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The Competitiveness of Nations
(page 4)
Economic Context
The three forms of knowledge generate different and distinct types of technology. It is generally forgotten that
technology is derived from the Greek tekhne meaning art and logos meaning reason, i.e. reasoned art. In simple terms, the physical sciences generate the technology of the 'hand'; the humanities and the social sciences generate the technology of the 'head'; and the arts generate the technology of the `heart'.
Definitions
To understand the new knowledge economy and the contribution of the differing sources of contemporary knowledge, it is appropriate to begin with
basic definitions:
(a) information is discreet bits of knowledge arising either from application of the scientific method and/or through direct human experience, that is to say, experiential
knowledge;
(b) knowledge is systematized and retrievable information either in the form of expert opinion, or from a storage medium such as books and computers;
(c) understanding involves the emotional valuation of both individual bits of information and knowledge, e.g. right or wrong, good or bad, useful or useless, etc;
(d) wisdom involves human experience and knowledge combined with the power to apply them critically or practically, i.e. to getting results;
(e) the knowledge economy implies the monetarization of information, i.e information that was once freely available, e.g. university research, is transformed into a
potential financial asset; its availability becoming rationed by money, not interest in knowledge for knowledge's sake; and
(f) the currency of exchange in the knowledge economy takes the form of intellectual property - either as legally enforceable
property such as copyrights, registered industrial designs, patents and trademarks, or the form of managerial 'know how' and trade secrets.
Legal Foundation
Intellectual property rights, in fact, provide the legal foundation for the industrial organization of the arts and sciences, i.e. for the
total knowledge industry. But legal systems are the product of specific cultures and different cultures recognize different creative rights. As well, in international law, intellectual property conventions require only 'national treatment', i.e. before the courts, the rights of
a foreign creator are the same as those of a national. But such conventions do not require either harmonization or standardization.
In French-speaking and most Western European countries, droits d'auteur or author's rights are the equivalent of English common law
copyright. The difference in the 'spirit of the law' between copyright and the civil code is significant
(Vaver 1987: 82-83)
In this regard, and in addition to problems about agriculture, GATT negotiations concerning a new world trade agreement are floundering due to
these differences. The civil code recognizes creators have inherent and inalienable moral rights extending far beyond common law copyright. But such moral rights are available only to individuals, i.e. they do not extend to legal entities such as business corporations. The American position in GATT
negotiations is that such civil code rights be extended to corporate copyright holders. Europeans disagree
(Morner 1991).
This trade dispute has implications not only for the global knowledge industry but for cultural sovereignty of the post-modern nation state.
Two examples will demonstrate.
First, another tradition of creative rights exists among aboriginal or 'Fourth World' peoples. Native or 'collective' copyright is not yet
embodied in international statute. But pressure for such rights is growing. Such rights are based on a collectivist concept of creation. To tribal peoples, a song, story or icon does not belong to an individual but to the collective. Rights may be exercised by only one individual in each generation -
generally through matrilineal descent. There has even been a proposal placed before the U.S. Congress to convert Amerindian art into 'inalienable communal property'
(Suro 1990: Al & 13).
Second, there is a separate Arab Copyright Convention reflecting, to a degree, concepts and creative rights which emerge from the Islamic Shar'ia
law, not from common law or civil code traditions concerning creators rights.
Physical Technology
Advances in physical technology result from research in the natural sciences and engineering. In the last few generations such research has
resulted in creation of the aerospace, biotech, electronics and nuclear industries. It is accepted that this type of technological change leads to growth in national wealth. To the best of the author's knowledge, however, there are no empirical studies demonstrating a causal link between investment in
natural science and engineering research and growth in national income. Theoretic and political belief, however, is very strong. Various terms have been used to describe what, at any given moment, is the most efficient physical technology. Leading edge has been used, as has state of the art.
Organizational Technology
Organizational technology - to motivate workers and managers and then to marry them with financial capital plant and equipment creating a
successful business enterprise embodies humanities and the social science knowledge.
Advances and insights generated by HSS influences, among other things, the ability of a company or a country to innovate new products and
processes. Two examples demonstrate.
First, the cost of impaired worker and management motivation is estimated at between 20 to 40% of the net national product of the United States
(Liebenstein
1966; 1981). The phrase which is the touchstone for organizational success is in search of excellence.
Second, the new democracies of the former Soviet empire are requesting not just capital from the West, but also managerial 'know how' to establish
profit-making enterprise and a market economy. The former Soviet Union might have been a world leader in the physical sciences, but its organizational technology was simply inadequate to survive the, post-modern era.
Aesthetic Technology
Just as the physical and social sciences are the source of distinct technologies, art is the source of aesthetic technology.
Aesthetic technology is different from technical or functional design. It contributes elegance. Its impact on consumer behavior
involves what has been called "the best looking thing that works" (Cwi 1985). If a consumer, in any given culture, does not like the way a product looks, she or he may not even try it.
