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June 2001
Following is the Riley Report for June, 2001. Please feel free to pass
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This month's column is an essay on the emerging knowledge economies and the
increasing divides amongst the world's people that this is creating. The
essay also looks at some ways through which governments and international
organizations can help developing countries become a part of the emerging
knowledge economies without subverting their national identities.
AN OVERVIEW OF THE KNOWLEDGE ECONOMY
"For the last two hundred years, neo-classical economics has recognised
only two factors of production: labour and capital. This is now changing.
Information and knowledge are replacing capital and energy as the primary
wealth-creating assets, just as the latter two replaced land and labour 200
years ago. In addition, technological developments in the 20th century have
transformed the majority of wealth-creating work from physically-based to
"knowledge-based." Technology and knowledge are now the key factors of
production. With increased mobility of information and the global work
force, knowledge and expertise can be transported instantaneously around
the world, and any advantage gained by one company can be eliminated by
competitive improvements overnight. The only comparative advantage a
company will enjoy will be its process of innovation -- combining market
and technology know-how with the creative talents of knowledge workers to
solve a constant stream of competitive problems -- and its ability to
derive value from information. We are now an information society in a
knowledge economy. This page lists and rates electronic resources related
to the field of knowledge based economy and information society."
(see:The Enterprise Development Website: The Knowledge Economy
http://www.enterweb.org/know.htm).
The knowledge economy, as Prime Minister Tony Blair of Great Britain has
said, is really about one economy. There is, he says, "no new economy,
there is one economy, all of it being transformed by information
technology, it is a profound economic revolution."
What this means is that business and organizations must be in a constant
process of change and adaptation to the new economic realities. In this
new economy, it is evident that the key to success is "knowledge". For
governments they are going to have to invest in, and develop, knowledge
workers. This is going to mean that government budgets must allocate funds
for skills development and education. What is important to realize is
that the Internet has tipped the scales in favour of both businesses and
governments. For example, for scientists in business and government, the
Internet is a major tool to assist in the sharing of research and the
findings. Scientists can now do this in an increasingly global
environment. Exchange of research and ideas has accelerated innovation,
inventions, and creation of new goods and products, at a rate never before
known in human history.
The rapid development of the Internet in the past ten years has resulted in
an escalation of the global economy. This globalization has had a profound
impact on both the economies of nations and the pressures on countries to
compete effectively in this new global environment. Globalization of the
economy has also raised new issues of nationalism and protection of local
culture. It is this tension, and the belief by many that globalization only
further disenfranchises the poor, is what has led to such wide protest in
the last three years, at international meetings of world leaders. There is
the sense out there that the private sector is busily engaging in, and
profiting from, global rules that benefit them but by-pass, and take away,
rights of citizens in local regions. The protests are as much about the
developed, industrialised economies, as they are about the widening
economic disparities in developing countries.
Yet, the pressures for change, brought by this new phenomenon, have also
meant that countries can compete on a global scale. In this new
environment two of the most important commodities of a nation are becoming
information and knowledge. The challenge is for governments to enact
policies, rules and laws that create a fair playing fields, and enshrine
certain basic rights, for all its citizens.
Globalization has been spurred on by the Internet, which operates 24 hours
a day, 7 days a week (24/7, as it has become known). This has meant that
ideas and innovation can be occurring around the clock. In this new
environment, it will be important for governments to development mechanisms
to encourage the private sector, and public sector research organizations,
to be innovative and able to deploy knowledge. Increasingly, as Prime
Minister Blair has pointed out, more and more individuals and companies are
engaged in businesses that are connected to the Internet. In 1999 it was
estimated that Britain was the leader in e-Commerce in Europe, spending £2
billion online. It is predicted that by the year 2004, the United States
might reach sales of $1 trillion online. But this is not just about the
Internet, or e-commerce for that matter. The Knowledge economy is about
how the new technologies have transformed the way we think and act, and the
ways in which we use the Internet and ICTs which are transforming our world
economies.
