind of worker to keep
innovating and keep competing with other countries and
organizations. Comment by Don de Lange: Reference:
https://www.gov.uk/government/collections/creative-industries-
economic-estimatesComment by Don de Lange: Reference:
http://www.thecreativeindustries.co.uk/resources/infographics
In conclusion, we live in a globalized digital network, as
Castell’s puts it, where the emergence of the internet changed
the way we do things. For starters, we can communicate with
anyone in the world, from anywhere in the world, at any time.
This paved the way for mass self-communication where the
masses can communicate with the masses, with the use of
multimedia, text, and voice in real-time. In addition, our
products and services have also been largely digitized. As a
consequence our economy changed to an information economy
with information as the main driver. The economy further
distinguishes itself with the driving role of science and
technology, information processing, emergence hierarchical
networked organizational structure, and the rise of
socioeconomic globalization. The emergence of this new digital
society lead to a digital divide however, as not everyone has

29. equal access to the internet. This equality is social, economical,
political, and technical, even though it’s usually treated as just
a technical problem. DiMaggio identified five dimensions of
inequality; technical means, autonomy in usage, skill level
users, social support, and variation on purpose. Given that a
large part of today’s society has been digitized, those who do
not participate in the digital cyberspace, effectively don’t
participate in society. The UK government tries to close the gap
by treating creativity as a key aspect in policy making.
Creativity is about creating policies that aim to include every
UK citizen in the digital cyberspace and give them all a equal to
participate in a manner of their choosing. These policies include
the encouragement of creating content on the web and teaching
UK citizens digital skills. By doing this, the UK could secure
their participation in digital market.
Creative Industries
· Demographics
http://www.thecreativeindustries.co.uk/resources/infographics
·
https://www.gov.uk/government/uploads/system/uploads/attach
ment_data/file/206944/13-901-information-economy-
strategy.pdf Information economy
· https://www.gov.uk/government/collections/creative-
industries-economic-estimates
· https://www.gov.uk/government/publications/creative-nation-
a-guide-to-the-uks-world-leading-creative-industries
· https://www.gov.uk/government/organisations/innovate-uk
· https://www.gov.uk/government/news/creative-industries-
worth-almost-10-million-an-hour-to-economy
Reference
1. Gov 2012 -
https://www.gov.uk/government/publications/2010-to-2015-
government-policy-communications-and-telecomms/2010-to-
2015-government-policy-communications-and-telecomms

30. 2. Information economy strategy -
https://www.gov.uk/government/uploads/system/uploads/attach
ment_data/file/206944/13-901-information-economy-
strategy.pdf
3. History http://www.history.com/topics/industrial-revolution
4. US History Scene http://ushistoryscene.com/article/second-
industrial-revolution/
5. The Economist http://www.economist.com/node/21553017
6. Van Dijk
http://journals.sagepub.com/doi/abs/10.1177/1461444810386774
7. Commons Debate Broadband 2015
https://www.youtube.com/watch?v=-XhG6rSFG_Q
8.
Reduced Scale Step Marking: Undergraduate Level
Class
Descriptor (which reflects the highest possible mark attainable)
Possible Mark
Upper-range first
Your work is exceptional and of sufficient quality to be
awarded an upper-range first class mark. Your work is
authoritative and amply demonstrates very advanced knowledge
and a very advanced ability to integrate the full range of
principles, theories, evidence and techniques. The clarity and
originality of thought and the way that it is expressed is very
impressive for this level of work.
100
Upper-range first

31. 95
Upper-range first
92
Mid-range first
Your work is outstanding and of sufficient quality to be
awarded a mid-range first class mark. Your response to the
question is insightful. You demonstrate a sophisticated
understanding of this topic. To improve future marks you
should attempt to refine your analysis and arguments even
further.
88
Mid-range first
85
Mid-range first
82
Lower-range first
Your work is excellent and of sufficient quality to be awarded a
lower-range first class mark. You demonstrate a detailed level
of understanding of this topic. To improve future marks you
should attempt to identify any weaker parts of your argument
and/or its presentation, ensure you have addressed opposing
viewpoints or evidence decisively, and consider extending the
range and use of supporting resources even further.
78
Lower-range first
75
Lower-range first
72
2.1
Your work is very good and of sufficient quality to be awarded

32. a merit mark. Your work is sound and well-considered. To
improve future marks you could integrate a wider range of
sources and/or deepen your analysis. You may also need to
develop weaker parts of your argument and/or its presentation,
ensuring that you have identified and addressed key opposing
viewpoints or evidence.
68
2.1
65
2.1
62
2.2
Your work is good and of sufficient quality to be awarded a
pass mark. Your work is competent and coherent. To improve
future marks you could integrate a wider range of sources and
should increase your level of critical appraisal and seek to
demonstrate a more integrated understanding of the subject and
possible opposing viewpoints in your analysis. You could also
improve the presentation and structure of your work.
58
2.2
55
2.2
52
3
Your work has sufficient knowledge, use of appropriate
resources and quality of presentation to warrant a pass. You
demonstrate an adequate understanding of the topic. To achieve
a higher mark you need to make sure that all your points are
fully supported with data or evidence from the literature. You
also need to achieve greater analytical depth and take fuller
account of opposing viewpoints or evidence in order to provide

