Knowledge Potential: Limits Unstated

In 1963 Harold Wilson spoke of the "white heat" of the technological revolution. Decades later, innovation and the knowledge-based economy are all the rage. Since then innovation has been enshrined, along with universities and skills, in the formal title of a ministerial department. In 2000 Europe's leaders committed the region to becoming "the most competitive and dynamic knowledge-based economy in the world" by 2015.

Governments have good reason to fosterinnovation, for it is the mainspring of economic growth. Developing countries can grow quickly by investing heavily in new plant and equipment. But rich nations have already built up big capital stocks. If they are to sustain growth in the years ahead, they must be economic pioneers, pushing out the technological frontier through advances in knowledge.

Britain, which has dismantled its old manufacturing industries faster and further than most, has madeanespeciallybig bet on its ability to thrive as a knowledge-based economy. So how innovative is it?

There is no black and white answer, because performance varies according to the gauge that is used. There is a host of plausible measures, ranging from basic scientific work to patents and business research and development, from use of computer software to spending on broader types of knowledge-based activities such as instilling best managerial practice.

Britain undoubtedly scores high in basic scientific work. It undertakes 5% of the world's research and publishes 12% of cited papers. That share of citations places it second, behind America, in a world ranking of research excellence. British scientists claim around 10% of internationally recognised scientific prizes every year.

But what matters for economic innovation is turning scientific discoveries into new products and smart processes. Patents are one guide to this, and on this basis Britain is doing badly. In patents per head that are granted internationally Britain lags behind Japan, America and Germany. And the gap has widened since the mid-1990s.

This disappointing performance reflects a poor record in research and development. Britain spends 1.8% of GDP on R&D, considerably less than many other advanced economies-notably Sweden, which commits 3.9% of national resources. The main reason for the shortfall is a low contribution from business.

But some of the gap reflects the structure of an economy that has switched a long way from manufacturing to services. This change has tended to bring down business R&D spending in Britain, since manufacturers usually account for the bulk of it. Yet firms in America spend 1.8% of gdp on R&D although manufacturing comprises an even smaller share of their economy than it does in Britain.

Other measures, such as the share of R&D staff in employment, paint a similar picture. In 2005, using a range of conventional indicators, the oecd described Britain's innovation performance as "mediocre" compared with the best countries. An "innovation scoreboard" published by the European Commission in 2007 ranked Britain behind the leaders, a group made up of Sweden, Switzerland, Finland, Denmark, Japan and Germany.

Yet Britain's thriving business and financial services are hardly innovation – free zones. Rocket scientists may be thin on the ground in traditional r£d but investment banks are keen to recruit them to dream up sophisticated financial products. The City of London invests heavily in computer software and is heaving with innovation, notably in derivatives.

Britain also has a big “creative” sector – industries such as advertising, publishing, broadcasting and design. Provisionalresearch by the oecd based on data from five countries suggests that such businesses are more important in Britain where they account for 5.8%of the economy. Next highest was Canada, at 3-5%, then America, Australia and France, at around 3%. Britain's creative firms are also more innovative than those in other sectors, a government survey found in 2005.

The vitality of these knowledge-based businesses suggests that Britain's performance might look better if innovation were measured more broadly. For example, Britain is a software-savvy country, spending £23 billion ($42 billion) in 2006-worth 1.75% of GDP, one of the higher levels among advanced countries.

Recent research has valued a range of such intangible activities in the business sector of the economy. At present software is the main intangible counted as investment, which adds to GDP. The others are treated as if they are used up, like electricity, in production. Including them all as investment would boostbusiness output by 13%, about the same effect as other research has shown for America. Since America is commonly regarded as a pretty innovative economy, that is an encouraging result. But Britain's poor record in basic schooling should puncture any premature celebration. A well-educated and highly skilled workforce is vital in adopting new technologies and innovative practices. It is hard to see how Britain can score top marks as a knowledge-based economy as long as so many of its youngsters fail to make the grade.

(The Source: adapted from www.economist.com/node/9597461 )

D. Decide whether these statements about the text are true or false:

1. Innovation and the knowledge – based economy are in decline.

2. Innovation is the mainspring of economic growth.

3. Advanced countries can prosper fostering manufacturing industries.

4. Patent performance is satisfactory in Britain as a result of low contribution from business.

5. The City of London invests heavily in computer software.

6. “Creative” sector accounts for 3% of the British economy.

7. Excluding intangible activities from GDP would boost business output.

8. Britain scores high in basic schooling and scientific work.

E. According to the title, the text can be divided into three main parts. Group the ideas respectively paying special attention to the words and word combinations which mean:

a) good, getting better / higher, the result of getting better;

b) bad, getting worse / lower, the result of getting worse.

Check words you are not sure of in a dictionary.

The Good	The Bad	The Ugly

F. Based on your notes, write a summary of the text. Bear in mind that you can omit some irrelevant information as well as combine similar ideas, thus condensing the content and giving valuable output.

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C. Read the text and match the highlighted words to their definitions.	\|	III. Vocabulary

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