Economic Intelligence – A Two Edged Sword

In these ever-changing times and days of rapid fluctuations, it’s important to sit down and take stock of what’s going on. It’s said that knowledge increases when shared and this is where economic intelligence comes in. Technically, economic intelligence can be defined as the Information related to the production, distribution and consumption of goods and services as well as labour, finance, taxation and it’s a lateral indicator of the nation’s economy. It is a term that’s frequently used interchangeably with Knowledge Management. This is what helps us in establishing information asymmetry and facilitates policy makers in rational decision making. The information asymmetry is of immense use in free market operations.

So when exactly did the idea of Economic Intelligence originate? Well, there are no official records to state this; however the system was in place since Roman Times. When each country was invading the other to fend off each others resources, deciding where to invade and rule was done on the basis of the natural resource base of that country. The question then wasn’t to just research and analyze. It also came with the notion that whatever information has been researched would not be shared. This was evident in the later centuries too during the World War period. Great measures were taken to protect the interests and sensitive information from unwarranted disclosures. Predominantly of use to power hungry countries, Economic Intelligence has helped in studying the resource base of varied countries and the political structure they build on. This sensitive information can be used to break in to any country’s economy and tap the potential.

CIA Central Intelligence Agency United States Of America Economic Intelligence A Two Edged Sword

To regress, there are a few key developments in the past which can be attributed to the use of Economic Intelligence and its stark dark effects. The CIA (Central Intelligence Agency, USA) has been involved with the effects and aftermath of the Cold War with Russia. The economic spying and security measures that were to be taken translated in effect to added Military expenditure and cold blank bureaucracy.

All of this was being paid for out of the government’s budget at an expense to other key issues which were important for the growth of the economy. There are a plethora of controversies linked to the US government such as Ecuador, Guatemala, Bolivia and Iraq where they tried to penetrate the system and capitalize on the assets after creating US interest groups. The US economic policy has in fact, been framed around the wars it’s been involved with. They have come up with strategic military solutions to strengthen the civil defence system which were unrequited in the first place. The widespread information asymmetry is what has lead to civil wars in Africa which in effect stifled its growth. Coming closer to home, Development Failure is what defines the failure of Nepal and the multiethnic groups engaged in civil war along with unequal distribution of wealth. It’s often said that the World Bank is indirectly working for the US economy and the funds that it gives out or the loans it offered are nothing but debt created to service the US economy’s best interest. It can be effectively surmised that any nation can frame its domestic and international policies, devise a strategy and invade or perpetrate a smaller nation’s economy by just making use of economic information.

When we shift our view to Organizations which share the analogy with countries, the perspective changes but not to a major extent. In these days of short product life cycles, growing demand, rising prices, outsourcing and globalization its imperative for organizations to devise their strategy well. They need to be able to match their finances, resource base, skill set and labor/manpower requirements judiciously. The strategy is built on External and Internal Information. External information is made up of observation related to Market, Property Regulations, Competitors and technological advances. Internal information on the other hand is more tangible and deals with knowledge management as to how well our cash balances are along with supplier information, technical know how, existing customer base and market share. What the firm must strive to do is strike a balance and make use of both sides by confrontation, comparison and calibration. The main challenge is to transform the unorganized data from varied sources, channel it in to information and then filter in to knowledge which in effect is intelligence.

Economic Intelligence Consequences two edged sword the world as we live in e web world services world

In recent times both the corporate and government sector have colluded to make the most out of the information they have. Mammoth organizations which have a valuable stake in the economy make the use of economic intelligence gathered by the countries intelligence unit to engage in activities that can be termed as economic espionage. This gets magnified to huge pro-portions in a capitalist economy. What we’re left with is a ruthless play of prices and a dangling social structure to deal with the wrath of profit centric groups with unethical measures.

The solution to monitor and prevent acts such as these has been coined as ”New Institutional Economics” wherein Phillip Zelikow states 4 key points for use of economic intelligence as follows:

 

  • It should leverage unique capabilities.
  • To operate in areas where there is no open information.
  • Should fit information for special requirements.
  • Finally, it must operate where the private sector cannot.

 

To dissect the argument, its evident that intelligence must be a public good rather than putting it up for the private sector. Also a fine line of demarcation is required between security and economic intelligence. There should also be lesser reliance on private sector for gathering data as it’s bound to be manipulated. Rather in-house talent must be trained to source information in an unbiased manner.

Hence it can be seen that economic intelligence is the very heart of free market operations and for devising government polices ethically. What is required the rationality of deciding the usage of the information at hand for the betterment of mankind at a micro as well as a macro level.

Guest Article by Neha Sharma

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