Introduction

Successive waves of technological innovation generate hopes of a ‘social dividend’ and an improved quality of life. The telegraph was welcomed in the 19th century because “technology supports a kinship of humanity” (Scientific American 1881, quoted in Fischer, 1992); some decades later the radio was welcomed, as “making us feel together, think together, live together” (Marvin, 1989). Similar hopes have been raised by the spread of ICT: personal computers, the internet and mobile phones could promote social inclusion, increasing educational and labour market opportunities and enriching social networks.

The “social dividend of technology” has been on the European policy agenda ever since Padraig Flynn, EU Commissioner for Employment and Social Affairs, established the High Level Group of Experts in May 1995 to examine the social changes associated with the Information Society (Steyaert, 2002). At the same time, policy makers have recognised that technology also produces risks and that innovation carries a fundamental ambiguity:

• • “The Information Society promises new digital opportunities for the inclusion of socially disadvantaged people and less-favoured areas. Information and communication technologies have the potential to overcome traditional barriers to mobility and geographic distance, and to distribute more equally knowledge resources.

• • On the other hand new risks of ‘digital exclusion’ need to be prevented. In a society increasingly dominated by the usage of information technologies across all sectors, internet access and digital literacy are a must for maintaining employability and adaptability, and for taking economic and social advantage of online contents and services.” (European Commission, 2001c, p 4)

The eEurope initiative aims to ensure that the transition to an information society is socially inclusive, builds trust and strengthens social cohesion. This resonates with the Lisbon Strategy and the Nice European Council (December 2000), which identified e-inclusion as a key objective within efforts to combat poverty and social exclusion. In October 2001 the Council adopted a resolution on e-inclusion (European Commission, 2001c; European Council, 2001). More focused policy statements include the Ministerial Declaration of April 2003 Towards an Inclusive Information Society in Europe (European Council, 2003). A similar set of ambitions in relation to the social benefits of technology can be found in global policy forums, such as the United Nations Development Programme, whose Human Development Report of 2001 carried the subtitle Making new technologies work for human development.

Introduction

Human investment is central to the new knowledge-based economy. In Chapter 4, for example, we saw that human capital occupies a key role within recent neo-Schumpeterian growth theory; and that sociological models of organisational learning give a central place to ‘communities of practice’ which apply skills of practical creativity. Chapter 5, concerned with organisational change, identified the skills of those working at different levels within an organisation as the necessary complement to ICT investment, business strategy and managerial leadership, in securing the dynamics of innovation.

The new economy generates new requirements for human capital and skills, so that the workforce can deal effectively with technological innovation in ICT and with organisational transformation, both in the economy and in public services. This changes the outputs expected from education and training institutions. At the same time, however, these institutions are themselves exploiting the new technologies and they are developing novel organisational and market strategies, in an effort to shape and to benefit from the opportunities which the new economy affords. Finally, of course, these developments also transform the situation in which individuals and households find themselves: the range of skills that are in demand on the job market, the opportunities for learning and the sources of information, by means of which they can make decisions on education and training, and judge the costs and benefits of those decisions.

These transformations are taking place across a global terrain. While the global diffusion of advances in technology and business processes is nothing new, the pace is accelerating, with education and training services themselves subject to these globalising tendencies. The ICT revolution is one contributing element: there are of course others, notably the political drive for open markets under the auspices of the WTO, including GATS (Knight, 2003). Education and training systems are no longer a secure part of domestic national policy (although national independence of education and training regimes prior to the present century can be exaggerated: see Room, 2002). However, the direction and extent of these pressures of globalisation are not uniform: they are shaped by the specific political economies of the countries and regions involved and the position they occupy within the global distribution of economic and cultural power (for further discussion, see for example Cornford and Pollock, 2003).

Introduction

In this study we have been concerned with the processes of dynamic change and innovation that seem to characterise the new knowledgebased economy. Chapter 4 developed a conceptual model of the innovation process: the subsequent three chapters applied this model to enterprises, education and training, social cohesion and inclusion.

The conceptual model broke down the innovation process into four stages. We used a taxonomy of readinessi, intensity, impact and outcome indicators, corresponding to these four stages, with different categories of indicators being assigned to different stages of the innovation process. This taxonomy was by no means original. However, like other authors before us, we were then able to look for suitable indicators of readiness, intensity, impact and outcome, paying particular attention to those indicators that are being used by official bodies for tracking the new knowledge-based economy. Those that are being used by the European Union, as part of the Lisbon benchmarking processes, have been of special interest.

In this chapter we take stock of these indicator sets and their adequacy in light of our analysis. It is, however, first necessary to address two difficulties that we have encountered in the course of our investigation, concerned respectively with modelling and measurement.

Models

At first glance at least, the conceptual model of Chapter 4 was a linear model, with innovations proceeding through four stages. In our discussion of the model in that chapter, we took a more nuanced approach: technological and organisation innovation interact; streams of innovation cross-fertilise each other; there are feed-back effects from later stages to earlier; innovations can move along different trajectories, depending upon the national institutional settings in which they are embedded.

As we also stressed in Chapter 4, it would be wrong to imagine that the movement through these four stages is a simple process of technological competition, in which those inventions that are most fit for purpose will necessarily triumph. Hegemonic domination and creative destruction are also involved, as successive waves of innovation reinforce the position of those first able to ride them. This also, however, means that challenges, should they develop, will take the form not of seeking to imitate and undercut existing technologies but of technological (and maybe organisational) innovations that are on a quite different terrain.