33. more substantial, comprehensive and nuanced support for your
argument.
48
3
45
3
42
F
Your work demonstrates insufficient knowledge and skills in the
specific topic area and does not merit a pass mark. Your work
demonstrates some awareness of the topic, although it is a
frequently incoherent, or partial, response. To improve future
marks you should improve your awareness of the appropriate
principles, theories, evidence and techniques and engage more
critically with them. You should present and structure your
arguments better and make sure that they are substantiated.
You should seek to undertake, or demonstrate that you have
undertaken, independent work.
38
F
35
F
32
F
Your work is inadequate and does not merit a pass mark. It
demonstrates a confused or deficient awareness of the subject
matter. To improve future marks you should improve your
awareness of the appropriate principles, theories, evidence and
techniques and engage critically with them. You should present
and structure your arguments and make sure that they are
substantiated. You should seek to undertake, or demonstrate

34. that you have undertaken, independent work.
28
F
25
22
F
Your work is severely inadequate and does not merit a pass
mark. You demonstrate a very deficient understanding of the
topic. To improve future marks you should improve your
awareness of the appropriate principles, theories, evidence and
techniques and engage critically with them. You should present
and structure your arguments and make sure that they are
substantiated. You should seek to undertake, or demonstrate
that you have undertaken, independent work.
15
F
Your work is profoundly inadequate and does not merit a pass
mark. Your representation or understanding of thinking in the
discipline is highly deficient. To improve future marks you
should seek to understand thinking in the discipline and engage
critically with it. You should present and structure your
arguments and make sure that they are substantiated. You
should seek to undertake, or demonstrate that you have
undertaken, independent work.
5
F
0
This article was downloaded by: [The University of Manchester

35. Library]
On: 12 October 2014, At: 10:26
Publisher: Routledge
Informa Ltd Registered in England and Wales Registered
Number: 1072954 Registered office: Mortimer
House, 37-41 Mortimer Street, London W1T 3JH, UK
Economy and Society
Publication details, including instructions for authors and
subscription information:
http://www.tandfonline.com/loi/reso20
British Pharmaceuticals: a cautionary tale
Julie Froud a , Karel Williams a , Colin Haslam b , Sukhdev
Johal b & Robert Willis c
a University of Manchester
b Royal Holloway , University of London
c East London University
Published online: 28 Jul 2006.
To cite this article: Julie Froud , Karel Williams , Colin Haslam
, Sukhdev Johal & Robert Willis (1998) British
Pharmaceuticals: a cautionary tale, Economy and Society, 27:4,
554-584, DOI: 10.1080/03085149800000033
To link to this article:
http://dx.doi.org/10.1080/03085149800000033
PLEASE SCROLL DOWN FOR ARTICLE
Taylor & Francis makes every effort to ensure the accuracy of
all the information (the “Content”) contained
in the publications on our platform. However, Taylor & Francis,
our agents, and our licensors make no
representations or warranties whatsoever as to the accuracy,
completeness, or suitability for any purpose of

36. the Content. Any opinions and views expressed in this
publication are the opinions and views of the authors,
and are not the views of or endorsed by Taylor & Francis. The
accuracy of the Content should not be relied
upon and should be independently verified with primary sources
of information. Taylor and Francis shall
not be liable for any losses, actions, claims, proceedings,
demands, costs, expenses, damages, and other
liabilities whatsoever or howsoever caused arising directly or
indirectly in connection with, in relation to or
arising out of the use of the Content.
This article may be used for research, teaching, and private
study purposes. Any substantial or systematic
reproduction, redistribution, reselling, loan, sub-licensing,
systematic supply, or distribution in any
form to anyone is expressly forbidden. Terms & Conditions of
access and use can be found at http://
www.tandfonline.com/page/terms-and-conditions
http://www.tandfonline.com/loi/reso20
http://www.tandfonline.com/action/showCitFormats?doi=10.108
0/03085149800000033
http://dx.doi.org/10.1080/03085149800000033
http://www.tandfonline.com/page/terms-and-conditions
http://www.tandfonline.com/page/terms-and-conditions
British pharmaceuticals:
a cautionary tale
Julie Froud, Colin Haslam, Sukhdev Johal, Karel
Williams and Robert Willis
Abstract

37. British pharmaceuticals is generally represented as a successful
sector which illus-
trates the potential of knowledge-intensivc, high-value-added
activities. 'l'his article
presents a revisionist account based on evidence and argument.
Pharmaceuticals is a
small sector which combines high-~alue-added and average
wages to benefit capital
not labour. The knowledge base in the laboratory creates
imitative product with mar-
keting then applied to capture social expenditure. When
product-market growth
slows, the sector restructures defensivel~ without solving its
problems.
Keywords: pharmaceuticals; manufacturing; UK; industrial
policy; competitixe-
ness.
And so it happens that in the real Miss Nightingale there was
more that vas inter-
esting than in the legendary one; there was also less that was
agreeable.
(Lytton Strachey, Eminent Victorzans)
I n all the long-industrialized high-wage countries, new forms
of external and
internal competition impose industrial transformation and a new
division of
labour. If these processes hollow o u t manufacturing and
crowd labour into low-
wage service jobs, they may also create new poles of growth
and possibilities of
prosperity around knourledge-intensive, high-value-added
activities. T h i s

38. paper explores the extent and nature of these possibilities
through case study
of o n e UK sector, pharmaceuticals, which has been widely
represented as t h e
practical realization of all t h e possibilities of prosperity in a
dynamic British
case.
T h i s article comes to revisionist conclusions about British
pharmaceuticals,
as Strachey's essay did about Florence Nightingale: in both,
there is a gap
between legend and reality which m u s t be registered and
explored by all who
wish to move o n intellectually and politically after rejecting
sentimental illu-
sion. T h e article which argues this case is organized in a
fairly straightforward
Econorn)~ ~ n d Soctety Volume 27 Number J Nozenzbev
1998: 554-584
0 Routledge 1998 0308-i 117
D
ow
nl
oa
de
d
by
[
T

39. he
U
ni
ve
rs
it
y
of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1
0:
26
1

