The Competitiveness of Nations in a Global Knowledge-Based Economy

A. Introduction

1. The Question

It is generally accepted that the economy is in fundamental transformation. One dimension is beyond dispute – globalization. This can be demonstrated, on the one hand, by international trade statistics and on the other, by the triumph of Markets over Marx embodied in the impending entry of the People’s Republic of China into the World Trade Organization.

Another dimension of transformation, however, remains obscure. Is the economy experiencing a ‘Third Wave’ on the scale of the Agricultural and Industrial Revolutions? Is it becoming a ‘post-industrial’ or ‘post-modern’ economy? Is it becoming an ‘information’ or a ‘knowledge-based economy’ (KBE)? And, if so, what does ‘knowledge’ and ‘information’ mean? Do they refer only to natural and engineering science? If not, to what other ‘knowledge domains’ do they refer? How is knowledge and information converted – culturally, technically and legally - into marketable or economic property? Is conversion – in terms of character and rate - consistent among and between the nations of the world?

Furthermore, concepts of ‘competitiveness’, ‘nation’ and ‘knowledge’ are themselves mutating in the early years of the 21st century. First, while the concept of competitiveness has been with us since at least Adam Smith’s Wealth of Nations (Smith 1776), contemporary usage extends mass market price competition to embrace "working smarter" in response to consumer demand for higher quality, more customized goods and services, globalization and technological advance including systemic changes such as the Internet.

Second, in economic theory the decision-making unit responsible for management of the overall or macroeconomy is the nation state. Since the collapse of Communism, however, the concept of the nation state has also come into increasing question – both internally and externally. Internally, the nation state is under stress from cultural and ethnic ‘separatists’ and fiscal ‘downsizing'; externally, by supra-national institutions. 

Internally, old ‘separatist’ movements have revived in Quebec, among the Basques of France and Spain, in Ireland, Scotland and Wales, among others. Some have exploded with appalling loss of human and economic potential, e.g., the former Yugoslavia, Burundi, Indonesia, etc. Nation states are being twisted and turned and sometimes torn apart by what historically, in the Anglo-American tradition, would be called ‘tribes’ but in the French tradition are called nationes.

In addition, most nation states are confronting the forces of fiscal ‘downsizing’ embodied in Brian Mulroney, Ronald Reagan and Margaret Thatcher during the 1980s and implemented by their successors in the 1990s. They have successfully altered the post-World War II pattern of public provision of public goods in a battle against ‘deficits and debt’. This change has been achieved by elimination of some services, imposing user fees on others and ‘privatizing’ provision of yet other public goods and services. Whether an emerging era of ‘budgetary surplus’ will translate into a return to the old pattern, continuance of fiscal downsizing or the unfolding of yet another pattern remains to be seen.

Externally, the economic sovereignty of the nation state is being surrendered through membership in ‘supra-national’ institutions. At the regional level, the European Union has a political economic agenda for the integration of nation states that have been engaged in continuous warfare (hot and cold) for over 500 years. NAFTA has committed Canada, Mexico and the United States to significant economic integration with profound macroeconomic implications. At the global level, creation of the World Trade Organization in 1994 marked the formal triumph of Markets over Marx and the emergence of a truly global economy in which the nation state is constrained by common rules of competition. In such a context, what does the competitiveness of nations mean?

Third, with respect to knowledge, there is a deepening crisis in the global learning industry including institutions engaged in primary, secondary and tertiary education. Like other sectors, it is confronting a changing epistemological context in which ecological, ethnic, religious and women's knowledge, among others, is being 'legitimized'. Such institutions face, in effect, six challenges:

  • there is growing questioning of the paramount position granted to the natural and engineering sciences and their claim to having their standards of validation apply - no matter the object or subject of investigation, e.g., genetically engineered food;

  • 'reality' is increasingly recognized as socially constructed with the central concepts of social life - choice and volition - appearing incompatible with scientific laws;

  • the failure of Western (and in the past, Soviet) assistance to ‘developing' nations indicates that scientific and technical knowledge is insufficient, on its own, to engender the economic developmental process, e.g. the contrasting experiences of tribal Africa and Confucian Asia;

  • there is growing tension between vocation and education. At a time when industry and government is calling for more scientific and technical education, declining Canadian enrollment in such subjects has, at best, bottomed out;

  • there is increasing realization that learning has become the ultimate economic resource but the hierarchy of traditional knowledge remains unchanged and has failed to accommodate important elements of learning other than literacy and numeracy; and,

  • within the natural and engineering sciences themselves a paradigm shift is in progress. After three centuries of dominance, physics as the ‘Queen of the Sciences’ is being challenged by biology.

