Globalisation and the knowledge economy

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(No Transcript)
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Globalisation and the knowledge economy

• Ian Brinkley
• Director Knowledge Economy Programme
• Work Foundation

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Globalisation the story so far

• In OECD economies the big structural changes are
  driven primarily by technology and markets, with
  globalisation accelerating and reinforcing these
  fundamental shifts
• All OECD economies have seen an expansion of the
  technology and knowledge based industries and
  these have uniformly been big generators of new
  jobs
• Rapid growth in world trade and entry of BRIC
  economies over past decade has been associated
  with falling unemployment and rising living
  standards across the OECD
• Like all structural change, globalisation creates
  highly visible losers and economic minuses and
  less visible winners and economic pluses.

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Globalisation and manufacturing

• Even in the internationally exposed sectors of
  the economy such as manufacturing, trade has
  accounted for between 10 and 30 per cent of jobs
  lost in the decade to 2002 (Rowthorne and
  Coutts)
• Many of the trade related impacts on jobs come
  from North-North rather than North-South trade
  (eg cars, engineering, high tech)
• China is a low innovation, assembly economy with
  many exports dominated by factories owned or
  operating on behalf of US, Europe and Japanese
  multi-nationals
• Some of the increase in imports from China to
  Europe is replacing imports we would have
  otherwise taken from US and Japanese factories
• Some economies such as the UK have been unable to
  exploit the Chinese demand for high quality
  production goods in contrast to, say, Germany.

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Offshoring of services

• No statistics on offshoring impact, so have to
  rely on indirect measures, one-off studies and
  monitoring
• Most US studies suggest scale of actual job
  losses to offshoring is very small share of
  natural job loss rate in the economy
• European Restructuring Monitor in 2005 found just
  over 5 per cent of all job losses across the EU
  from restructuring due to offshoring
• UK offshoring scare in 2003 subsequent DTI/ONS
  studies show employment went up in UK callcentres
  and in occupations thought most vulnerable
• Trade in technology and knowledge based services
  (excluding transport, travel and tourism) is
  almost all North-North
• UK trade in services with India is small and
  excluding travel and transport we export more
  services by value to India than we import.

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UK-India knowledge services trade in
2004financial, business, high tech, cultural
services and royalties and licence fees. IT
related are computer, information, and
communication services. Source Pink Book, 2006
edition.
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Globalisation responses to competition from low
wage manufacturing exports

• High tech manufacturing now accounts for a higher
  share of exports in UK, Germany, France compared
  with the early 1990s but not in US and Japan
• Except for the UK, the change has been modest and
  the vast majority of EU manufacturing exports are
  still from medium to low tech industries
• There has been no shift in trade towards services
  across the OECD
• The big exception is the UK the only major OECD
  economy (so far) to specialise in technology and
  knowledge service trade

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Trading in ideas and knowledge - UK becomes a
world leaderBalance of trade as share of GDP in
2005WF definition business services, finance,
high tech, telecommunications, cultural,
education Source Eurostat/OECD. All figures
2005 except Japan, 2004.)
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Looking to the future are we being too
complacent?

• Unprecedented scale of Chinese and Indian
  economies makes previous experience with OECD
  Asian economies unreliable guide
• Technology and increased supply of knowledge
  workers will create high skill-low wage
  economies across the OECD
• The first great unbundling of manufacturing
  production to Asia will be followed by a second
  great unbundling of service jobs
• The great doubling will flood world labour
  markets with unskilled, capital poor labour
  pushing wages down among unskilled workers.

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Looking to the future an alternative view

• Although trade will become more important as an
  agent of change, technology and markets will
  remain the key drivers of economic restructuring
  in major OECD economies
• The pace of structural change in the exposed
  sectors of the economy manufacturing and some
  knowledge based services - will speed up as both
  North-North and North-South trade increase
• Big potential markets in non-OECD economies from
  what the World Bank terms the global middle
  class who will actively participate in the
  global economy and demand high quality products
  and high quality services
• Global supply of knowledge workers may struggle
  to keep up with demand, with OECD economies
  increasingly competing to attract brightest and
  best.

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Looking to the future how do we cope?

• A more mature political and public debate too
  easy for politicians and pundits to blame
  globalisation for all the economic and social
  ills of the world
• Investment in human capital at all levels,
  including expanding higher education, and
  developing the science and technology base
• A key issue will be how to cope with ever faster
  structural change whether generated by
  technology or trade and ensure individuals and
  communities that lose out are effectively helped
  and compensated
• One option is to move further towards the
  flexisecurity model of Nordics and Netherlands
  liberal markets (including liberal migration
  policies), strong active labour market policies
  and more generous but employment friendly social
  welfare safety nets.