40. 2
O
ct
ob
er
2
01
4
samerichughdallyn
Highlight
Brztzsh pharma~eutz~als: a cautzonsyll tale? 555
w a y I t s first section delineates a legend by reviewing t h e
orthodox story of
Britain's brilliant success in pharmaceuticals and relating this to
broader
American arguments about t h e potential of high-value-added,
knowledge-
intensive activity. Subsequent sections all show how t h e
images, claims and
assumptions about Rritish pharmaceuticals offer partial and
misleading rep-
resentations.
T h e second section shows that the imagery of success diverts
from questions
about the weight and significance of the pharmaceuticals sector.
'The third

41. section shows how pharmaceuticals combines high-value-added
with average
lvages so that its distinguishing characteristic is generous
rewards for capital.
T h e fourth section shows how the knowledge-intensive
stereotype misrepresents
an activitj- which is about the aggressive marketing of imitative
product. A fifth
section demonstrates how and whq- the sector must restructure
and cannot be a
source of stability. T h e end result is a cautionary tale and a
brief conclusion
dravs out the implications of these revisions for o u r
understanding of the so-
called knowledge-intensive, high-value-added activities.
S e c t o r a l s u c c e s s , n a t i o n a l p r o s p e r i t y ?
L>iscussion of Rritish pharmaceuticals draws on, and is shaped
by, a common
language which creates a story of success. It can be illustrated
with two quo-
tations from the right and t h e centre left, represented by a
Financial Times edi-
torial and a Will H u t t o n column:
[Pharmaceuticals is] . . . the only industry in which the country
is an undis-
puted world leader.
(Financial Times 29 January 1995)
Pharmaceuticals h a e stood as a beacon of UK excellence in
an industrial
landscape otherwise depressing11 bare of international success.

42. (Will H u t t o n , Guardtrrn 8 M a r c h 1995)
T h i s language creates its effects by the repeated assertion of
exceptional success
(against an assumed background of general British failure)
which is t h e ~5-ell-
deserved outcome of a contest to w-in leadership through
excellence. T h e same
few factoid indicators of success are used again and again,
especially the trade
surplus and the development of world-beating drugs which is
always linked to
the knowledge i n p u t of research.
T h i s legend of our times originated inside pharmaceuticals as
part of a re-
branding. I n the 1960s and 1970s, after Kefauver's Senate anti-
trust investi-
gation, American and Rritish d r u g companies were widely
accused of
profiteering from patents. If this suspicion now lingers o n only
in The Econo-
mist, this is because, in the 1980s, the British sector used t h e
language of
deserved success to refurbish its own image. Peter Cunliffe,
then Chairman of
ICI's pharmaceuticals division, inquired rhetorically:
D
ow
nl
oa
de
d

43. by
[
T
he
U
ni
ve
rs
it
y
of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1

44. 0:
26
1
2
O
ct
ob
er
2
01
4
samerichughdallyn
Highlight
samerichughdallyn
Highlight
556 Jufulie Froud et al.
How dare your industry operate successfully where others fail?.
. . How can
you trade successfully with the entire world when others cannot
compete even
in the U K ? You are clearly above average in your
performance.
(ABPI 1982: 19)

45. More recently, Jan Leschly, chief executive of Smith Kline
Beecham, self-
confidently invited Tony Blair: 'He should meet us. We [in
pharmaceuticals] are
probably the most successful business in the UK' (Financial
Times 29 July 1996).
T h e Thatcher era began with a massive manufacturing
recession and
promised regeneration that turned out to be elusive. Against this
background,
Conservative ministers eagerly accepted trade invitations to
endorse pharma-
ceuticals in familiar terms as a 'British industrial success story'
(Redwood in
ABPI 1990: 4). T h e sector's export record and commitment to
research and
development was singled out for special praise. In the trade
association's annual
report, Geoffrey Howe, as Chancellor, praised pharmaceuticals
as 'a remarkable
industry . . . [whose] record, in particular in exporting, is one of
considerable
success' (ABPI 1982: 5 ) . Nearly ten years later at a trade
conference, William
Waldegrave praised the knowledge base:
we are proud of the success of research and development in this
country. As
you know, three out of the top six best-selling drugs world wide
were
researched in Britain, including the number one best seller
itself, Zantac. This
is an excellent record.

46. (Waldegrave 1991: 92)
T h e more academic literature on pharmaceuticals assimilates
and elaborates
versions of the familiar story. This is the case not only in
business texts which
celebrate success but also in mainstream economics texts and in
radical work
which aims to unsettle established identifications.
T h e business-school texts take the leading pharmaceutical
companies as
exemplars of managed success. Their enthusiasm for Glaxo, the
leading British-
owned pharmaceuticals company, is almost boundless. John Kay
identifies Glaxo
as 'Europe's most successful company' (Kay 1995: 30), while
Davis et al. (1991)
represent Glaxo as the most successful company in the world.
More sober main-
stream texts concur in less extravagant terms and with less
hyperbole. A recent
academic text on the world pharmaceutical industry argues that
'the existence
and vigorous development of a nationally based (British)
pharmaceuticals busi-
ness had led to substantial benefits in employment, investment
and (perhaps
most important of all) in the nation's technological capacity'
(Taggart 1993: 232).
Mainstream economics concurs when Hart asserts that this is
one industry
where the UK is 'powerful and dynamic' and has little to fear
from German com-
petition (Hart 1992: 85).

