Knowledge-Based Economy Becoming a Reality


Several millenniums ago, the world was dealing with the dynamics that resulted from the transition from a hunter-gatherer society to a farming one. Industrialization was the main economic phenomenon in the last century but the world is now headed towards a knowledge-based economy. A ‘knowledge-based economy’ refers to the role that is played by technology and knowledge in modern economic development. Human beings in form of labor act as the carriers of knowledge in a knowledge-based economy. On the other hand, technology has emerged as a major determinant of economic growth where high levels of technological advancement translate to faster economic growth. Recently, the role of knowledge in an economy has become very important to stakeholders hence the call for an economic future that is dominated by this phenomenon. The advent of a knowledge-based economy is mostly regional with Europe and other western-based economies taking the lion’s share of the benefits of this type of economy. A knowledge-based economy is dominant in some sectors of the economy including education, communication, and manufacturing. In the early stages of knowledge-based economies, most entities concentrated on research and development as the main economic drivers. However, the current knowledge-based economy is dominated by software development and search engines that enable organizations to arrange and utilize knowledge. The leading figures in the push for knowledge-based economies are governments and information and communication technology (ICT) enterprises. On one hand, governments are pushing citizens towards customized learning that has a direct impact on economic development. However, employers are reluctant to adopt knowledge-based training because they fear that their valued knowledge might end-up in the hands of their competitors. Governments and other economic entities have secured measures that enable organizations to safeguard their information. The element of lifetime learning applies to knowledge-based economies because it satisfies the need for constantly changing knowledge. Some employers choose the employees with the highest capacity for knowledge and sponsor them to engage in lifetime learning. Throughout the advancement of the knowledge-based economy, stakeholders have questioned its practical application in the current and future economic landscapes. This paper explores a knowledge-based economy and the elements that might constrain it from becoming a reality.

Knowledge-based Economies

The most common economic trend in knowledge-based economies is the tendency to favor “high-technology goods and services, particularly information and communications technologies” (Hallier & Butts 1999, p. 82). In a knowledge-based economy, a computer and its related infrastructure play an important role in contributing to the tangible development of an organization. The input of a computer can only be matched by the training and labor efforts of any economy. The element of expertise (especially if it is technology-related) plays a big part in economic development. Governments in collaboration with other entities that are concerned with the pursuit of a knowledge-based economy spend a considerable amount of their resources harnessing research and development practices. It is estimated that most governments spend about twelve percent of their resources in propagating knowledge-based training. An example of this form of training is occasioned by instances where educational curriculums are intertwined with apprenticeships. The sales of software programs have also risen considerably in both educational and work-related programs where knowledge-based economies are concerned. In a knowledge-based economy, the sales of software programs have been found to exceed those of hardware-related components. The whole world aspires to be a knowledge-based economy in the future based on these latest trends.

All over the world, the demand for skilled labor has risen considerably. Consequently, the demand for skilled labor that passes the threshold of university-level is quite high when it is compared to labor from individuals with a secondary-level education. Nevertheless, the knowledge-based economy has led to job cuts in the manufacturing sector. For instance, fewer factory employees are needed to accomplish production in computer and pharmaceutical factories. However, the demand for knowledge-based employees is on the rise in service-based industries. In addition, knowledge-based employees earn considerably more money compared to the ones with low knowledge requirements. This development marks a significant shift from the industrialization era were individuals who contribute most to the output of end products earn less than ‘knowledge’ workers. In the future, this trend can either keep developing or witness a turn-around. Either of these two developments can have a significant impact on the future of the knowledge-based economy. Currently, the employees who are in high demand include computer technicians, marketing experts, and therapists. The main trend in a knowledge-based economy involves producers paying more for knowledge than they do for manual labor (Green 2006).

Most of the trends that dominate a knowledge-based economy have led to the revision of the dominant economic models and theories. Modern economists are grappling to find a foundational model that can be used to define and develop the knowledge-based economy. In the past, economies have been built around the concept of production-based elements such as raw materials, labor, and capital (Cooke 2010). Knowledge and technological inputs have always been external factors of the production process. However, the knowledge economy has prompted the revision of these fundamentals. For instance, most modern economists consider technology and knowledge to be part of the fundamental components of the production process. On the other hand, organizations are recognizing the need to invest in knowledge-based ventures. Consequently, it is common knowledge among economists that “investments in knowledge can increase the productive capacity of the other factors of production as well as transform them into new products and processes” (Cooke 2010, p. 948). Knowledge-based components of production have also been found to have positive contributions towards long-term economic growth. Economists describe knowledge workers as the ‘men of speculation’ and they are in charge of an organization’s knowledge agendas. These experts are also the individuals who take part in the creation and distribution of knowledge-based input in any organization. One advantage of adopting knowledge as an economic driver is that it has the capacity to correct the economic anomalies that are associated with the capital injection. For instance, when there is a lot of capital in an economy, the rate of return on capital decreases. However, this anomaly can be upset by advancements in technology. New technology has been found to increase economic growth in both organizational and economical bloc environments. In the absence of a knowledge-based economy, the equilibrium shifts between production and commodity exchange. However, both knowledge and technology have been found to have a considerable effect on the economic equilibrium.

