Sources: Australian Bureau of Statistics, Singaporean Bureau of Statistics.
Ó Karl-Erik Sveiby September 1999. All rights reserved.
What confounds us trying to understand the New Knowledge Era Economy is that many of the features that made the old commodity based economy successful are turned into factors that inhibit growth in the new Knowledge based economy. To be "resource-rich", for instance, gets a new meaning as can be seen from the comparison below, between the resource-richest nation in the world per capita, Australia, and the little Singaporean economy with no natural resources at all – except 3.5 million people.
Sources: Australian
Bureau of Statistics, Singaporean Bureau of Statistics.
The GDP per capita is a reasonably good yardstick to compare the economic welfare of nations. Measured in such terms, the Singapore Economy left the Australian Economy behind already in 1993 and it has not looked back since, keeping Australia at a distance even during the Asian turmoil of 1997-98.
The growth of the Singaporeans' wealth compared to the slow deterioration of the Australians' is a good illustration of the enormous power of the Knowledge economy to generate wealth and the struggle it is to keep wealth generation up when one is based on the old economy. Most countries are a mix of the two; it seems the last two decades have reinforced the emergence of a "two-tier" economy, one being the old, slowly deteriorating Industrial Age economy with its reliance on commodity production, and the other being the new rapidly emerging Knowledge Era Economy. The Knowledge Era Economy relies on one primary resource: the knowledge creating abilities of its people.
Australia's vast natural resources no longer give the country an advantage in a world, where commodity prices are deteriorating long-term, see below. Commodity prices seem to be deteriorating at an even faster pace in the last two decades and an important factor can be the growth of the Knowledge economy. Supported by new technologies the developing world is using less energy to produce more goods, and is substituting silicon wafers and fibre optics for steel, coal and copper. The value of an average American car is now, for instance, more than 50% information technology.
Legal Frameworks need to be re-invented
Natural resources are more of liabilities than assets when the industrial economies are squeezed by the rise of the Knowledge Era, because their existence prevents change. When confronted with the need for change entrenched lobby groups resist introduction of the new frameworks required to guide the Knowledge economy. Such lobby groups are long established businesses, employee groups and bureaucrats, who believe they have a lot to loose, so they try and protect their power bases instead of embracing the trends and try and grow with them. They will not succeed in the long-term of course, but in the short-term they prevent the required change in the whole institutional framework which was constructed for the Industrial Age in the last 100 years.
And it is a huge legal job we have in front of us. Nations that wish to exploit the benefits of The Knowledge Era must re-invent most of their legal framework, such as:
How we do this huge task is by no means straight forward. Do we spend our energy resisting the wave of change or do we surf the wave utilising the energy?
ã Dr. Karl-Erik Sveiby, Brisbane
Professor, Macquarie Graduate School of Management, Sydney
email: karlerik@sveiby.com.au