47. T h e language and the story are so all-pervasive that even
radicals get drawn
in despite their reservations about its representational and
partial character. D
ow
nl
oa
de
d
by
[
T
he
U
ni
ve
rs
it
y
of
M
an
ch
es
te

48. r
L
ib
ra
ry
]
at
1
0:
26
1
2
O
ct
ob
er
2
01
4
samerichughdallyn
Highlight
Brztzsh pharma~eutz~als: a cuutzonar)l tale? 557

49. Thus, Moran's (1995) account of 'the health care state'
emphasizes the strategic
importance of the pharmaceutical and medical equipment
industries: their size,
technological importance and growth rates ensure that the
outcome of inter-
national competition in these activities is 'central to the
industrial policy of
states' (Moran 1995: 772). His radicalism is then expressed in a
supplementary
caveat about representational importance:
T h e pharmaceutical industries therefore have disproportionate
importance to
a capitalist industrial state such as Britain, because of their
economic signifi-
cance and because they provide state elites with a rare example
of a pres-
tigious, world class industry
(Moran 1995: 773)
I n a different way, the same kind of prekaricating relation to
the stereotype re-
appears in the journalist Matthew I,ynnls book which provides
the most imagi-
native and informative recent account of the business. Lynn
disparages Glaxo as
a company which used marketing to turn Zantac, an imitative
product, into a
world best-seller (1,ynn 1991: 235). But the force of this attack
is diminished by
the Manichean way in which Glaxo is constantly contrasted with
Merck whose
success is virtuously based on real innovation (Lynn 1991: 13).

50. T h e British story- of sectoral success in pharmaceuticals can
be set against the
background of a broader debate on the possibility of prosperity
through high-
value-added, knowledge-intensive activity. T h e changing and
increasingly pes-
simistic assumptions of American debate on these issues can be
established by
comparing the seminal work by Magaziner and Reich (1982) on
industrial com-
petitivity with early 1990s restatements of the argument by
Reich (1991) and
'I'yson (1992) as well as Krugman's (1994) polemic against
competitivity.
At the beginning of the 1980s, Magaziner and Reich's M i n d i
n g Amevica ir Busi-
ness advocated industrial policy to assist structural
transformations which would
move the long-industrialized countries into knowledge-
intensive, high-value-
added activities. 'l'he US could achieve prosperity 'only if (1)
its labour and
capital increasingly flow towards businesses that add greater
value added per
employee and (2) we maintain a position in these businesses
that is superior to
that of our international competitors' (Magaziner and Reich
1982: 4). Suhse-
quent American debate about competitivity in the 1990s has
been marked by
growing intellectual scepticism about the relation between value
added and
knowledge intensity as well as increasing political pessimism
about whether
industrial policy can sustain a broadly based national

51. prosperity.
Paul Krugman (1994: 38) raised the difficulty that high-value-
added, know-
ledge intensity and high technology were not always positively
associated as
Magaziner and Reich had assumed. When US industries are
ranked in terms of
value added per capita, using 1988 data, cigarettes and
petroleum refining realize
the highest value added per worker of $488,000 and $283,000
respectively; while
electronics adds value of only $64,000 per worker which is
below the average of
$66,000 for manufacturing as a whole. T h e distinguishing
characteristic of the
D
ow
nl
oa
de
d
by
[
T
he
U
ni
ve

52. rs
it
y
of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1
0:
26
1
2
O
ct
ob

53. er
2
01
4
samerichughdallyn
Highlight
558 Julie Froud et al.
high-technology industries is not the level of their economic
output but the
quality of their social input of educated labour. According to
Tyson's evidence
(1992: 36-7), the average value added per worker is one-third
higher in high-
tech activities than in American manufacturing as a whole. But,
this average
covers a substantial range of variation which includes below
average perform-
ance in activities like aircraft production. T h e economically
diverse activities of
high tech are, however, united by a social difference in the
composition of
employment because the high-technology sector as a whole
employs eighty-five
scientists and engineers per 1,000 employees, twice as many as
manufacturing as
a whole. Knowledge-intensive turns out to be a tautology.
While these economic relations have been explored, American
discussion of

54. political possibilities and social consequences has been growing
steadily more
pessimistic. Tyson and Reich provide restatements of
competitivity for the 1990s
where industrial policy is discarded, the economically
defensible area is much
diminished and the inevitable social consequences of growing
inequality and
social division figure ever more prominently.
Tyson (1992) is an argument for an American trade policy
response against
the Japanese and Europeans which narrows the area of the
defensible: active
trade policy should apply only to high tech with free trade
recommended for the
76 per cent of American manufactured imports in the medium
and low tech cat-
egories. Reich (1991) presumes the consequence will be a
general migration of
'routine production' activity to industrializing countries and his
of Nations
provided an influential restatement of the social consequences
of these economic
processes. Knowledge is still the key to the future but, as part
of a new global
division of labour, it is now a recipe for sectional inequality and
social division,
not national prosperity for all Americans. A 'fortunate fifth' of
Americans will
prosper as 'symbolic analysts' whose problem-solving and
brokering skills are
integrated into global networks while many under-qualified
Americans are
herded into an overcrowded service market because the factory
production of

55. global networks is often located outside the USA.
T h e American debate about competitivity is echoed in a
British context
through selective and up-beat appropriation of positive themes.
As long as the
Conservatives were in power, the main emphasis was on
competition through
flexible labour markets and low wages which would attract
inward investment.
But, there were also glimpses of another knowledge-intensive,
high-value-added
pathway to competitiveness which pharmaceuticals exemplified.
In 1986 the
NEDC pharmaceuticals committee (1986: vi) identified
pharmaceuticals as 'a
sector which typifies the new industry that the UK is anxious to
sustain and
develop'. By 1995, this was taken up in the government's White
Paper, Compet-
itiveness: Forging Ahead, which accepted the representation of
the British indus-
try as an established export success based on knowledge which
has established a
position 'among the world's leaders in innovation' (Cm 2867
1995: 39). T h e
White Paper then elaborated this into a political economy of
specialization where
the success of pharmaceuticals, chemicals and aerospace
showed how 'R and D
dependent industries . . . assisted by supportive relationships
with suppliers,
D
ow

