Knowledge for the West, Production for the Rest?

Abstract

This article develops the argument that a ‘knowledge economy,’ despite its cheerful optimism, is also an elegant incarnation of the demise of Western economies. An analysis of policy documents, research statements, and national accounts reveals this paradoxical coexistence of anxiety and progress in the discourse on knowledge economies. While the concept is often hailed as a temporal concept (superseding other forms of economic production), this article argues that a knowledge economy is best understood as a spatial concept – it is a way of contending with global reorganizations of production. This spatial approach is elaborated to tackle three paradoxes. (1) A knowledge economy enfolds defeat with progress. (2) A knowledge economy downplays the importance of industrial labor and simultaneously depends on it to materialize its ideas. (3) While seemingly intangible and ephemeral, a knowledge economy is fixed in place in national economies through government and corporate policy (including through the emergent phenomenon of ‘knowledge-adjusted gross domestic products’). A spatial approach provides a view of the tenuous global interconnections and specific conditions that prop up a knowledge economy, and shows how the concept is mobilized to redraw the map so that endangered economies can regain their challenged sense of centrality in a world economy.

KEYWORDS:

• knowledge economy
• creativity
• national accounts
• geography of value
• global capitalism

ACKNOWLEDGMENTS

Research for this article was funded by a University of California Chancellor's Fellowship, UvA Employability Fund Fellowship, Catharina van Tussenbroek Fellowship, and Henriette 575 Sara De Lanoy Meijer Fellowship. I thank Susan Harding, Carel Smith, Lisa Rofel, Jack Amariglio, Susan Bergeron, Donald Brenneis, Bruce Norton, Rachel Levin and Peter-Wim Zuidhof for their thoughtful comments. I would like to express my gratitude to the two anonymous reviewers for their astute insights.

Notes

1. The Council on Competitiveness is an American lobby organization. Godin (2004) describes the context of its emergence, characterized by concerns over a ‘competitiveness crisis’ due to a negative trade balance. Since its inception in 1986, its members, hailing from industry, labor, and universities, have sought to ‘eleva[te] national competitiveness to the forefront of national consciousness’ in the USA. See http://www.compete.org/about-us/history/.

2. See for instance Corrado et al. (2006), DeLong and Summer (2001), Florida (2004), Lévy and Jouyet (2006), Moulier Boutang (2011, p. 11).

3. For example, Van den Berg et al. (2005), Feser et al. (1998), Hudson (2009).

4. This paper focuses primarily on the juxtaposition of manufacturing and knowledge economies. Services are affected by the reorganization of production as well. Some services have been subsumed in the notion of a knowledge economy. In the industrial classification index, for instance, a number of services, such as business services, educational services, and publishing, were aggregated in 1997 in a newly organized category, ‘information economy’ (Knott Malone & Elichirigoity 2003, p. 514). On the other hand, services have become subject to outsourcing processes. Standardized services in call centers or back-office work such as data processing and accounting have been outsourced. Labor in what is called the advanced service sector – financial services, consulting firms, and management instruction – is currently less outsourced, and more likely to be labeled ‘knowledge work’ (Taylor 2011; also Palm 2006).

5. Geographical shorthands like the ‘West’ and ‘elsewhere’ are highly problematic. Throughout this paper, I develop the point that the label of a knowledge economy functions as a positioning device. It offers countries facing a crisis in manufacturing competitiveness – mostly though not exclusively western countries – a way to imagine themselves as the center of economic production. In so doing, the notion of a knowledge economy also, precariously, reframes the relations between nations in industrial decline and the current centers of industrial production. The latter are, from the point of view of a knowledge economy, the ‘elsewhere’ I refer to. Both a knowledge economy and the ‘elsewhere’ it depends on are unstable and interdependent labels. For instance, faced with emerging competition in industrial labor, Taiwan set out to transition from a manufacturing economy to an economy based on culture and creativity in 2010, fashioning itself as an emerging knowledge economy (Wang et al. 2010). My point is that a knowledge economy is a geographical mapping device. Taiwan's understanding of itself as a knowledge economy also reframes its relation with overseas production areas (Taiwan's elsewhere), offering Taiwan once again a central role in economic production.

6. A notable and interesting exception to this pattern is Fritz Machlup, who was one of the first economists to perform a systematic analysis of the role of knowledge in economic processes. His classic book The Production and Distribution of Knowledge in the United States (1962) is an optimistic study of the role of technological progress in the US economy. This confident outlook does not reframe an otherwise gloomy picture (in his study, manufacturing continues to thrive in the USA alongside widespread knowledge production). Rather, it exudes an unfettered postwar expectation of an ever more modern world.

