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Technology has always been a key element in economic development: whether machine
technology in the industrial age, or computer technology today. With investment in technology,
not only is the productive capacity of resources increased, but the ability of business to create
new products and production processes is enhanced.
Ultimately it is technology that is crucial for long-term economic growth. Without constant
technological advance, economies are likely to stagnate and fall behind their rivals, as new
products emerge and as markets grow.
So with each wave of technology, economies must change and adapt if they are to stay in the
game. The high-technology wave, which the world economy is currently experiencing, is of
massive proportions - and it is widely accepted that the wave is not as yet at its full height! Not
only is it changing the structure of production, trade and international competitiveness, it is also
changing employment patterns, skill requirements and the direction of investment. In addition,
businesses have been forced to reorganise to reflect the enhanced flexibility that new technologies
offer. Governments also have had to assess and reassess, in this new technological age, how they
can best aid their industries in creating the right conditions to achieve economic success. In many
respects these policies are quite different from those pursued in the past.
It is hardly surprising, then, to find that many aspects of economic life are reflecting this ever-
changing technological position.
The OECD economies are more strongly dependent on the production, distribution and use
of knowledge than ever before. Output and employment are expanding fastest in high-
technology industries, such as computers, electronics and aerospace. In the past decade,
the high-technology share of OECD manufacturing production and exports has more than
doubled, to reach 20 to 25 per cent. Knowledge-intensive service sectors, such as education,
communications and information, are growing even faster. Indeed, it is estimated that more
than 50 per cent of GDP in the major OECD economies is now knowledge-based.
Investment is thus being directed to high-technology goods and services, particularly
information and communication technologies. Computers and related equipment are the
fastest-growing components of tangible investment. Equally important are more intangible
investments in research and development (R&D), the training of the labour force, computer
software and technical expertise. Spending on research has reached about 2.3 per cent of
GDP in the OECD area. Education accounts for an average 12 per cent of OECD
government expenditures ... Purchases of computer software, growing at a rate of 12 per
cent per year since the mid-1980s are outpacing sales of hardware. Spending on product
enhancement is driving growth in knowledge-based services such as engineering studies
and advertising. And balance of payments figures in technology show a 20 per cent increase
between 1985 and 1993 in trade in patents and technology services.
Question
In what ways might government contribute to improving the knowledge networks within an
economy?
2
Government policy and the new technological age
We have seen that both workers skills and a knowledge network are vitally important within the
current technological revolution. In fact, the two are intimately related:
.. [skills] are essential to selecting, using and manipulating the knowledge which can be
codified. The ability to select relevant information, to recognise patterns in information and to
interpret and decode information is not easily bought and sold.
This aspect of new technology has significant implications for government policy. Workers
require relevant training and education, and such training and education must be updated
continuously. Education is thus at the centre of the knowledge-based economy.
Education, whilst of vital importance, is not the only target of government policy on
technological diffusion. Governments in many advanced industrial economies have adopted some
or all of the following measures:
The protection of intellectual property by more effective use of patents and copyright. By
reinforcing the law in these areas, it is hoped to encourage firms to take the risks of developing
new products and commit themselves to research.