56. nl
oa
de
d
by
[
T
he
U
ni
ve
rs
it
y
of
M
an
ch
es
te
r
L
ib
ra

57. ry
]
at
1
0:
26
1
2
O
ct
ob
er
2
01
4
universities and government . . . can harness the nation's brain-
power to create
wealth and comparative advantage' (Cm 2867 1995: 3 6 ) .
New Labour's rhetoric emphasised knowledge-intensive, high-
value-added
activities much more prominently- and presented them
provocatively as the key
to social inclusion (rather than the social division which figured
in the Ameri-
can debate of the 1990s). Early in 1996, Tony Blair's Tokyo and

58. Singapore
speeches presented a light and airy pre-election vision of how a
new economic
base could (rc)create 'one nation' (Blair 1996a: 8; 1996b: 2).
His upbeat tone was
sustained by a blurred definition of value added and by the
assertive association
of added value with knowledge intensity. If value added has a
precise technical
meaning in company or national accounts, it can also be used
simply as 'a
synonym for "desirable"' (Krugman 1994: 3 7 ) . Blair uses
value added in this
rhetorical sense while echoing 1980s Reich: 'when very low
labour cost countries
can outbid us at the lower end of the market we must be moving
up continually
to higher value-added products' (1996b: 2). 'This high-value-
added activity is
then associated with knowledge intensity as in the Tokyo speech
which presents
no evidence but announces 'Knowledge. Infrastructure.
Technologj- . . . are the
wellsprings of national prosperity today' (Hlair 1996a: 6). 'The
next era will be
the creative age' (Blair 1996a: 2) with prosperity derived from a
base of human
capital strengthened through technology and training. I n this
era, education and
training can become the policy lever that produces the happy
joint outcome of
economic competitiveness and social inclusion.
T h e question of whether, and to what extent, knowledge-
intensive, high-
value-added industries will deliver such results can be clarified

59. by turning to the
case of U K pharmaceuticals. T h e next section takes up this
task by focusing on
a range of evidence which allows us to weigh the contribution
of thc pharma-
ceutical sector.
B r i t i s h p h a r m a c e u t i c a l s : s p e c t a c u l a r t r a
j e c t o r y a n d l i g h t
w e i g h t
If the orthodox story of success is always supported by the same
few factoids,
this section moves back to primary sources so as to lay out a
range of relevant
statistical evidence. T h e material is laid out in tables so that
readers can judge
our rather different story about the spectacular trajectory and
light weight of
UK pharmaceuticals. T h e sector is throughout defined, in the
orthodox way, to
include all the British-based firms operating in and out of the
UK regardless of
ownership.
T h e trajectory of British manufacturing as a whole over the
past twenty-five
years has been dismal. As Kitson and Michie (1996: appendix)
show) manu-
facturing as a whole has not managed any sustained output
increase while
employment has declined dramatically: real output at the 1989
cyclical peak
was only 10 per cent above the 1973 peak while the employment
base has
unsteadily eroded so that the sector which once employed seven

60. million people
D
ow
nl
oa
de
d
by
[
T
he
U
ni
ve
rs
it
y
of
M
an
ch
es
te
r

61. L
ib
ra
ry
]
at
1
0:
26
1
2
O
ct
ob
er
2
01
4
560 Jfulie Froud et al.
now employs just over four million. Trade performance is weak;
British manu-
facturing has a declining share of world trade and, except in
periods of cur-

62. rency depreciation, the overall trade deficit has generally
increased. British
manufacturing has failed to compete successfully against
European, American
and Japanese rivals. T h e corporate sector has adapted to
failure by productive
retreat from high-tech competition to low-tech sheltered
industries: the leaders
of the 1980s and 1990s are companies like Hanson
concentrating on bricks and
tobacco or privatized utilities operating in sheltered and slow-
moving sectors.
Against this background, it is hardly surprising that so many
have empha-
sized the exceptional success of pharmaceuticals which has
moved along a
different trajectory. T h e sector's success is not imaginary
insofar as the famil-
iar claims are vindicated by the evidence about real output,
employment, trade
share and trade surplus. As Table 1 shows, the real output of the
UK pharma-
ceuticals sector has increased by nearly three times in the past
twenty years
while, as Table 3 shows, U K pharmaceuticals employment has
not declined but
increased by one third. T h e trade success is even more
spectacular. British
pharmaceuticals has managed to claim a modestly increasing
share of the world
pharmaceuticals market against all corners: the UK-based
sector's share rose
from 7.5 per cent in 1982/3 to 9.3 per cent in 1987/8 (EIU 1994:
33). More
dramatically, unlike most of the rest of British manufacturing,

63. pharmaceuticals
has managed to ratchet up the exports and contain import
penetration so that,
as Table 2 shows, the trade surplus in pharmaceuticals has
grown quite spec-
tacularly, more than fifteen times from L100 million to L2
billion over the past
twenty-five years.
T h e conventional story of pharmaceutical success relies on
the indicators
above (plus research and development expenditure). As Tables 1
and 2 show,
every one of the stock claims is true but together they provide a
very partial
Table 1 UK pharmaceutical sector real output
Year Index (1 97.5 = 100) Year Index (1 975 = 100)
1975 100 1984 151
1976 97 1985 161
1977 106 1986 150
1978 109 1987 174
1979 115 1988 196
1980 132 1989 216
1981 127 1990 227
1982 140 1991 238
1983 141 1992 27 1
Average growth per annum = 9.5 per cent
Source: P A 1002 Census ? f P m d u c t r o n , London: H M S
O
N o t e
Pharmaceuticals includes all activity in SIC 257. Nominal
output is deflated by a pharmaceuticals