Knowledge and Lifelong Learning

It is a common misconception that knowledge strictly refers to the information that is held by workers and other individuals who participate in the economic process. However, the concept of a knowledge-based economy is much broader than the simple concept of educating individuals. Consequently, several methods of learning have been proposed to coincide with the needs of knowledge-based economies. Individuals should be aware of several aspects of the economy including the relationships with the trading partners, the needs of the customers, the process surrounding patents, intellectual property, and the distribution networks. Nevertheless, it is important to note that this information is constantly changing hence the need for lifelong learning in respect to knowledge-based economies. In the new millennium, an educational experience is incomplete without the element of lifelong learning. Lifelong learning is thought to be the main ingredient of a knowledge-based economy. Under lifelong learning, outsiders of the traditional educational process are being brought back into it. For instance, lifelong learning involves several demographics including industry leaders, executives, the old, and the young.

In a knowledge-based economy, the concept of a lifelong career naturally translates to lifelong learning. The knowledge worker realizes that the fast-changing aspects of work skills and technology can only be counteracted by lifelong learning. On the other hand, several stakeholders are dedicating their efforts towards minting the perfect knowledge worker. The concept of lifelong learning and knowledge workers is deep-rooted within the dynamics of developed economies. However, the same concept is also not yet developed within developing economies. Overall, lifelong learning is an economic driver for most developed economies but it also presents the developing ones with a wide array of threats and opportunities. In the pursuit of lifelong learning, workers are seeking to replace the institution of ‘old-knowledge’ with that of ‘new-knowledge’. Lifelong learning also endeavors to integrate the learning and work processes with the view of merging them into a single aspect under a knowledge-based economy. In addition, the knowledge-based economy presents workers with an opportunity to keep up with the latest economic and tactical development of their organizations.

At one point in history, it was assumed that lifelong education was a solution to all of mankind’s problems. However, this concept is highly doubtable under the current economic environment. Governments and other political blocs in Europe had promoted the idea of lifelong learning with the hope of alleviating a wide range of global issues including conflict and poor economic performance. However, this concept has been around for the past few decades and the world is still grappling with some of these issues. The European Union sought to transform the economic and political fortunes of Europe by using lifelong learning to turn the region into “the most competitive and dynamic knowledge-based economy in the world” (Green 2006, p. 308). A closer investigation of Europe reveals that the goal of the European Union has only been achieved to a certain extent.

The agenda of lifelong learning is often pushed by two entities; governments and organizations that employ knowledgeable employees. For governments, the goal of lifelong learning is to enable their citizens to engage in nation-building activities. On the other hand, fostering lifelong learning among citizens encourages personal growth that gives a country competitive edge when it comes to economic development. An economy under lifelong learning is set to be faced with lower unemployment levels and stimulated economic growth. Nevertheless, in places such as Europe where the concept of lifelong learning has thrived for several years, the levels of unemployment keep on rising and falling randomly. This trend indicates that the concept of lifelong learning has not worked as perfectly as stakeholders would have wanted it to work. In societies that have embraced lifelong learning there are also cases of skill mismatches that contribute to constraints in lifelong learning. For instance, several people have gone to school to acquire skills that are no longer required by employers. Furthermore, employers’ expectations often fail to be satisfied by the competencies and skills of potential employees. These labor patterns indicate that the concept of lifelong learning is yet to be perfected several years after it was instituted.

In the context of a fully developed economy, ideas take priority over physical input. In addition, the ability to apply technology is more important than the ability to change raw materials into finished products. Therefore, organizations are seeking to keep up with the requirements of lifelong learning with the view of maintaining profitability. The process of adopting lifelong learning among organizations depends on an organization’s ability to hire and maintain knowledgeable employees. Organizations achieve this goal by harnessing their recruitment processes or by offering employee training to capable employees. Modern workers use their skills and abilities to give meaning to their lives. On the other hand, remuneration in the modern workplace is proportionate to the levels of knowledge among employees. The concept of knowledge employees is problematic to employers because some of their most valuable assets are often found in the hands of their labor force. For instance, several organizations are forced to make their employees sign confidentiality agreements that bar the latter from disseminating valuable bits of knowledge to competitors. For instance, an employee who shifts between Apple Inc and Samsung poses a risk to his/her former employer given the level of competition between the two organizations. The two companies rely on knowledge as their main assets and exposing it to competitors is risky. On other occasions, employers are hesitant to educate their employees because the educated individuals might leave their parent organizations thereby transferring their knowledge to competitors. This development is one of the various hindrances that are faced by the institution of lifelong learning in relation to knowledge-based economies.

Knowledge-based economy; Reality or a Fad?