Biotech now affects our very genes, the food we eat, the children we parent and how we conceive them and all other species on the planet - current and past. In a way we increasingly see ourselves as ‘genetic’ passengers on a global Noah’s Ark. Biotech has ignited ethical questions that have and will continue to inhibit and/or encourage innovation of natural and engineering scientific knowledge in different ways in different nations. To understand the innovation process of natural science and engineering knowledge, it is necessary to appreciate the specific ‘cultural matrix’ into which they are being introduced.   

To synthesize the above into a single question: What will determine the competitiveness of nations in an emerging 21st century global knowledge-based economy? This question is the subject of Section B – Objectives.

A number of corollary questions must, however, also be addressed. First: have other scholars identified ‘disconnects’ between traditional economics and a holistic understanding and appreciation of the competitiveness of nations in a global knowledge-based economy? This question is addressed in this Introduction below under 2. Literature Review.

Second: what previous work has the candidate contributed towards answering the question posed above? This is addressed below under 3. Previous Work.

Third: is there a disciplinary tradition broad enough to intellectually accommodate the wide-ranging and disparate factors, forces and interactions involved? This question is addressed in Section C - Methodology.
2. Literature Review

First, have other scholars identified ‘disconnects’ between traditional economics and a holistic understanding and appreciation of the competitiveness of nations in a global knowledge-based economy? In 1942, Schumpeter identified the forces of ‘creative destruction’ characteristic of technological change (Schumpeter 1942). In 1949 Bertrand de Jouvenel’s On Power: Its Nature and The History of Its Growth was published in English (De Jouvenel 1949). Arguing, contrary to Marx, a pattern of top combining with the bottom against the middle of the political power structure, de Jouvenel identified a disconnect that by the end of the century had become institutionalized in the European Union in the policy of subsidiarity and that is increasingly squeezing the nation state between still emerging international institutions like the UN and WTO and its regional components.

In 1962, Machlup pointed out the transition from an industrial economy to a knowledge-based economy in: The Production and Distribution of Knowledge in the United States (Machlup 1962). In 1969 Liebenstein contrasted the theoretical predictions of costs associated with monopoly and the much greater costs to national economies of x-inefficiency involving, among other things, poor motivation of workers and managers (Liebenstein 1966, 1981). In the same year, Drucker named the transformation The Age of Discontinuity (Drucker 1969). In 1970 Volume 10 of the Collected Works of C. G. Jung was published: Civilization in Transition highlighting the breakdown of traditional unifying symbols and emergence of new yet only partially formulated ones (Jung 1970).In 1972, Tibor Scitovsky observed: "What's Wrong with the Arts Is What's Wrong with Society" (Scitovsky 1972). In 1975 he refined his argument into The Joyless Economy (Scitovsky 1975). Also in 1972, Kenneth Boulding raised the seminal question of this thesis:

The founding father of economics, Adam Smith, had a strong sense of the cultural matrix of economic phenomena. One of the most interesting of the unasked questions of intellectual history is how the science of economics should have lost this sense and become an abstract discipline void of almost any cultural context (Boulding 1972: 267).

Daniel Bell in 1973 profiled the transforming economy in The Coming of Post-Industrial Society (Bell 1973) and then highlighted The Cultural Contradictions of Capitalism (Bell 1975). Also in 1975, Erich Jantsch transcended his earlier work in technological forecasting and assessment (Jantsch 1967) to set out a ‘systems philosophy’ approach to the transformation of the economy and society as a whole in Design for Evolution (Jantsch 1975). Then in 1977 Porat defined the end point of the economic transformation as The Information Economy (1977).