64. sector producer price index obtained from the C S 0 Red Book.
Output equals gross value added
defined as gross output minus purchases
D
ow
nl
oa
de
d
by
[
T
he
U
ni
ve
rs
it
y
of
M
an
ch
es
te

65. r
L
ib
ra
ry
]
at
1
0:
26
1
2
O
ct
ob
er
2
01
4
samerichughdallyn
Highlight
Brztlsh p k u r m u ~ e u t ~ c n l s : a cautzonary tule.7 561

66. Table 2 UK pharmaceut~cal sector balance of trade
Yeur Exports I m p o ~ t s Esports/ Bulirnce
m211 A; mill r mnpovt.s A; m111
1971 160 40 4.00 120
1975 350 111 3.15 239
1980 699 252 2.77 447
1985 1484 660 2.25 824
1990 2397 1224 l .96 1,173
1995 3887 1893 2.05 1,994
S o u r c e : Central Statistical Office, L'K Oz,ersras Tvuile
Stutlsttn,., London: HMSO
.Vote
Pharmaceutical sector includes all imports and exports in SITC
Division 54; halance is calculatrd
bq subtracting imports from cxports and is positive in all years
representation of the activity which concentrates on the sector
in itself rather
than the sector's weight and significance in the broader
economy. Tables 3 and 4
rectify this absence by relating the pharmaceutical sector to
manufacturing as a
whole. T h e neglect of the size and weight issue in the
orthodox story of phar-
maceuticals interestingly parallels similar neglect of this issue
in the case of
Japanese manufacturing transplants, which were another 1980s
symbol of
success against a background of manufacturing failure.
Academics and journal-
ists asserted or assumed that Japanese transplants were carriers
of new high-

67. performance manufacturing techniques and could significantly
contribute to the
regeneration of UK manufacturing: they ignored the fact that
this transplant
sector was always relatively very small and has recently grown
slo-ly so that it
has never employed more than 65,000 (JETRO communication
1997) and there-
fore accounts for less than 2 per cent of British manufacturing
employment.
Coincidentally, as Table 3 shows, pharmaceuticals is not much
larger.
As a sector, pharmaceuticals lacks the weight to make illuch
difference to
many households or communities within the UK or to act as
counterweight to
the more general manufacturing failure. British pharmaceutical
success has not
produced a substantial domestic sector, like cars in Germany or
electronics in
Japan, which accounts for 10 per cent or more of domestic
manufacturing value
added. In terms of size, what we see is a rapid increase from a
very small base.
Over the last thirty years the pharmaceuticals' sector share of
manufacturing
output has increased eight fold but this takes pharmaceuticals
only from 0.49 to
4.07 per cent share of total manufacturing output. Similarly,
after a large three-
fold increase in its share of total manufacturing employment
over the last thirty
years, pharmaceuticals still accounted for only 1.8 per cent of
total manufactur-
ing employment in 1992. A good deal of the percentage increase

68. is accounted for
by the decline in overall manufacturing employn~ent. 'The
absolute number
employed increased in pharmaceuticals from 60,000 in 1963 to
just under 80,000
in 1992; as Table 3 shows, brilliant success translates into
20,000 extra jobs over
thirty years.
D
ow
nl
oa
de
d
by
[
T
he
U
ni
ve
rs
it
y
of
M

69. an
ch
es
te
r
L
ib
ra
ry
]
at
1
0:
26
1
2
O
ct
ob
er
2
01
4

70. samerichughdallyn
Highlight
samerichughdallyn
Highlight
Table 3 UK pharmaceutical sector share of manufacturing
output and employment: 1963-92
Year G VA G VA Pharmaceuticals Employment Employment
Pharmaceuticals
manujacturing pharmaceuticals share i n manufacturing i n
pharmaceuticals share
A mill A mzll 000s 000s
( a ) ( h ) f a / b ) (d) f e ) ( d / e )
Source: PA l002 Census of Production, London: H M S O
Note
Pharmaceuticals includes all activity in SIC 255; manufacturing
includes ail activity in SIC Divisions 2 4 . Gross value added
(GVA) is calculated subtractively as gross
output minus purchases and stock adjustments. Employee
numbers include full and part-time and are not full-time
equivalent adjusted
D
ow
nl
oa
de
d

71. by
[
T
he
U
ni
ve
rs
it
y
of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1

72. 0:
26
1
2
O
ct
ob
er
2
01
4
Brztzsh pharmaceutzculs: a cuutzonury tale? 563
Nor does the sector have the leverage to shift the constraints
established by
more general failure. Thus, pharmaceuticals is an export success
but the value
of its exports is not large enough to redress the balance by
abolishing deficits and
trade constraints. As Table 4 shows, the sector's trade surplus
may be L2 billion
but pharmaceuticals still account for only a modest share of
total manufacturing
exports; pharmaceuticals increased their share of total
manufacturing exports to
around 2.5 per cent in the mid-1980s since when the share has
been virtually
constant.