Introduction

As we saw in Chapter 1, when setting the context for this study, the development of the new knowledge-based economy is intimately bound up with the process of globalisation (see, for example, Soete, 1999; Togati, 2002). The ICT revolution enables enormously greater speed and accuracy of communication, transcending national boundaries and permitting greatly increased transparency of markets worldwide. These global markets then foster more intense competition, driving technological and organisational innovation and reshaping the global division of labour and welfare. They pose new challenges for the regulation of commerce and the protection of intellectual property rights.

Any attempt to conceptualise and measure the new economy must acknowledge this transformation of the international political economy. This does not mean that processes of globalisation are an outworking of the new economy alone. The challenge is to understand the specific ways in which the new economy and processes of globalisation are interrelated.

Globalisation can be defined as the organisation of economic, social or other activity in terms which transcend – and may even ignore – national boundaries (Dasgupta, 1998; Held et al, 1999; Torres, 2001). It raises questions of governance: how shall this activity be subjected to political scrutiny and direction if the nation state – traditionally the principal mode of governance – can no longer exercise control of this activity by reference to its own boundaries? It also raises questions of information: how can public policy makers provide themselves with the statistical information they require for evidence-based policy, when the instruments which they have inherited for this purpose are still organised principally by reference to national boundaries?

Globalisation is only one element in the reorganisation of space that has been under way in recent decades. For the countries of the EU, the effects of globalisation have to be set alongside those of Europeanisation, including monetary union and the Lisbon process, and the growing importance of the regions, at least in terms of governance. Nevertheless, the principal focus in this final chapter will be upon globalisation and the new economy, with these additional dimensions of spatial reorganisation being addressed only in so far as they are relevant to that discussion.

Policy concerns: the macroeconomy

The US economy enjoyed sustained growth through the 1990s and this, although interrupted during 2001/2 thereafter made some recovery. This was the more remarkable, when set against the performance of Japan and the Eurozone, both becalmed. This was also the period when it seemed that a new economy might be developing, based around the new information technologies. Here also the US was the leader, Japan and the EU the laggards. The implication seemed clear: the new information technologies were driving economic growth, and at an accelerated tempo.

To disentangle the various elements involved in this process, and to measure their respective contributions to economic growth, became a key challenge for national policy makers, seeking to establish where and how to offer support. Should they concentrate on providing fiscal stability and sound macroeconomic management? Or would they need also to intervene to ensure adequate stocks of human capital, an appropriate infrastructure supporting innovation and incentives to entrepreneurship? Questions such as these are at the heart of the major studies of the new economy emanating from the OECD and the US Department of Commerce, as discussed in our opening chapter. The conclusions are fairly clear: fiscal stability and institutions fostering competitive markets are essential and without these, action on other fronts is unlikely to bear fruit.

The stability or instability of the new economy has also been a major concern in public debate. The sustained growth of the US economy suggested that the new economy might provide greater stability of development than did the old; the rise and fall of the ‘dotcoms’ around the turn of the century suggested the contrary (US Department of Commerce, 2002a, ch 2). Nevertheless, as economies recovered, a modest degree of confidence returned (US Department of Commerce, 2003, ch 1).

Meanwhile, the European Union was forging economic and monetary union, with strict rules of fiscal discipline, as laid down in the Stability and Growth Pact. If the new economy had novel characteristics, in terms of growth and stability, this might prove to be of major significance for economic and monetary union. It would be essential to monitor the development of the new economy, and to secure whatever degree of national policy convergence was necessary, in order to support the stability and growth objectives of EMU.

Introduction

Our aim is to understand the new knowledge-based economy. However, it is also to identify the major challenges that this economy presents for policy makers and to suggest tools which they might use for monitoring change and for steering social and economic transformation.

Policy makers have hailed the new economy as an engine of dynamism and innovation, productivity growth and competitiveness. Thus, for example, the policy statements developed within the Lisbon process, leading to eEurope 2005, characterise Europe as suffering from a competitiveness gap with the United States and Japan. This is said to arise from an inadequate productivity record, including the use of ICT: “The EU rate of ICT has been gradually rising over the last years from 5.4% of GDP in 1996 to 7.1% of GDP in 2001, almost narrowing the gap with US figures which suffered a marked decline in 2001. However, the increase in ICT spending of the last few years has yet to translate into productivity gains” (European Commission, 2002i). Differences remain in both productivity growth and in levels of investment in ICT, even if within the EU both have been increasing (Jorgensen, 2003a).

Nevertheless, it has long been realised that the connection between ICT investment and productivity is far from simple. Solow's aphorism, “You can see the computer age everywhere but in the productivity statistics” (Solow, 1987), suggested that applying computers to organisations structured and managed in traditional terms would not in itself lead to substantial benefits (see Dedrick et al, 2003, for a survey of the debate). Productivity during the 1980s did increase in most parts of the developed world, but apparently by less among the more intensive users of ICT – services – than in the less intensive users, notably manufacturing (Triplett, 1999). Since then, however, the productivity effects of ICT do seem to be showing through, at least in the US economy. The rapid growth of output per capita in the US during the 1990s has been attributed to the use of ICT to effect qualitative improvements in the performance of companies through business process change, integration of supply chains or substantial reduction of inventory (Triplett, 1999).