4.9 Knowledge Economy
4.9 Knowledge Economy
As more manufacturing jobs are outsourced to places where labor is cheaper, what work will people in the developed world do to maintain their standards of living? One important area is called the knowledge economy or knowledge-based economy. This refers to the use of knowledge to produce economic benefits. More specifically, it refers to highly technological businesses such as computer software development, telecommunications, and educational and research facilities.
The knowledge economy is booming all around the world, providing both opportunities and challenges for those involved. Technology makes it possible for people in almost every country to have access to the same ideas and information; therefore, they have the same opportunities to prosper.
"In earlier years, offshoring, or the substitution of foreign for domestic labor, meant that an American dialing a toll-free number caused a phone to ring in India, or a German sending an e-mail to Microsoft got a reply from China. Now it means that sophisticated computer programs, once written in Silicon Valley, are coded in Bangalore. Medical X-rays, previously read by doctors in Frankfurt, are now being analyzed by medics in New Delhi. Bank clerks are crunching numbers in India and sending them electronically to New York. Material for animated movies is created now in Hyderabad, not Hollywood."
The world's economists agree that the economy is not a zero sum game. In order for one person to experience gain, another person does not have to experience loss. The Canadian government concluded in a report in 2001 that Canada, the United States, and Mexico had all benefitted from "the gradual shift of capital, technology, and new job opportunities in all three countries toward more productive uses. The result has been a rise in productivity and increasing standards of living."
This is exactly what Adam Smith predicted. If we expand our markets and workforce to include the economies of many countries rather than just one or two, wealth will grow for everyone. Although short-term job losses might occur in some areas, everything will balance out eventually. What has been bad for white collar-workers and programmers in the United States and Canada has been good for Asian workers.
"In Shanghai and Kuala Lumpur, in Delhi and Bombay, white-collar denizens of the offshoring boom now gather at hip bars and pricey restaurants. It is as if the exuberance of Silicon Valley has moved to Asia. They spend their new paychecks on trendy Western clothes, trips abroad, and new cars. Every month, two million more Indians and five million more Chinese carry cell phones as their countries grow richer. Young college graduates job-hop for ever-higher pay. The future has never looked brighter. While Chinese computer programmers splurge to buy the latest consumer goods, many will live with their parents until they are in their 30s, saving three-quarters of their $5,000-a-year salaries to buy a home or a car. That is not a sacrifice for them. It is an improvement."