In 1978 the GAMMA group (McGill and University of Montreal Group on the Future) published The Selective Conserver Society (Valaskakis, Sindell, Smith, 1978). Subsequently, one its authors noted that the disconnect between gross material progress and human happiness: 

The mountain of commodities even has its indicator: the gross national product (which to its detractors is getting grosser and grosser all the time). Growth in GNP is interpreted as an increase in the standard of living ... and therefore an increase in "happiness" (Valaskakis, 1980: 3).   

It is also the basis of dialectical materialism and the economic determinism of certain forms of socialism. The difference between the capitalist and socialist viewpoints in this connection seems to lie not in the realm of objectives but in the realm of means to get to the objectives. In both systems, the improvement in overall well-being is inexorably linked to the improvement in material well-being (Valaskakis, 1980: 4-5).

One of the principal weaknesses of our mass-consumption society is its apparent inability to discriminate between types of growth. Instead, through a sort of social genetic code, cities, factories, products, and individuals reproduce themselves in ever-increasing quantities, creating dangerous exponential paths of expansion for certain sectors of society at the expense of others. Growth for growth's sake leads to unbalanced growth (Valaskakis, 1980: 11).

The 1979 report of the Club of Rome - No Limits to Learning (published eight years after its inaugural report: The Limits of Growth), identified human learning as the single most important natural resource on the planet but noted this resource was underutilized.

The elements through which all learning is mediated include language, tools, values, human relations and images... The present theory and practice of ... learning tends to elevate language at the expense of all other elements. Tools still receive some attention, but are often considered a second-class of instruments. The others are usually limited to those intrinsic to the status quo, human relations are dismissed as irrelevant, and images are seldom made explicit except in the arts (Botkin, Elmandjra, Malitza, 1979).

In 1990, Gilles Paquet in “Science and Technology Policy Under Free Trade” argued that free trade does not mean giving up all levers of government action to manage trade for national advantage. It only constrained such action. In an Information Economy, he argued, knowledge is a central input and production of knowledge - scientific, technical and artistic - is the critical economic activity. Government has a responsibility, he argued, to ensure production of knowledge is treated as a 21st century equivalent of railroads and transportation infrastructure that made the Industrial Revolution possible (Paquet 1990).

In 1991 Robert Reich highlighted in The Work of Nations, transformation of the American worker into a ‘symbolic’ worker, i.e., a worker who produces and/or processes symbols as disparate as DNA coding, computer software, rock ‘n roll and fashion design. In 1992, Vacel Havel, poet-president of Czechoslovakia, noted that the West did not fully appreciate the end of Communism as marking the end of the Age of Reason. By this he meant Communism had put its trust in the power of collective human reason to plan and manage the economy. Its collapse represented the victory of an arational principal – the perfectly competitive marketplace. By definition, a perfectly competitive market is one in which no single buyer or seller can influence the terms of exchange, that is, human reason is not in charge (Havel 1992). 

In 1993, Samuel Huntington in “The Clash of Civilizations” extended Havel’s observation to note that global conflict based on traditional ideology - Marx vs. Markets - had been replaced by the clash of cultures. He argued that where the "tectonic plates" of different and competing cultures (for example, Catholics, Orthodox and Moslems speaking the same Serbo-Croatian language in the former Yugoslavia) collide current and future international conflict would erupt.

During the 1990s the intellectual playing field shifted from academia into the public and private policy sectors. Phrases like the digital, information, knowledge, knowledge-based, networked and new economy became part of the public and private policy lexicon. This tendency was reinforced in 1996 with publication by the OECD of: Industrial Competitiveness in the Knowledge-based Economy: The New Role of Governments (OECD 1996).

In many countries, including Australia, Canada, New Zealand, Singapore, Taiwan, the UK and the USA, this new policy paradigm became institutionalized within government. Within the corporate sector many companies such as KPMG created executive positions titled ‘international knowledge manager’ to facilitate competitiveness in a knowledge-based economy. What both public and private sector efforts shared was an almost exclusive focus on knowledge emanating from the natural and engineering sciences.

