Rebooting Industry: Can Knowledge Industries Powerup Barbados' New Economy?
The knowledge economy is seen as the latest stage of development in global economic restructuring. Thus far, the developed world has transitioned from an agricultural economy (i.e., the pre-Industrial Age of a largely agrarian sector) to an industrial economy (with the Industrial Age, largely the manufacturing sector) to a post-industrial/mass production economy (mid-1900s, largely the service sector) to a knowledge economy (late 1900s – 2000s, largely the technology/human capital sector).
Definition of 'Knowledge Economy'
The Knowledge Economy is a system based on intellectual capital and usually makes up a large share of all economic activity in developed countries. In a knowledge economy, a significant part of the country's GDP value may consist of intangible assets, such as the value of its workers' knowledge (intellectual capital). However, generally accepted accounting principles do not allow companies to include these assets on balance sheets.
The economies of most countries will consist of each of three major categories of economic activity (agriculture, manufacturing and service), but in differing proportions relative to the wealth of that country. Developing countries tend to have manufacturing or a mix of manufacturing and service-based economies, and developed countries tend to have a higher percentage of service-based or knowledge economies since these countries are better able to invest in and support economic activities that include research, technical support and consulting.
The advent of the Knowledge Economy has been marked by upheavals in technological innovations with new products and processes developed from within the research community (i.e. universities, labs, incubators associated with educational institutions – or sometimes just the wild imagination of a creative thinker) to support global competitiveness.
The Knowledge Economy vs the Knowledge-Based Economy
The Knowledge Economy must, however, be distinguished from the Knowledge-Based Economy. The essential difference is that in a knowledge economy, knowledge is a product, while in a knowledge-based economy, knowledge is a tool. This difference is not yet well distinguished in the subject matter literature; however, they are strongly interdisciplinary, involving economists, computer scientists, engineers, mathematicians, librarians, geographers, chemists and physicists, as well as cognitivists, psychologists and sociologists.
The knowledge economy is often misrepresented as favouring services over manufacturing, as destroying jobs, as creating money from thin air. All of these are misconceptions. In fact, the knowledge economy is as much about manufacturing as it is about services, and it is the most productive and valuable part of any economy.
According to Phil Cooke and Loet Leydesdorff, (in their study entitled Regional Development in the Knowledge-Based Economy: The Construction of Advantage,) "The term 'knowledge-based economy' has added the structural aspects of technological trajectories and regimes from a systems perspective. This perspective leads, for example, to discussions about intellectual property rights as another form of capital". At its heart, the knowledge-based economy refers to activities which create value from exploiting knowledge and technology rather than physical assets and manual labour.
But What is Knowledge?
Knowledge can be a tool or a product. As a tool, knowledge is a productive asset that can be used to attain organizational or economic goals.
Knowledge as a product is an educational and innovative intellectually manufactured good or service that can be used for economic value.
There are several examples of how knowledge has been used as a tool for economic development. An example that comes to mind immediately is Silicon Valley in California. Other examples are aerospace and automotive engineering in Munich, Germany, biotechnology in Hyderabad, India; electronic and digital media in Seoul, South Korea and more recently the rise in the petrochemical and alternative energy industry in Brazil. In addition, one would recall that the software engineering sector in India produced a large number of software engineers who migrated to Silicon Valley. Many of these persons, having made millions in the U.S.A, returned to India where they invested in and developed the computer industry in India
Barbados' Competitive Advantages
The World Bank provides four core requirements in their Knowledge Assessment Methodology that a country must have to capitalise on knowledge as a tool and as a product: a sound institutional and economic regime; education system, telecommunications infrastructure, and an Innovative System.
Indicators suggests that Barbados certainly has the capacity to build a knowledge-based economy and by extension− the resources to nurture the growth of innovative knowledge industries. Based on World Bank ratings Barbados ranks number 41 out of 146 countries when the indicators of Knowledge Economy Index (KEI), Knowledge Index (KI), Economic Incentive Regime, Innovation, Education and Information and Communication Technology (ICT) are measured. With respect to the KI, Barbados has a rating of 7.92 while the highest rated country, Sweden has a rating of 9.38. For ICT Barbados' rating is 8.87 compared to Sweden's rating of 9.49. China has an overall ranking of 84th and India of 110th, with KI ratings of 4.57 and 2.89 respectively.