Yet, despite these glowing accolades about the benefits of the transformed
world economies, there are the deeper issues as to whether or not many of
the developing nations can also benefit, as well as the less well off in
the developed countries. The digital divide, economies of scale,
trans-global organizations dominating the world markets, powerful economic
engines of a few rich countries, and other concerns, can leave the
impression that the gap in the world between the rich and the poor will
widen over time. There is an argument to be made that the gap will further
widen, in a very short period of time, if developed countries and
international organizations do not move faster to narrow the gaps and bring
in policies that will benefit all the peoples of the world. The evolving,
powerful new technological tools, and the Internet, are media that can be
harnessed to benefit developing countries. But this cannot happen in a
vacuum. To succeed in the knowledge economy there are certain very basic
policies that are needed. The first is to create a cultural change within
the institutions of the country as a buffer zone against the social forces
emerging as a result of globalization.
Joseph Stigliz, Senior Vice President and Chief Economist, the World Bank
Group, in London, UK, maintains that "in industry, the shift towards a
knowledge-based economy involves a shift in organization away from top-down
hierarchical systems to horizontal structures such as networks of
semi-autonomous teams." He maintains that it is essential for any
country, in developing structures for their knowledge-based economies, to
develop their own best practices based on their history and cultural
development. Best practices from other jurisdictions cannot simply be
imposed on a country. Stigliz points out that any attempts by external
agencies to impose their own set of "Best Practices" for a knowledge
economy, "will not produce lasting change. It will undermine people's
incentives to develop their own capacities and weaken their own confidence
in using their own intelligence. The external development agency, instead
of acting as a catalyst or midwife to empower change, will only
short-circuit people's learning activities and reinforce their impotence.
The external incentives may temporarily overpower the springs of action
that are native to the institutional matrix of the country but that will
probably not induce any lasting institutional reforms." This is an
important principle to understand as, for any country to succeed, it must,
by necessity, rely on its own internal understanding and the wisdom of its
own culture.
There is much evidence surfacing in Asia that many countries there are
becoming disillusioned with organizations such as the World Bank and the
International Monetary Fund. Many countries see globalization as a threat
to their centuries old cultures. To many in the world, globalization
benefits the rich and powerful nations and is perceived as another form of
colonialization for developing countries. Obviously, individual countries
are the ones best suited to change their own culture. But, the lesson is
the same: for any country to transform itself into a viable,
knowledge-based economy, internal, institutional change will be crucial.
Who better to develop its own strategy but the government of a particular
country working in tandem with a multitude of groups, including
Non-governmentat organizations, academics, public interest groups and other
stakeholders in society?
One of the prime tools a government needs, in order to embrace as much of
their citizenry as possible, is wide access to both the Internet and
Information and Communication Technologies (ICTs). Thus, to achieve this,
connectivity programs, funded by government, are necessary. Also, where
there is access in the school, or in the workplace, or in the community,
programs are needed to widen computer literacy. Of course, in many
countries, raising the overall literacy of the population is a primary
goal. Part of this should be built into programs to ensure that the
current and next generations become computer literate or are in a position
to benefit from the changes technology is bringing. It does not matter what
our individual views of technology might be, the fundamental fact is that
the growing technoligical infrastructure spanning the globe is fundametally
changing the way of life of much of the world's population.
Importance is placed on computer literacy because in many countries, such
as Canada, the United States, Great Britain, Singapore, and Australia, it
is now estimated that 60% of production is created by knowledge workers.
This does not mean that 60% of the workforce is creating knowledge that can
be bartered and sold on the world markets. Though this is partly true, the
fact is that information technologies are now driving the economic engines
in most of the industrialised world. Chips embedded in the infrastructure
now drive most technologies in the workplace and home. Technology pervades
our lives, from the kitchen, to our means of transportation, to the
workplace. Some form of information technology drives nearly all facets of
life. This is not just isolated to developed countries, but is evident in
most of the developing countries. In the case of the latter, the
technology, and the economic prospects they bring, are not as universal.
