KNOWLEDGE economy is a fundamental socioeconomic change from adding value by producing things, which is limited, to adding value by developing and harnessing knowledge, which promises a limitless scope. The nature of the final form of this evolution is not yet known, but it will be very different from the industrial revolution that first gave birth to it. Knowledge economy was first introduced in 1966 by Peter Drucker in his book The Effective Executive, which described the differences between a manual worker and a knowledge worker. A manual worker works with his hands and produces goods or services, he wrote, while a knowledge worker works with his head and produces ideas, knowledge, and information. The key problem in the formalization and modeling of knowledge economy is the vague definition of knowledge itself. “A knowledge-driven economy is one in which the generation and exploitation of knowledge play the predominant part in the creation of wealth.” In the industrial era, wealth was created by using machines to replace human labor. Many people associate the knowledge economy with high-technology industries such as telecommunications and financial services. For the last two hundred years, neo-classical economics recognized only two factors of production: labor and capital. Knowledge, productivity, education, and intellectual capital were all regarded as exogenous factors that fall outside the system. Then change came with the “New Growth Theory” that was based on the research of Stanford economist Paul Romer. Romer had proposed a change to the neo-classical model by seeing technology (and the knowledge on which it is based) as an intrinsic part of the economic system. Knowledge has become the third factor of production in leading economies. Unlike capital and labor, knowledge strives to be a public good (or what economists call “non-rivalrous”). Once knowledge is discovered and made public, there is zero marginal cost to sharing it with more users. Secondly, the developer of knowledge finds it hard to prevent others from using it. Instruments such as trade secrets, protection and patents, copyrights, and trademarks provide the developer with some protection. Knowledge workers are defined as “symbolic analysts” – workers who manipulate symbols rather than machines. They include architects and bankers, fashion designers and pharmaceutical researchers, teachers and policy analysts. In advanced economies such as the US, more than 60 percent of workers are knowledge workers, and in such economies, know-why and know-who matters more than know-what. One of the most revealing comments on the knowledge economy was what Tony Blair said at the 2000 Conference on Knowledge-Based Economy. He said he strongly believed that the knowledge-based economy was Britain's best route for success and prosperity. He asserted that this new, knowledge-driven economy was a major change. “I believe it is the equivalent of the machine-driven economy of the industrial revolution,” he claimed. But how can such an assertion and claim be made? The industrial revolution in Britain in the 19th century, i.e. the technical scientific revolution or the rise of the use of modern machines, opened a path for progress. For the first time there arose a need of workers who were capable of carrying out modern production. As a result the concept of educating the entire population arose, and providing public education became an obligation on the society. Health care, provision of pensions and social welfare followed. Blair's suggestion that “knowledge-driven economy” is the equivalent spur to the progress of machine-driven economy of the industrial revolution was completely wrong. The opposite has occurred. By linking scientific and technical revolution to the pay-the-rich system will lead to even more and systematic destruction of the productive forces. It is, in short, the road to disaster. Such a path to disaster and the subsequent loss of jobs can be witnessed today. Globalization, inward investment and export of commodities, which were hailed as the savior of the auto industry, have pushed the auto industry in Britain into further crisis with closures and cutbacks. In the north of England, the clothing industry has almost wiped out due to such globalization. Agriculture too is in an increasing crisis. The knowledge economy is going to make the situation worse as it will destroy more jobs than it can create. This reflects capitalism in its final parasitic and moribund state. Knowledge economy is in fact saying that education needs to be narrowed down, not broadened up, and it has to be geared to serve the demands of the monopolies in the global economy. Education is becoming very narrow. In other words, far from broadening education so that it facilitates the empowering of all the people to fully participate in the development of society, the present knowledge-driven economy is a brake on the further education of the working class. It is a factor in the destruction of the productive forces and of knowledge itself. In sum, the actual program of the knowledge-driven or knowledge-based economy is about narrowing knowledge and education and aiming it specifically to serve the interests of companies. It is linked with maximum profits on stock markets and the most parasitic definition of what a successful company is. It is about exploiting the digital divide with its imperialistic logic. It is also a fact that this economy will intensify the capitalist crisis and become a major factor in the destruction of the national economy and the manufacturing base. It is attacking the jobs of workers in all sectors of the economy and it will intensify the problem of unemployment. At the same time, it is an ideological weapon that the bourgeoisie is using to act as a cover, a “Third Way”, to give the impression that the political parties of the rich are taking the economy in a progressive direction. If there were such a thing as a genuinely knowledge-driven economy, then it would be for developing a national economy to meet the needs of all and not a globalized economy to secure profits of the monopolies. Such a line of march starts with the demand of the working class that society stops paying the rich and brings an end to the globalization of the economy by demanding that more should be put into the economy than what is taken out. The knowledge economy appears in manifolds, but there are predictions that the new economy will extend so radically that even ideas will be recognized and identified as a commodity. It is the thrust of this new form of economy which will certainly force us to make hasty judgments on this contention. For example, it is not proper to consider an information society as being interchangeable with a knowledge society. Information is usually not equivalent to knowledge, as well as their use depends on individual and group preferences . The global scale paradigm shift from agricultural revolution to the industrial revolution points out that just as the industrial revolution did not end agriculture because people have to eat, knowledge revolution will not end industry because we still need physical products. But from the perspective of understanding, the global societal change may shift one's attitudes, values, and norms as it come through a struggle of thought and many of the changes are counterintuitive from a traditional point of view and they may be difficult to conceptualize with a new knowledge-era vocabulary. It may not be a simple or cumulative process, as new principles will have to be learned and some old principles will have to be unlearned indicating that creating new frameworks for an evolving world will require challenging assumptions that support our traditional and intellectual construction. – SG The writer is lecturer of economics at the Healthcare Administration College (BMC), Jeddah. He can be reached at [email protected] __
