By ANDREW GAWITH*
Knowledge has been at the core of successful economies since we started forming communities. So let's not get carried away about discovering that knowledge is important to economic success.
Knowledge has some unusual properties. Unlike the traditional ingredients of economic development - labour and capital - it is not consumed as people use it. In fact, the more it is used, often the better it gets - it is powerfully self-perpetuating.
Knowledge and its economic importance have at least three dimensions.
Depth of knowledge is about having a bunch of really smart people who know a lot about what's important, whether that is in leading areas of biotechnology, or how to develop and sustain dynamic companies.
The second dimension is breadth of knowledge and the ability of a large proportion of the population to pick up relevant knowledge.
There is no sense in having just one or two in the tribe who know how to kill woolly mammoths. It's important that others know the basics and can pick up the really important points quickly so the tribe doesn't starve when the experts have a day off.
The third and often overlooked aspect of knowledge is converting it into economic advancement - not just treasuring it for its own sake.
The first aspect supports the idea of centres of excellence. We want to nurture people and institutions that produce new knowledge and keep extending the technology frontier.
Logically, that would occur in areas in which we have some historic and/or natural advantages, such as farming, rugby, conservation or earthquake science. But modern economies also need to be plugged into a broad base of knowledge such as science, engineering, legal, financial and social policy.
If a small economy is to achieve knowledge depth, it must concentrate its resources, just as the Government is doing in managing our defence forces. If we want universities able to stay in touch with the Knowledge Wave then serious rationalisation will be required.
In a market cluttered by mediocrity, universities will have to specialise and cannibalise, and be aggressive about it.
Academics and communities will resist the carnage. But if the Government does not have the stomach to pursue such change then the first roll of the Knowledge Wave risks ending up a mere ripple.
The second and third dimensions of knowledge don't always get the air-time they deserve. But they lie at the heart of how it contributes to economic development.
Converting knowledge into commercial concepts and then translating these into successful goods and services are what makes knowledge valuable. On its own, it may have some intrinsic value, but it doesn't clothe, feed and house people.
Probably the most important aspect of the knowledge economy, so far as New Zealanders are concerned, is ensuring that the vast majority of us can participate and contribute to the sort of lifestyles we want. That means ensuring as many of us as possible have the basic skills to pick up and use the relevant knowledge quickly when required.
Without a well-educated population, no amount of in-depth knowledge embodied or generated by a few will translate into the sort of widespread economic success we require to stay in touch with developed economies.
The capacity to generate economic growth is to a large degree a function of how well the majority of people are educated.
In economies as small and remote as New Zealand's, it is imperative that almost everyone participates and contributes. That means ensuring the average level of achievement is high by global standards.
One of New Zealand's glaring problems is the number of people who are poorly educated and therefore can't contribute effectively.
Up to 17 per cent of our young people leave school with no formal qualifications and another 17 per cent leave with only School Certificate.
A third of school leavers, therefore, will struggle to make an impact in a knowledge-driven economy. It is little wonder we are slipping down the global economic league tables.
It would be an economic miracle for this economy to generate sustained growth of 5 per cent or more, as some are calling for, without first enabling our workforce to perform better. Without smart people, we will not do enough clever things to support a first-world society on such a small scale.
* Andrew Gawith is an economist for Infometrics. He can be contacted at
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