The fact is that the best looking things that work tend to come from abroad, particularly from Europe. Why? Given capital plant and
equipment in North America is as good as that in Europe, the answer is not superior European production technology. In fact, it results from a feedback between skilled consumers and producers resulting in superior design. As noted by Tibor Scitovsky in his path-breaking book, The Joyless Economy:
The North American buyer of European imports benefits from the high standards which careful European shoppers' finicky demand imposes on their
producers; he does not have to be a careful shopper himself. In other words, he can be what is known as a free rider, enjoying the benefits of other people's careful shopping without paying his share of the cost, in terms of time and effort, that careful and aggressive shopping involves. That explains why producers
find it unprofitable to cater to his demand by trying to out-compete high quality imports, despite the often exorbitant price they fetch. Consumers seem willing to pay a high price, in terms of money, for the reputation of European imports; that is we pay cash to obtain high quality without having to pay for it in
terms of careful shopping. (Scitovsky 1976: 178)
When the design advantage of Europe and Japan is combined with the wage advantage of the Third World, then American producers are left with a
narrowing mid-range market. This combination of design and wage disadvantages partially explains the apparent deindustrialization of America. Improved productivity through robotics and new technology may lower costs of production, but only improved design will secure for American producers a competitive
share of the highly profitable up-scale marketplace.
Beyond product design, art plays another crucial role in the economy, advertising - perhaps the most pervasive aspect of the information
economy. It is generally forgotten that within the ecology of capitalist realism, advertising is the lubricant of the market economy. And advertising involves the application of the literary, media, performing and visual arts to sell goods and services. Actors, dancers,
singers, musicians, graphic artists, copywriters, and editors are employed to sell everything from fruit to nuts; from cars to computers, from beer to toilet paper.
The manipulation of consumer emotion's through advertising involves, among other things, the reasoned application of art to place products in an
positive context (McCraken 1988). In this regard, global advertising agencies are struggling to gain economies of world scale while confronting the cultural specificity of global markets (The Economist May 6, 1989: 64).
This economic role of art has been identified by various research projects around the world:
There is, then, another aspect to culture, namely good taste, good design and creative innovation, that should enable ... economies to compete
effectively in the world economy... In this endeavour, higher quality implies an organic relationship between business and engineering, on the one hand, and design and craftsmanship on the other... High quality products, technologies, plants, homes, cities and locales require the long-run presence of creative artists
of all kinds. To increase the long-run supply of artists... governments must support... the arts. The long-term return from investment... is real and substantial. In the absence of strong public support of this sector, [a country] will not reap these benefits. Governments at all levels should increase their
contribution to their respective arts councils (Royal Commission 1985:115-116).
Both organizational and aesthetic technology are, however, very sensitive to culture, custom and tradition. This may explain why there has
been little investigation or appreciation of these technologies by mainstream economics.
Implications - Economic
The implication of the `spiral ladder' for the knowledge economy is that creativity, in all three domains of knowledge, represents the
ultimate economic resource. The importance of creativity as the ultimate economic resource was recently highlighted by Akio Morita, founder and chairman of Sony Corporation at the 1992 World Economic Forum. When asked how Sony dealt with competition, he answered: `What
competition? Sony invents and innovates new products; there is no competition".
Competitiveness can be achieved through creativity in
NSE; it can also be achieved by HSS research leading to liberalization of historic religious
restrictions on business; it can also be achieved by cultivating a distinctive aesthetic and establishing one's culture as a benchmark for global style and taste.
Whether basement inventor, experimental scientist in white lab coat, choreographer, novelist, painter or playwright, it is the creative act that
generates the new knowledge that fuels the knowledge economy. At the core of this new economy is the buying and selling of new ideas, inventions, styles and techniques. Around the world, nation states are enhancing incentives for creativity through parallel rights, outside of international conventions, avoiding
national treatment of foreigners.
Government may have a responsibility, i.e. Adam Smith identified infrastructure as a responsibility of government, to ensure production of
knowledge is treated as the 21st century equivalent of canals, railways, roads and air transport infrastructure, i.e. Adam Smith (1776) identified infrastructure as a responsibility of government
(Paquet 1990). In a more philosophic vein, a community,
region or nation will eventually run out of raw materials and lose comparative advantages based on traditional sources of wealth generation. Only creativity can conjure up a substitute which turns lead into gold, sand into silicon chips or a first novel into billions in book, movie, T-shirts, toys, records, tapes
and other ancillary sales and royalties.
At the individual creator level, how much is one Georgio Armani, Agatha Christie or Thomas Edison worth to a community or a nation? Can
business, government and the learning industry cultivate an environment in which creative talent (in all domains of knowledge) can come to flower?
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