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January 4, 2005
Welcome to the Intangible Economy
Welcome to The Intangible Economy, Athena Alliance's weblog of insights and information on the I-Cubed (Information, Innovation, Intangible) Economy.
The I-Cubed Economy is upon us. As I have argued elsewhere, the global economic situation has changed. Twenty years ago, the concern in the US was over global competition in goods and the loss of domestic manufacturing firms. Now we face a new challenge brought about by the fusion of manufacturing and services and the opening up to international competition of services sectors once thought to be immune to this competition. Then, the issues were quality and productivity; now they are the need for increased customization, speed and responsiveness to customer needs. Then, the concern was over creating a flexible and educated workforce; now, in addition to those concerns, we must foster an educational enterprise with the constantly changing types of education and skills required in a knowledge and information intensive economy. Then, the challenge was the cost of capitol; now the challenge is to unlock the value of underutilized knowledge assets and to insure the efficiency and stability of the global financial system. Then, the problem was how to raise policy awareness of the importance of international trade; now the problem is how to craft policy for an increasingly globalized and interconnected economy. Then, our focus was on individual firms and industries; now we must face the challenges of sustaining networks of firms and adopting new of business models. Finally the speed with which all of these problems and challenges arise has increased.
Information, knowledge and other intangibles now power economic prosperity and wealth creation. Intangible assets - worker skills and know-how, informal relationships that feed creativity and new ideas, high-performance work organizations, formal intellectual property, brand names - are the new keys to competitive advantage. The I-Cubed Economy is one of relentless change and competition. We are on a new treadmill. While the industrial economy demanded higher and higher levels of productivity to continue to drive costs down, this new economy demands more and more innovation. Intangibles and information drive our innovation process, which is a combination of formal research and informal creativity. These elements combine to produce the productivity and improvement gains needed to maintain prosperity.
One feature of the I-Cubed Economy is that portion which made up purely of intangibles. It has been estimated that the size of investment in intangibles in the US is over $1 trillion. But intangibles are part and parcel of the overall economy. They can not be separated out and treated as distinct economic sector. As a myriad new information and technologies sweep across the domestic and international economy, all sectors and industry, as well as the suppliers of financial, technological and human capital, need to develop their intangible capabilities and resources.
In this Intangible Economy, the rules have changed. But public policy has not caught up with this new economic environment. Governments are struggling with ways to utilize information, foster the development of intangibles and promote innovation and competitiveness. Policy makers are grappling with the urgent need to frame policy questions in light of the changing economic situation. Issues of developing and managing intangibles underlie discussions on a variety of subjects, such as intellectual property rights, education and training policy, economic development, technology policy, and trade policy. Crafting new policies in these areas will require infusing a better understanding of intangibles and the information economy into the public debate.
We also need to go beyond existing solutions. Our current economic theory and policy is a product of the industrial age of mass consumption, mass production. We need to develop new ways of thinking about economic activity, different means of promoting and organizing economic opportunities and activities, and different economic policies and programs.
But, understanding is not enough. We must also enlarge the repertoire of strategies, mechanisms, tools, and capabilities that individuals, firms, and communities can use to shape their own positive economic futures, with special attention to those in danger of being left behind.
American firms and workers lead the world in creating and using intangible assets. But, the increasing global competition means that we must continue to develop our intangible economy. No American need be left behind in the new economy as in this new era of intangible-based global competition.
It is our hope that this discussion will provoke thought - and comments - as we grapple with this new economic reality.
We also invite you to view our papers and the summaries of our policy forum on the Intangible Economy (co-hosted with the Wilson Center) at the main Athena Alliance website.
Posted by Ken Jarboe at January 4, 2005 2:25 AM