But to thrive in the global knowledge economy it is going to be important
to change the whole educational system to ensure a wide base of knowledge
workers who understand and use these information technologies. Thus,
education is a key, in order to ensure the skills for the knowledge economy
exist in abundance. It is important that there be an army of skilled
technical experts who understand and can apply technical knowledge. These
workers are the underpinnings of the knowledge economy.
Part of the challenge in allowing wide access to the rich resources that
exist through the Internet and other ICTs, is ensuring that there are
sufficient opportunities for businesses, entrepreneurs and individual
citizens to be online. This is a step beyond providing the education of
citizens to create opportunities. There need to be programs to fund
businesses, and other groups in society, to get them online. This is an
important lesson many of the developed countries have had to learn.
Getting businesses online is not just ensuring wide access to the Internet.
It also requires extensive educational programs so people understand the
opportunities and benefits of having an online presence. This is important
so that they can take advantage of the world as a potential partner,
whatever the activity the individual is engaged in.
Equally crucial is that business be able to thrive in a competitive
environment, and can compete, not only within their own country, but in the
wider global economy. Diversity is a key characteristic of the knowledge
economy. It is important that there be intellectual property laws, to
protect businesses and innovators. However, the laws themselves must be
flexible to ensure that monopolies do not develop. It is important that
there be innovation, creativity and diversity in the emerging knowledge
economy.
The combined precepts of the developing knowledge economies are changing
the way many national and international institutions operate. For example,
the World Bank has changed its focus to the intangibles of knowledge,
institutions and culture. The World Bank is now transforming itself "into
more of a knowledge bank and is forging a more comprehensive development
framework to put the new focus into effect. In more advanced, industrial
economies, the challenge of creating and nurturing a culture of innovation
and challenge is no less daunting."
Thus, it is evident that the world is rapidly moving towards information
and knowledge intensive societies. Some of the tools needed for the
knowledge economy include information policies, that give citizens equal
and universal information rights so that all, not just a privileged few,
shall benefit in the new economy. This is a major challenge facing any
groups in society who are seeking wide and effective access to government
information, as most countries in the developed world have poor or
inadequate information policies. Privacy and data protection laws are also
essential, in order to protect the rights of individuals from abuse of
their personal information and to give control to the information as to
when and how their personal information can be used.
·
In summary, to succeed in the knowledge economy, some of the measures
governments need to enact are::
1) Develop programs to create a climate to nurture knowledge workers;
education is the key in this process, starting with
front-end entrance institutions to higher education institutes;
2) Invest in online connectivity to embrace as much of the citizenry
online;
3) Invest in technology to build infrastructures;
4) Build programs to stimulate innovation and creativity;
5) Enact legislation to create security and confidence for businesses
to operate in the growing knowledge economy;
6) Develop strong privacy and data protection laws to
protect individual's from abuse of their personal information;
7) Develop new information laws which extend the information rights of
the citizen not just to information held by government
but to information held in the private sector;
8) Create web sites within government with information that will
assist businesses, entrepreneurs and citizens as a whole
seeking to engage in knowledge-based economic activity.
9) Work to bring about cultural change in institutions to adapt to the
new economy emerging in the world.
Governments cannot do this by themselves as the dramatic shifts occurring in
the world today are the result of many forces converging to create
fundamental change in the way we are working and living as human beings in
the world. However, governments and international organizations do have a
responsibility and a duty to ensure that all citizens benefit as a result
of the rise of the knowledge economy. After all, the knowledge society is
not just about business and the economy it is about how all of us live as a
people. The changes we are witnessing are not about technology itself but
how people are using technologies to forward the common good or how the few
might develop policies and programs that reap wide benefits to the
detriment of the majority and thus create new elites. These are some of
the fundamental challenges for the immediate future.
Thomas B. Riley
Visiting Professor,
University of Glasgow
President, Riley Information Services,
Ottawa, CanadaPh: 613-236-7844
Fax: 613-236-7528
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