Friday, May 03, 2024
The knowledge economy refers to an economic system where information, knowledge, innovations, intellectual assets, and human expertise are the fundamental driving forces. The knowledge economy grows based on the rapid generation of data, information, and innovations. In contrast, the industrial economy is characterized by the labor force, physical infrastructure, and traditional economic components such as natural resources like coal and gas. In the knowledge economy, human knowledge generation excellence acts as the fuel of economic growth instead of physical production or industrial processes. The World Bank estimated that knowledge-based capital contributes around 50 per cent of the high-income country's economy. Only in the USA, the knowledge-based sector contributes around 25 per cent to the national GDP.
The basic pillars of the knowledge economy are Research & Development, Innovations, Education & Skill Development, and Intellectual Property. All the components make an ecosystem where the knowledge economy grows faster.
The knowledge economy has a significant impact on the modern economy and employment. Already, 4IR is leading disruption in human civilization, and our economy is not out of it. According to a report by the World Economic Forum (WEF), by 2025, 85 million traditional jobs may be replaced by frontier technologies like AI or Robotics. At the same time, 4IR will also create a lot of high-skill jobs. At present, the shift towards knowledge-based jobs is significantly higher around the world. According to the International Labor Organization (ILO), knowledge-based services accounted for nearly 28 per cent of global employment in 2020.
Expert human capital is the key component of the knowledge economy, the transformation of employment and professions towards technical skill-oriented jobs focuses on education and expertise. Up skilling and reskilling concepts are very common in knowledge-centric first-world countries. Within the next couple of years, the global workforce will need to be reskilled to be employed. WEF predicted, 50 per cent of the global workforce will need to reskill them to adapt to the technological paradigm shift by 2025. In the future, we will see Science, Technology, Engineering, and Mathematics (STEM) based life-long learning systems play a catalyst role in the global economy.
Investment in education boost-up economic growth, high-income countries allocate 4-6per cent of GDP to education, whereas Lower-Middle-Income and Low-Income Countries allocate 2-4per cent
Investment in R&D is another key to the success of knowledge-based economic growth. According to a report by World Intellectual Property Organization (WIPO), global R&D expenditure was approximately $2.4 trillion in 2020, which reflects the significance of knowledge-driven innovation. Intellectual Property (IP) protection transforms innovations into economic output. In 2021 almost 3.4 million IP applications were filed globally. China, the USA, and Japan, these three countries belong to 72.3per cent of the total, which makes a clear picture of how first-world countries are making a gig economy by emphasizing education, innovations, and IP protection.
In conclusion, the knowledge economy is shaping the present and future of our global economy. With a focus on research, innovation, education, and intellectual property, it is driving economic growth and transforming employment patterns. However, it also calls for reskilling and investment in education to adapt to technological advancements. By emphasizing these key pillars, countries can harness the potential of the knowledge economy and pave the way for a prosperous future.
The writer is an engineer
