Does the UK know its economic place?

Earlier this month, Tony Blair told New Scientist that ‘the future for the British economy is about being at the cutting-edge of the knowledge economy’.

The European Union says that by 2010 it plans to be the world’s leading knowledge economy.

The message from the West, in case you have not noticed, is that the way for us to compete with the rising powers in the East is as a knowledge economy.

There is some simple logic to this. China and India, with their vast, low-cost human resources, present an unassailable rival for people-intensive work such as manufacturing or software programming.

In response, the traditional economic powers of the UK, Europe and the US are to concentrate on our strengths in design, innovation, invention, creativity, entrepreneurialism and plain old-fashioned good ideas.

Sounds easy. Let’s do it.

While we are at it, consider this. On the Nanjing Road in Shanghai there is, apparently, a huge billboard proclaiming innovation as the future of the nation.

This anecdote was told by Sir Robin Saxby, the founder and former chief executive and chairman of Arm, the semiconductor design firm that is often held up as the archetype of the knowledge economy. Arm is a UK success story, with its chip designs used in mobile phones, digital cameras, iPods, PCs and servers. Arm licenses its intellectual property – it has never manufactured a product. Saxby, one of the few knights of the IT industry, therefore knows a thing or two about the knowledge economy.

In an interview with Computing, at an event organised by Icon Corporate Finance and IT trade body Intellect, Saxby scoffed at the idea that the West has some unique claim to a higher capability for innovation.

On what basis are our economic powers-that-be assuming that we will have any particular intellectual edge over China and India, just because those countries are pretty good at making cheap goods and low-cost software? Both are investing heavily in education and churning out hundreds of thousands of highly-qualified students, while in our schools science and technology are increasingly shunned.

This is not to say that the knowledge economy is not the right path for the UK to take – we have little choice.

But the danger is to assume that we have in any way an inherent advantage. The knowledge economy is not the route to continued domination, it is merely the next area of competition – and that competition will be ferocious.