7. ‘Conceptual economy’ is the term that Allan Greenspan used to describe a knowledge economy. He argued that ‘the fraction of the total output of our economy that is essentially conceptual rather than physical has been rising’ (2003, n.p.). With the diagnosis of an ‘increasing conceptualization of U.S. Gross Domestic Product’ Greenspan argued that economic production was decreasingly a matter of raw materials, and increasingly a process revolving around the value of ideas, entangled or not in material products and processes. ‘Over the past half century, the increase in the value of raw materials has accounted for only a fraction of the overall growth of U.S. gross domestic product,’ he said, and ‘the rest of that growth reflects the embodiment of ideas in products and services that consumers value’ (2003, n.p.). Greenspan has repeated versions of this statement for more than a decade. The speeches can be found on http://fraser.stlouisfed.org/publication/?pid = 452.

8. The specifics of this periodization are subject to change. One of the first writers on a knowledge economy, Peter Drucker, saw a knowledge economy as primarily post-agricultural. The transition from the nineteenth into the twentieth century, according to Drucker, could be characterized as a transition from agriculture to knowledge: ‘Where the farmer was the backbone of any economy a century or two ago … knowledge is now the main cost, the main investment, and the main product of the advanced economy and the livelihood of the largest group of the population’ (Drucker 1968, p. 264). Walter Powell and Kaisa Snellman (2004, p. 215) invoke the temporal stages by describing a transition from an industrial economy ‘based on natural resources and physical inputs’ to an economy ‘based on intellectual assets’ (see also Florida 2004; Etzkowitz & Webster 1995, p. 481). In his book Cognitive Capitalism, Yann Moulier Boutang also uses a temporal stage rhetoric, describing mercantile, industrial, and then cognitive capitalism (2011, p. 50). The latter was no longer based on machines and manual labor, but on ‘immaterial investment,’ that is, on knowledge and creativity (Yann Moulier Boutang 2011, p. 56–57).

9. In Europe the European Union's ‘Lisbon Strategy’ explicitly sought to remake Europe into a knowledge economy by 2010 (European Commission 2000). The year 2009 was, rather forlornly in the middle of an economic crisis, called the European Year of Creativity and Innovation. While the Lisbon Strategy was subsequently labeled a failure, the ensuing ‘Europe 2020’ calls for ‘Smart growth,’ the development of ‘an economy based on knowledge and innovation’ (European Commission 2010). For the USA, see footnote 7.

10. The European Policy Center is a think tank ‘committed to make European integration work.’ Its members hail from corporations and trade unions, as well as diplomatic missions, NGOs and religious organizations. See http://www.epc.eu/about.php (accessed May 13, 2013). Rosamond (2002) usefully shows how the notion of ‘competitiveness’ has contributed to the imagination of Europe as an economic entity.

11. Kong et al. (2006) provide an interesting analysis of the varied appropriations and adaptions of the concept in Asia. Hong Kong, Singapore, Taiwan, and South Korea stand out as most forcefully embracing the knowledge economy policy discourse. China showcases a mixed picture, it invests both in knowledge-intensive and in labor-intensive industries (Kong et al. 2006; see also Keane 2007, 2009a, 2009b). Taiwan is an example of a formerly low-wage industrial production center that, when it lost its competitive edge, sought to relabel itself as a knowledge economy. Its six-year Challenge 2008: National Development Plan (Taiwan R.O.C. Executive Yuan 2002) called for a reorganization of production:

With the cost of production rising and developing nations catching up fast, Taiwan's manufacturing sector has found itself in a difficult situation. Large-scale manufacturing operations no longer enjoy competitive advantage in Taiwan. In order to create new sources of competitive advantage, Taiwanese industry needs to adopt the new concepts of the knowledge economy, developing new areas of production where innovative design is the core element. Only then it will be possible for Taiwanese companies to differentiate themselves from their overseas competitors and create more value added (Wang et al. 2010)

12. Lehman in the documentary RIP: A Remix Manifesto (2009).

13. Even critics of the current web of intellectual property law and trade regulations seem to take the intellectual part of intellectual property somewhat for granted, arguing e.g. that ‘ideas are more profitable than oil or land’ (RIP Remix Manifesto 2009). That is, creative commons activists (with Lawrence Lessig as an excellent protagonist, 2001) share with advocates of tighter intellectual property rules that ideas and intangibles are valuable. In so doing, they seem to take the very separation of tangible and intangible property, as well as the organization of production that underpins this separation, for granted.

14. Lehman's interview ends with a somewhat dejected reflection that China has not returned the favor of US imports by complying with US copyright law. ‘The idea was that in order for us to import manufactured goods, the government that exported to us would have to comply with US copyright law. We met our part of the bargain…’ (2009).

15. The history of deindustrialization is of course a longer one. See Bluestone and Harrison (1982), Cowie and Heathcott (2003), High (2003), High and Lewis (2007).

16. For studies of supply chain capitalism, see Ong (1999, 2006), Ong and Collier (2005), Sassen (2006), Tsing (2009).

17. Harry Braverman (1974), in a searing critique of the effects of scientific management, prefers the terms ‘execution’ for manual labor, and ‘conception’ for intellectual labor.