So what do we stand to gain from the development of Knowledge Industries?
It is our belief that Barbados can accrue significant benefits from the development of a Knowledge-Based Economy.
The immediate and probably most obvious gain is an increased opportunity for the utilization of the highly educated and technically skilled labour force produced through the country's educational system.
Identifying, making available and applying this wealth of knowledge can also certainly enhance our ability to improve current production processes and our capacity to bring new products to the market faster and more cheaply.
Within a knowledge based environment, sources of key knowledge no longer necessarily have to reside within the four walls of the company in order to be accessible. A company therefore should no longer be constrained by a deficiency in key business skills or expertise.
Knowledge based economies encourage information sharing, promoting the sharing of best practices surrounding business processes and influencing the ability of firms to respond more effectively to customer demands.
What do we have to fire our engines?
The English-speaking Caribbean currently has one of the highest per capita ratios of Nobel laureates and I believe that, continuing in that vein, any future development is going to be knowledge-based. The paradigm for the measurement of the level of development of a country is rapidly changing. Those countries that can utilise scientific knowledge to develop new technologies and use that technology to generate wealth will be at the top of the ladder. Then there will be those that have the money to buy the technology and generate wealth...and the rest will be dependent on those two. We have to decide where we as Barbadians are going to be in that scenario.
Barbados has a broad knowledge base and a high literacy rate and we are in a position where we can develop technology. For a long time, however, we have been afraid to make a move, constrained by a culture of risk-aversion. I am however hoping that we can better utilise our scientific knowledge to move into new areas of development.
The prevailing economic environment has underscored the need for a new thinking in business; doing different things and doing things differently. The BIDC is in the vanguard of the quest for an innovative approach to business practice and development going forward. Consequently, while the Corporation is committed to assisting the traditional industrial subsectors, it will also seek to push investment in new viable project ideas consistent with economic and environmental sustainability in what is called the new economy.
It is encouraging to note that the island is already making some headway in forging into the development of knowledge industries. We have seen high potential possibilities in animation, biotechnology, computer assembly, software engineering, and gaming to name a few industries.
Support Interventions Needed in Barbados to advance Knowledge Industries
Emergence of these new industries can go a long way in reviving Micro, Small and Medium Sized Enterprises (MSMEs) and in forging a new path towards sustainable growth. To support their growth, the economic strategy of Barbados must, however, embrace new and bold initiatives. Efforts must also be made to leverage the knowledge and resourcefulness of Barbadians. Many of the opportunities will also require that businesses engage in greater creative thinking and innovation. We also need to look at developing the strategic partnerships that would enable us to capitalize on emerging opportunities. Collaboration and the strengthening of linkages, as well as the furthering of joint programmes amongst organisations including business support institutions like the BIDC, the Barbados Manufacturers Association (BMA), the National Council for Science and Technology (/NCST), Small Business Association (SBA), Barbados Agricultural Development and Marketing Corporation (BADMC), the Samuel Jackman Prescod Polytechnic, the University of the West Indies (UWI) and the Barbados Community College among others locally, regionally and internationally, should be a major part of the strategy moving forward. The level of investment in education and skills, research and development will also have to be increased; just as preparing, retraining and attracting talent will have to become an economic growth priority.
Partial visions of the knowledge industries focusing only on their potential to boost Barbados' competitiveness will be inadequate. We must embrace a wholistic approach to driving the development of these industries as new engines of economic growth. Movement towards the knowledge industries is being propelled by three fundamental drivers:
- Changing consumer demands – as consumers become richer, more sophisticated and more diverse, they increasingly buy intellectual content and technologically advanced products and services. This is driving up the demand for knowledge-intensive products and services.
- Technological progress – the development of new technologies both increases productivity and creates new products and jobs; in particular, the proliferation of powerful, cheap computing power and the Internet has made many knowledge-intensive ways of working possible; and
- Globalisation – increasing flows of ideas, knowledge and goods from around the world have accelerated the transition towards a knowledge economy.
These trends are unlikely to be reversed in the foreseeable future, and their implications are universal. They affect all industrial sectors, all sizes of firms, and the private sector as much as the public sector. The question for policymakers is therefore, not whether to embrace or reject the knowledge economy, but how best to support the changes required that would allow its expansion.