The main issue surrounding the integrity and success of a knowledge-based economy is the need for compulsory cooperation between the public and private sectors. Management-based needs and governance structures should be streamlined to accommodate a culture that fosters knowledge. The process of harnessing a knowledge-based economy is often marred by a variation between the government and the private sector. On one hand, the government actively invests in human capital by sponsoring efforts of training ‘knowledge’ employees. On the other hand, private organizations do not collaborate with the government on matters of updating knowledge and technological advancement. For example, public school curriculums only benefit from the input of private sectors after a problem has occurred between job skills and job training. This crisis has been addressed in some societies but it is a problem in others. In knowledge-based societies, learning institutions actively seek the harmonization of both work and training experiences. Some reputable schools like the Harvard Law School develop and update their curriculums in line with the needs of the law firms and other employers. This is also true for business and technical institutions of higher learning. Most developing and mid-level economies are yet to harness the cooperation between lifelong educators and employers of knowledge employees.

Nevertheless, the process of harmonization is yet to take effect where the required cooperation involves the private and public sectors. For instance, most governments around the world are considered as the employers of ‘ordinary’ employees. Most curriculums do not factor in the needs of the public sector. The needs of the private sector mostly require maximization of both production and profits. Most governments are not concerned with these factors and they often fail to reap the benefits of the knowledge-based economy. The effects of this divide between the public and private sectors include relatively lower performance among government employees as compared to workers in the private sector. The government as an employer has limited choices when engaging in a knowledge-based society. First, the government has limited incentives at its disposal and this prevents it from actively engaging its employees in lifelong learning processes. Second, most governments face legal hurdles that are not encountered by private employers when they are pursuing and motivating knowledge workers. Overall, the success of the knowledge-based economy depends on uniform cooperation between the public and private sectors.

One of the items that are top in the agenda for knowledge-based economies is the need to create knowledge. Knowledge creation in most parts of the world starts with the government but requires the active involvement of other stakeholders in the economy. Therefore, the resources that are required to educate a country should be mobilized to ensure that they accommodate the needs of a knowledge-based society. For example, educational curriculums should be restructured for them to reflect the needs of a knowledge economy. On the other hand, the private sector is required to communicate its specific training needs to educators and other stakeholders of lifelong learning. It is important for organizations to be in a position to capitalize on the abilities of knowledge workers if knowledge-based economies are to be successful. Furthermore, the needs of knowledge-based workers are important to the developers and other stakeholders of the lifelong learning process, which forms the backbone of the knowledge-based economy.

In the past, the academic culture used to be a reserve of the elite and the intellectually gifted individuals of a certain society. However, a knowledge-based economy cannot prosper where divisions between the academia and the community exist. In several instances in the past, the academic community has assumed superiority over the economic community and vice versa. However, the success of the knowledge-based economy depends on how stakeholders can bridge the gap between academia and the community. The national vocational requirement index is one way of ensuring that universities and other high-level trainers are producing the necessary levels of skilled labor. The partnership between the economic and academic communities will eliminate the misconception that learning is a luxury. Learning is a very vital component of knowledge-based economies and a change in attitude towards this process would lead to valuable economic gains. In a business environment, learning is not meant to add ‘titles’ to a worker or a leader but it is supposed to vitalize the concept of knowledge workers who introduce and distribute knowledge-based concepts within an organization. Experts point out that “the notion of lifelong learning is a move in the right direction but it must become much more tailored; learning that is in direct response to actual needs in real time” (Biesta 2006, p. 170). Knowledge-based economies are formulated around the concept of knowledge acquisition and consumption is a necessity in a developing society. Hence, no divisions should exist between the academic and economic societies as it has been witnessed in the past.

A knowledge economy is synonymous with global economy/learning. Therefore, individuals are supposed to be aware of the environments and developments that are happening around the world. The concept of global learning is strongly dependent on the instruments that make it a reality. Nowadays it is possible for a person to achieve lifelong learning without engaging informal learning through classroom environments. For instance, access to the internet provides individuals with a wealth of learning materials. Consequently, a knowledge-based economy is not entirely dependent on the classroom environment. The concept of global learning can make or break the institution of knowledge-based economies. On one hand, if citizens have access to technological resources that foster lifelong learning, it would be easy for countries to achieve knowledge-based economies. On the other hand, global learning jeopardizes formal learning, which is the backbone of knowledge-based economies. The reality of a knowledge economy can be hurt or promoted by the concept of global learning.


A knowledge-based economy is dependent on several variables including lifelong learning, economic partnerships, learning partnerships, and levels of technology. However, global learning is a reality in these economic environments if stakeholders consolidated their efforts with the view of fostering lifelong learning; the major determinant of a knowledge-based economy. Nevertheless, if the hurdles that are faced by organizations, countries, and individuals are not overcome, this concept will remain a fad.


Biesta, G 2006, “What’s the point of lifelong learning if lifelong learning has no point? On the democratic deficit of policies for lifelong learning”, European Educational Research Journal, vol. 24 no. 5, pp. 169-180.

Cooke, P 2010, “Regional innovation systems, clusters, and the knowledge economy”, Industrial and corporate change, vol. 10, no. 4, pp. 945-974.

Green, A 2006, “Models of lifelong learning and the ‘knowledge society”, Compare, vol. 36, no. 3, pp. 307-325.

Hallier, J & Butts, S 1999, “Employers’ discovery of training: self-development, employability and the rhetoric of partnership”, Employee Relations, vol. 21, no. 1, pp. 80-95.

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