73. Finally, we would note that, although the imagery of
pharmaceuticals empha-
sizes leadership, the British sector does not have the kind of
world leadership
position associated with American aerospace and software,
German cars or
Japanese electronics. Leadership in these foreign contexts
means a sector which
is substantially larger than in comparably sized advanced
capitalist countries and
which includes a phalanx of domestically owned firms that have
strong market
positions. T h e difference of U K pharmaceuticals is
established by Table 5 which
compares shares of national production in world
pharmaceuticals output; in
each case, national production includes production for the
domestic market plus
exports made by domestically located firms, regardless of
ownership.
In terms of global output share, the much-vaunted U K
pharmaceuticals
sector turns out to be no larger than the German, French or
Italian pharma-
ceutical sectors and much smaller than the Japanese sector.
National sectors
whose export success is much more muted can achieve much the
same size as
the U K because the culture of pill-popping is more established
outside the U K
and other national sectors consequently have the benefit of
larger domestic
markets. European countries, like France or Germany, have a
domesticallj~ based

74. sector (consisting of indigenous firms and foreign-owned
affiliates) which plays
the major role in satisfying domestic demand, just as in the U K
where more than
Table 4 UK pharmaceutical sector exports share of UK
manufactured exports
Year Manufacturing Pharmaceutical Phi~rmuceuti~~al
exports seclor exports share
E mill L nziN us ii %I
( ( 1 ) ( h ) ( b / a )
Sourcr: Central Statistical Office, Orerseas 7rrrdc S~r~tistzcs,
London: H M S O
Note
Pharmaceutical exports include all those in category PQ2570
and manufacturing exports include all
those in S I T C 5-8.
D
ow
nl
oa
de
d
by
[
T
he

75. U
ni
ve
rs
it
y
of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1
0:
26
1
2

76. O
ct
ob
er
2
01
4
samerichughdallyn
Highlight
564 Julze Fwud et al.
Table 5 National shares of world pharmaceuticals output, 1994
Countrj) Share of world output
U S A 30
Japan 22
Germany 7
France 7
UK 6
Italy 6
Rest of world 22
Source: Key Note Market Review (1995), U K Phurmureuticul
Industry, London: Key Note
three-quarters of domestic demand for pharmaceuticals is met
by domestically
based firms. Table 5 also shows that the world's second largest

77. national sector is
the Japanese sector which has been built on import substitution
rather than
export success, as a variety of impediments have obstructed
Western pharma-
ceutical exports to Japan. While successful export from the U K
is commend-
able, other national sectors have used domestic demand to
sustain growth.
British success is also precarious because it is based on best-
selling ethical
products whose replacements may not sell rather than on strong
companies
whose grip on production and distribution deters entrants. T h e
orthodox story
praises the British sector for producing more than its share of
the world's best-
selling drugs. According to BZW (1991) research into the
world's fifty best-
selling drugs of 1965-89, twenty of those drugs originated in the
USA, thirteen
in the UK and five or fewer in Germany and Japan. More
recently, Key Note
has claimed that 'of the top 20 global prescribed
pharmaceuticals, five were dis-
covered and developed in UK labs' (1997: 7). However, this
product-led export
success has created only one world-class British company. As
Table 6 shows,
after the 1995 merger, Glaxo Wellcome was the world's largest
drug company by
sales turnover. But, if we exclude the Anglo-American
SmithKline Beecham, it
was also the only British company in the global top ten or
twenty. By way of con-

78. trast, up to the point of the CIBA Sandoz merger, the much
smaller Swiss sector
had three companies in the top ten, whose combined share is
significantly larger
than Glaxo's.
British pharmaceuticals: high value added, average wages
T h e previous section shows how the orthodox representation
of British success
has exaggerated the pharmaceutical sector's weight. This section
takes the argu-
ment further by considering internal activity characteristics. It
introduces basic
data on value added and wages in the pharmaceuticals sectors of
the U K and
other advanced capitalist countries and cross-refers to
manufacturing as a whole.
It shows how U K pharmaceuticals is exceptional in that it
combines high value
added and average wages to benefit capital not labour.
D
ow
nl
oa
de
d
by
[
T
he

79. U
ni
ve
rs
it
y
of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1
0:
26
1
2

80. O
ct
ob
er
2
01
4
samerichughdallyn
Highlight
samerichughdallyn
Highlight
samerichughdallyn
Highlight
British pharrna~.euticals: a cuutionurll tule? 565
Table 6 Pharmaceutical company shares of vrorld market, 1995
Ranking b.y sa1e.s Conzpun.~~ M a r k e t shuve 90
1 Glaxo-Wellcome
2= hlerck
2 = Hoechst Marion Roussel
4 Bristol-Myers Squibb
5 American Home Products
6= Pfizer
6= Johnson and Johnson

81. 8 Roche
9= SmithKline Heecham
9= Ciba
11 Rhone-Poulenc
12 Rayer
13 Eli 1,illy
14= Sandoz
14= Schering-Plough
16= Astra
16= Abbott
18 Pharmacia & Upjohn
19= Sankyo
19= Takeda
Total share
Average top 20 company share of world market
World-wide sales revenue
Average company sales
4.7
3.5
3.5
3.1
3.0
2.9
2.9
2.6
2.5
2.5
2.2
2.1
2.0
1.9
1.9
1.8
1 .S
1.5

82. 1.6
1.6
49.8
2.5
$205 billion
$10.25 billion
Source: Anuncznl Tzmes S u r v e y , 25 March 1996
N o t e
Ciba and Sandoz have since merged.
Some basic relations arise from t h e double identity of value
added as cost
recovered in t h e product market and coat incurred through
production and
distribution. T h e y are reflected in t h e ways that value
added can be calculated
subtractively as sales revenue minus purchases or additively by
summing u p the
distributions of wages, depreciation, reinvestment, interest, tax,
distributed and
retained profits. T h u s , value added is both an upper limit set
variably by what
t h e consumer will pay and a requirement set by the
requirements of different
stakeholders as rewards for capital and labour. T h e identities
are such that high
value added cannot be credited with one simple significance as
a desired state
and index of achievement; a variety of supply and demand side
conditions,
including the product market and forms of competition as well
as technical pro-
duction efficiency and wages levels, influence the level of value