In 2000, Lawrence Lessig in his book Code and Other Laws of Cyberspace (Lessig 2000) identified yet another fundamental disconnect between the legal foundation of a knowledge-based economy (intellectual property rights) with its promise of a ‘public domain’ and increasing trade secret protection offered by computer software code.
To sum up, many scholars have identified ‘disconnects’ that inhibit a holistic understanding and appreciation of the competitiveness of nations in a global knowledge-based economy?  

3. Previous Work

My initial work involving the role of ‘knowledge’ began with my first firm,: Futures: Socio-Economic Planning Consultants, with a focus on the application of technological forecasting and assessment to social and economic policy. Initial work included a contract to develop a Canadian Copyright Industries Database for the Canadian Bureau of Intellectual Property in 1976. This was followed in 1980 with a commission from the Social Sciences & Humanities Research Council concerning Social Science & Humanities Research Impact Indicators (Chartrand 1980). In 1984, I submitted, on behalf of the Canada Council, a research monograph: An Economic Impact Assessment of the Canadian Fine Arts to the MacDonald Royal Commission on the Economic Prospects of Canada (Chartrand 1984). A summary was presented to the 3rd International Conference on Cultural Economics and published in the proceedings.  

Beginning in 1988 with "Subjectivity in an Era of Scientific Imperialism: Shadows in the Age of Reason" I began to investigate the cultural bias in English-speaking culture against the arts.  This continued with "Context and Continuity: Philistines, Pharisees and Art in English Culture" in 1991 and "Christianity, Copyright and Censorship in English-speaking Cultures" in 1992. 

In 1990, I published: “The Hard Facts: Perspectives of Cultural Economics” in the Transactions of the Royal Society of Canada (Chartrand 1990). In it I answered Kenneth Boulding’s question of how economics lost its sense of the cultural matrix – the impact of Jeremy Bentham. I also presented my model of the evolution of the knowledge-based economy from the concept of ‘disembodied’ technological change of the Neoclassical Period to ‘embodied’ in the Keynesian to ‘epistemological’ technological change in the post-modern period. In the same year I published: “University Research in the Information Economy: A Clash of Cultures” in the Proceeding of the National Conference on University Research and the Future of Canada held at the University of Alberta (Chartrand 1989a). In 1989, I also published an international comparison of alternative national models of public support to the fine or ‘art-for-art’s-sake’ arts (Chartrand 1989b).

In 1992 with a grant from External Affairs & International Trade Canada I researched and published "International Cultural Affairs: A Fourteen Country Survey" highlighting differences in national support to international activities in the NES, HSS and Art.  Also in 1992, with another grant from External Affairs & International Trade Canada, I prepared International Higher Education: The Peculiar Case of Canada. An appendix to the main study was The Competitiveness of Nations: Some Assembled Thoughts (Chartrand 1992).  In it I presented a model of the interaction between the three contemporary knowledge domains and how these interactions affect the competitiveness of nations in a global knowledge-based economy.

In 1995, I published: “Intellectual Property in the Global Village” in the e-journal Government Information in Canada (Chartrand 1995). In this article I surveyed the differing legal traditions governing intellectual property in the First, Second, Third and Fourth Worlds. In 1997, I published my first book The Compleat Canadian Copyright Act 1921 to 1997: Current, Past, Present and Proposed Provisions of the Act and in 1999 I published my second book The Compleat Multilateral Copyright and Related Agreements, Conventions, Covenants & Treaties.

In 2000, I published “Towards an American Arts Industry” (Chartrand 2000). In the article I presented results of 20 years of cultural economic research using a standard industrial organization model. Also in 2000 I published: “Copyright C.P.U.: Creators, Users & Proprietors” tracing the evolution of the Anglo-American copyright and a 21st century knowledge-based economy.

The candidate’s work to date has, with respect to the three knowledge domains focused on:

  • the Arts and, to a lesser degree, the Humanities & Social Sciences;

  • copyright and, to a lesser degree, registered industrial designs; and,

  • design and, to a lesser degree, organizational technology.

The candidate’s perceived knowledge and skills gaps include:

  • the Natural & Engineering Sciences;

  • patents and, to a lesser degree, trademarks; and,

  • physical technology


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