18. He cast himself in the third person.

19. The study had first been presented as a keynote address to the American Society of Mechanical Engineers in 1906. Taylor's studies came about in a time when the study of ‘work’ was well under way in Europe (Rabinbach 1990, pp. 238–271).

20. The history of accounting is intimately entwined with the history of scientific management, see Van Eekelen (2010), and Miller (1998, pp. 185–188).

21. See also Sohn-Rethel (1978, p. 151) and Braverman (1974, p. 77).

22. Another explicit statement of the transfer of power can be found in a description of his objectives: ‘taking the control of the machine shop out of the hands of the many workmen, and placing it completely in the hands of the management, thus superseding the “rule of thumb” by scientific control’ (Taylor 1907, pp. 11–12, paragraph 52).

23. See fn. 16.

24. Call center work has been made geographically flexible through programs that teach workers to sound, for instance, ‘generically’ American (McMillin 2006, Mirchandani 2004). It is important to remember that this organization of production continues to be premised on a certain exchange rate. If the dollar were to fall deeply, the discourse may shift, and a new economy and inflection might have to be conjured.

25. For a history of how creativity is deemed to resist standardization, see Van Eekelen (2010).

26. A knowledge economy recodes not only the crisis in economic production, but also the vanishing of manufacturing and standard service work that provided enough to make a living. By squeezing ‘work’ out of this narrative, it seems as if economic production proliferates through entrepreneurial spirits. A knowledge economy does interpellate people, but through a discourse not of work but of a ‘freedom’ to undertake new things. In the process, any kind of collective solidarity, such as unionized labor or social security, is weeded out. The call on workers to become creative entrepreneurs who mold themselves without any safety net thus articulates the demise of the welfare state without any of the friction that this culling of forms of security might otherwise entail (see Van Eekelen 2010).

27. A knowledge economy is, in that sense, a code word for what Anna Tsing calls the organization of difference. Tsing (2009) shows how supply chains are a way to organize production through the mobilization of difference. It is beyond the scope of this study, but it would be productive to analyze how exactly knowledge economies and supply chains are imbricated, and in what particular ways they mobilize and organize difference.

28. This should be seen in conjunction with a booming financial sector. According to Brenner, the focus on consumption and imports was paired with a shift toward financial markets as an instrument for economic growth. ‘Instead of supporting growth by increasing its own borrowing and deficit spending – as with traditional Keynesianism – the government would … stimulate expansion by enabling corporations and rich households to increase their borrowing and deficit spending by making them wealthier (at least on paper) by encouraging speculation in equities’ (2009, p. 10). Brenner calls this ‘asset-price Keynesianism’ (see also Ho 2009).

29. For an analysis of new accounting practices that seek to codify intangible capital, see Van Eekelen (2010, manuscript under review).

30. ‘High value’ is a term used to describe activities and processes that purportedly wield much profit (see e.g. European Policy Centre 2009). My point is that the term ‘high-value’ reflects how value is recognized, attributed, and accounted for, rather than how (and where) it is produced.

31. Etzkowitz and Webster (1995), Imparato (1999), Lessig (2001), Lev (2001), Shapiro and Hassett (2005).

32. The Council on Competitiveness calls for an increase in protection of intellectual property, a topic that has, according to the Council, ‘received too little attention in the public debate about competitiveness and innovation.’ It continues: ‘As global trade occurs increasingly in knowledge and intangibles, providing the global trading system with solid rules and regulations that defend intellectual property rights becomes more and more important’ (Council on Competitiveness 2006, p. 59).

33. See also Eekelen (2010). This idea centrism has far-reaching effects. The Council on Competitiveness encouraged, for instance, a shift from formal rule-based education toward training in the development of creative and ingenious problem-solving skills (2006, p. 90). And indeed, in the USA, university courses in creative thinking are on the rise in response to perceived economic need (Berrett 2013).

34. For a history of its emergence, see Marcuss and Kane (2007), Mitchell (1998, 2002).

35. For a study of the changes in census, accounting and national accounts practices that seek to incorporate knowledge, see Eekelen (2010, manuscript under review).

36. See also www.bea.gov/gdp-revisions.

37. For example, MacKenzie et al. (2007), in particular Callon's chapter (2007).

38. The claim that economic models do not capture ‘what is really going on’ is a recurrent critique in disciplines such as feminist economics (e.g. Nelson 1995; Strober 2003) and economic anthropology (e.g. Gudeman 2008).

39. Here you see the effect of relabeling intangibles: it is no longer a form of immediate consumption, but future-oriented investment.

40. Harding (2013), Imasogie and Kobylarz (2013).

41. For discussions of the accounting category of ‘intangible assets’ see Lev (2001), Author (2010).

42. It could be argued that instability is inherent in capitalism, and that the destruction of its previous incarnations is the rule in capitalism rather than a state of exception (see Schumpeter 1928, 1943).