83. added. T h e level
of value added in a sector like pharmaceuticals can be most
easily appraised by
bench marking it against the national manufacturing sector as a
whole in t h e
domestic currency and introducing cross-section comparisons in
a common cur-
rency.
I t is also possible to make the same bench-mark comparisons
in the case of
D
ow
nl
oa
de
d
by
[
T
he
U
ni
ve
rs
it
y

84. of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1
0:
26
1
2
O
ct
ob
er
2
01

85. 4
566 Julie Froud et al.
wages in pharmaceuticals and in manufacturing as whole. In
doing so, it is
important to bear in mind some basic points about the relation
between value
added and wages. In any going concern, value-added will be
normally greater
than wages because the value added fund includes a surplus that
covers pro-
ductive renewal and payments for finance capital. Nevertheless,
in advanced
country manufacturing, labour normally takes a 70 per cent
share of value added
and the surplus for capital is usually a precarious residual: the
question about
any manufacturing sector is whether and how it deviates from
this norm. T h e
one general law is, of course, that distributive claims expand to
appropriate the
value-added fund that remains when purchases have been
deducted from sales
revenue; and, if labour claims on the value-added fund do not
expand, the share
of capital will increase mechanically as this is the reciprocal of
labour's share.
With these points made, we can now turn to examine the
evidence on the
relation between value added and labour cost in pharmaceuticals
and in manu-
facturing as a whole in Britain and other advanced capitalist

86. countries. In each
case, the comparisons are made in domestic currencies and we
use ratios to
provide an intelligible comparative measure of the extent to
which the pharma-
ceuticals sector in each country generates higher value added or
pays higher
wages than the national manufacturing sector as a whole.
By this standard, in the U K and five other advanced countries,
pharmaceuti-
cals is everywhere and increasingly a high-value-added activity
vis-a-vis manu-
facturing as a whole. As Table 7 shows, in every country and in
every year since
1979 the per capita value added in pharmaceuticals is higher
than in manu-
facturing as a whole and that margin of superiority has
generally increased: by
1993 in three of the countries, including the UK,
pharmaceuticals value added
was more than twice as high as in manufacturing. T h u s in
1979, when the French
ratio was 1.1, the value added per capita in pharmaceuticals was
in this case little
higher than in manufacturing as a whole; and, if we exclude
Japan as an outlier,
in 1979 the highest ratio and the upper limit is set at 1.7 times
manufacturing
value added per head in the USA. By 1993, the range of
variation begins at what
was the top end in 1979 and runs much higher: across six
countries in 1993
pharmaceuticals value added per capita is between 1.6 and 2.9
times manu-
facturing value added; while, in two countries, USA and Japan,

87. the value added
per capita in pharmaceuticals is three times that in
manufacturing as a whole.
T h e U K is unremarkably in the middle of the distribution for
much of the period
with pharmaceutical value added per capita at 1.6 times
manufacturing in 1979
and 2.1 times in 1993.
If pharmaceuticals is within each national economy a high-
value-added sector,
its status as a relatively high-wage sector within each national
economy is much
less certain. Table 8 presents the data on the ratio between
labour costs per capita
in pharmaceuticals and in manufacturing as a whole in the same
six countries.
T h e pattern is different because the ratio of per capita
pharmaceutical labour
costs to those in manufacturing as a whole tends to long-term
stability in most
of the economies and the amount by which sectoral wages
exceed the manu-
facturing norm is also fairly modest; in most years, in most
advanced countries,
D
ow
nl
oa
de
d
by

88. [
T
he
U
ni
ve
rs
it
y
of
M
an
ch
es
te
r
L
ib
ra
ry
]
at
1
0:

89. 26
1
2
O
ct
ob
er
2
01
4
samerichughdallyn
Highlight
British pharmaceuticals: u cazltionary tale? 567
Table 7 National value added per employee in the
pharmaceutical sector and against
manufacturing
F r u n c r
Source: OECD, S ~ r u r t u r u l I n d u s t r j ~ .4nirl]~sis ( S
7 : - l h T ) Dutabasr, OECD: Paris; Eirrostut K w r Book if
l n i l u s t r r ~ ~ l S t u ~ t s t i i . ~ , Eurostat: 1,uxembourg.
lrlllr~
Pharmaceuticals includes all activity in ISIC 3522 and
manufacturing all activit! in ISIC 3. Employ-

90. ment includes all employees, full and part time, not adjusted to
full-timc equivalent. .ill1 compari-
sons arc of real value added per employee in 1995 prices in
domestic currencies; deflated using a
national consumer price indcv taken from the IMF Yearbook r !
f ' F ~ n u n c i a l S t u t i s t ~ c s . Value added is
calculated subtractively as gross output minus purchases and
stock adjustments representing the
contribution of each sector to GDP. 1990 total for Italy refers to
calendar year 1989.
the ratio of per capita labour costs in pharmaceuticals to those
in manufactur-
ing as a whole is in the range 1.3 to 1.5 times manufacturing as
a whole. 'The two
exceptions are Italy where the wage premium is substantially
higher and the UK
where the wage premium starts lower and then moves towards
the norm of 1.3
to 1.4. Ratios of this sort do not mean that pharmaceutical
sectors pay those
doing comparable work more than they would obtain if they
worked elsewhere
in national manufacturing. T h e pharmaceuticals workforce is
heavily biased
towards white collars and white coats with most of the
workforce engaged in
selling, administration and research and development rather
than in manu-
facturing: in Glaxo in December 1995, for example, the world-
wide workforce
numbered 54,000 but only 19,000 or 35 per cent worked in
manufacturing oper-
ations. In such cases, the wage premium presumably mainly
reflects a bias in the
composition of employment. T h i s is more or less what might