A student asked me: “It is easy to talk about information age or the transition from the manufacturing economy to the information economy in class but do we have any evidence that it is actually happens? All the economic textbooks are still mentioning that natural resources and capital are the main drivers of a country’s economy.”
I explained: “Today many things change quickly; economic textbooks have not catch up yet. As student, you must read more on recent business articles and follow the global economic news to understand what is happening and from these facts you may draw your own conclusion.”
In the manufacturing economy, natural resources and capital are the key drivers. For centuries, countries are fighting with each other or invade another country just to get resources such as iron, copper, gold, diamond and oil. The colonialism is based on this economic theory. However, we are no longer in the past so we must look into the situation that is happening today. In this information economy, knowledge and skills are the key drivers. There are many evidences that few people pay attention. For example, Taiwan is a small island with no natural resources but it is one of the richest countries in the world. Instead of mining its land or cut down its forest, it mines its people for their knowledge and grows their skills that transforms its economy because it has the most valuable resource in the world today.
Similarly, Israel is a small country in a desert-like environment with no natural resources. Almost everything has to be imported but it is one of the most prosperous economies, and its population enjoys a high standard of living, much better than most of the oil-rich countries nearby. The reason, it has one of the best education systems and the highest number of educated citizens in the region.
As the world is transitioning to the new economy, it is the education of the citizens that determines the future of a country. You need to look at countries like Singapore, Taiwan, Israel, South Korea, Hong Kong and Japan that lack the natural resources but have been doing very well in their economies and ask yourself why they are so successful? Why their citizens are enjoying high standard of living while African countries with abundant of natural resources but its people have been living in poverty? Why countries like Kazakhstan, Saudi Arabia, Kuwait, Oman, Algeria, Bahrain, Iran and Syria all have the most precious resources such as oil but their people are not doing well either, except few people at the top. If you can answer these questions, you will understand the information economy.
There is a theory known as “Dutch disease,” which stated that when a country becomes dependent on exporting natural resources and has a lot of money, it imports everything, its people enjoy the luxury and become addicted to this life style and lose the instincts, habits and incentives for working. When these resources are gone, many will fall into chaos and become victims to nearby country. History has plenty of stories like that.
By contrast, countries with little natural resources have to depend on what they have: The talent of their people. Countries like Singapore, Taiwan, Israel, and Japan are doing very well because their people understand that the country must live by its knowledge and skills. Instead of depend on natural resources which they do not have, they depend on the quality of their education. Every citizen knows that it is the education that decides the future of their country so they focus their efforts on building the best education system for their citizens.
If you want to know how a country will be strong or weak in this 21st century, do not look at the old economic theory of the manufacturing age that consider natural resources such as oil reserves, gold mines, or large forest etc. You must look at the education systems such as the number of teachers that they have the motivation of their students and how they manage their knowledge and skills. The best economic predictions for any country should be based on the result of the education system such as the number of educated citizens and their skills. If you do not believe of what I said, you can look at countries with the most successful companies and have the highest standard of living: Israel, Taiwan, Singapore, Hong Kong, South Korea and Japan.
In this difficult economic transition times, it is easy to fell back on the old theory of manufacturing by attempt to invest in manufacturing and incurring greater financial liabilities for the future. The better way would be to use education as the greater stimulus to grow the economy by giving more people the knowledge and skills to compete, to collaborate in a way that drives the country forward. Today knowledge and skills are the key assets of 21st-century economy but it is up to the country and its citizens to decide on how much to invest in education, how many schools to build, how many teachers to train, and how to develop a culture of lifelong learning so the country can thrive and be prosper.
Prof John Vu
Carnegie Mellon University
Original source: http://www.segvn.org/forum/mvnforum/viewthread_thread,1494
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