Productivity, Globalisation, and Sustainable Growth Ilkka Tuomi IPTS
The Lisbon Land 24 Growth Competitiveness rankings Australia Canada, 15 Japan Iceland Singapore Norway Switzerland Netherlands, 11 United Kingdom, 12 Germany, 13 Taiwan United States Sweden, rank 3 Denmark, rank 5 Finland, rank 1 Korea, 29 4 4.5 5 5.5 6 6.5 Source: World Economic Forum, Global Competitiveness Report 24-25.
The two factors of labour productivity Growth of GDP and employment in Finland, 199-23 3 3, 25 2,5 employment thousands of euro 2 15 1 GDP, euros per capita, current value 2, 1,5 1, employment (thousands) 5 199-23: Growth of GDP per capita +54.8 % Growth of employment -5.6 % 5 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23
Total employment in ICT industries, USA 1985-4 4,. 3,5. Information (inc. newspapers, books, radio, TV, movies, telecom, Web, etc.) Computer and electronic products manufacturing Computer systems design and related services ISPs, search portals, and data processing Software publishers Internet publishing and broadcasting 3,. thousands 2,5. 2,. The total job growth in ICT manufacturing and services (excluding telecom services) during the last decade was about.5 million. This corresponds roughly to 5% of job growth needed to keep the unemployment from growing (1 million new jobs per year). 1,5. 1,. 5. In absolute terms, the number of jobs in ICT manufacturing is now lower than in 199. Professional computer services increased, including custom programming, facilities management, system design.. 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 24
This is why ICTs pop-up in productivity studies 7 664. 6 Computers and peripheral equipment assets - productive value (BLS) Computers and peripheral equipment assets - current cost (BEA) 5 Billions of USD 4 3 2 1 69.3 17.1 138.6 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 Tuomi, I.: Economic productivity in the knowledge society. First Monday, 9(7), July 24.
A broader concept of ICT productivity? Productivity studies are often based on neoclassical growth models that assume: economic equilibrium (i.e., innovation is irrelevant for growth) all firms are equally efficient no-one is able to influence prices users pay the productive value for Linux, Apache, Perl, HTML all ICT investments have the same productivity impact no defensive investments (firewalls, facilities access control, virus removal, video surveillance, competitive pressure ) no problems in software development, implementation, and maintenance (no total, substantial or partial abandonment or runaway projects) no delays between investment and productivity impact quality-adjusted prices perfectly reflect productivity growth in the IT manufacturing industry (no stinking fish problem ) technical progress does not cost anything
The new concept of productivity Traditional concepts of productivity do not capture ICT related impacts; we have to focus on socio-economic development ICTs are composite and dynamic goods that need multiple ingredients to create growth Software and information content Hardware Skills Infrastructure (legal, technical, institutional) Organisational changes (new roles, responsibilities, and incentive structures) New management approaches and business models Socio-economic development centres on capabilities for social interaction and meaningful use; ICTs have a fundamental role in expanding such capabilities
Expanding the productivity space new incentives Skills Software change management Content, knowledge, information Infrastructure: legal, institutional, technical The Space of Productive Work New concepts, language, models Hardware & tools Process & practice
So, in the global context: 1. The hotspots of economic activity move (China, India, Brazil, Korea ) This is the traditional pattern of globalisation the Industrial Economy needs only telex and jet flights the key driver of value added is demographics 2. Globalisation of value chains Value chains become globally distributed networks; knowledge and work-in-process moves in addition to finished components and subsystems; telex becomes inadequate This is the new globalisation, which depends on the modern ICTs It makes economic activity simultaneously location-independent, and strongly dependent on local capabilities; any place can become a node in the global production networks ( disappearance of the distance ); only the most competitive places will ( centres of innovation )
The key factor for sustainable productivity growth: Expand the value-added within EU This cannot be done by simply buying ICT Most of the value is added to Asian and US national economies Avoid shrinking the space for productive work Fear is the most unproductive investment in the knowledge society; it destroys innovation and explodes the costs of change Position EU locations in the core nodes of global production and knowledge networks using advanced ICTs
What if we reach the Lisbon target? Growth of GDP and employment in Finland, 199-23 This is why ICTs pop-up in productivity studies 3 3, 7 664. 25 employment 2,5 6 Computers and peripheral equipment assets - productive value (BLS) Computers and peripheral equipment assets - current cost (BEA) thousands of euro 2 15 1 GDP, euros per capita, current value 2, 1,5 1, employment (thousands) Billions of USD 5 4 3 2 5 199-23: Growth of GDP per capita +54.8 % Growth of employment -5.6 % 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 22 23 5 1 138.6 69.3 17.1 198 1981 1982 1983 1984 1985 1986 1987 1988 1989 199 1991 1992 1993 1994 1995 1996 1997 1998 1999 2 21 IST 4 Den Haag, 13.11.4 IST 4 Den Haag, 13.11.4 Tuomi, I.: Economic productivity in the knowledge society. First Monday, 9(7), July 24. Expanding the productivity space new incentives Skills Software change management Content, knowledge, information Infrastructure: legal, institutional, technical The Space of Productive Work New concepts, language, models Hardware & tools Thank You! IST 4 Den Haag, 13.11.4 Process & practice