REGIONAL differentials in growth rates among developed and developing countries are an important focal point for nations. Technology, technological progress and human capital are considered the main driving forces behind the economic progress of developed countries.

Technological progress requires innovation. Innovation takes place where appropriate human and physical capital is present. This in turn attracts more of the same. Therefore, innovation and human capital tend to exist together in relatively compact geographical areas.

Hence, knowledge becomes ‘sticky’, ie it remains limited to specific places. For example, Japan is a technological hub and has remained so for many decades. London is one of the financial capitals of the world. The financial know-how has mostly remained within the realms of London. Knowledge spill-over does take place, but research suggests that it extends only to a distance of around 90-100 kilometres.

Similarly, innovation also remains intact in specific places. For example, Silicon Valley in California remains the IT hub of the world. Most IT innovations are generated in Silicon Valley. Many governments across the globe have tried to replicate Silicon Valley; so far none have achieved nearly anything like it.

Innovation and human capital tend to exist together in relatively compact geographical areas

A vast body of academic research has focused on success stories like Silicon Valley as to find out the mechanism through which innovation takes place. There is no single explanation that could help us understand it.

However, many reasons could potentially point to the success of such regions, like the accumulation of human capital and proximity to top universities powering the tech hub, as is the case of the University of California, Los Angeles, and Stanford University in California.

Hence, we find that explaining regional differences in growth on the basis of innovative activities depends on the understanding of the procedures through which knowledge is created and transformed into growth.

If we discuss innovation in the sense of technological progress, two key theoretical concepts emerge. According to traditional neoclassical perspective, technological progress is considered to be a phenomenon independent of the economic system, including capital and human capital.

Therefore, its effect is considered ‘residual’ or an unexplained phenomenon. Here, technological progress is seen as a public good. Thus, automatic convergence in growth rates is expected without taking into account any independent innovative activities.

On the other hand, according to economist Paul Romer, when technological and human capital accumulation is considered as the outcome of specific policies and actions of decision-makers, economic growth becomes an endogenous outcome. It is this latter, endogenous growth framework that pushes a country forward to catch up with developed countries.

So what can we do as a nation to catch up with developed countries?

As discussed above, technological innovation is compulsory for progress and for that we need technological know-how which comes from skilled human resources.

Hence, we need to invest in human resources, provide world-class training, international scholarships and retain as well as attract top human resources from abroad. We need reverse brain drain and a comprehensive scholarship programme in key technological areas that are important for our economy.

Programmes such as the ones started by Dr Atta-ur-Rahman during the past decade have received international acclaim. Where did those programmes go? Have we set our priorities right? The vision must be to change our economy to ‘knowledge economy’.

That would fundamentally mean revitalising our primary, secondary, higher and vocational education besides other measures. It would mean leaving behind our past educational practices that have served us no good, such as rote learning. It would mean abandoning all practices that make our educational system one of the worst systems in the world.

At the basic level, it would be improving early-years and primary schooling. At the primary level, integrating a cutting-edge science and technology curriculum would be a starting point for creating a future generation of tech innovators. One way forward could be to bring the nation’s leading scientists and tech experts on a single platform and gain insights from the specialists as to how to go about inculcating changes at the basic level.

Gaining insights from curriculum and teacher training tools in advanced countries, such as Japan and South Korea, could be a good way of expanding educational advancement in science and technology in developing countries. Partnering with advanced countries in the field of education would be a step closer to technological advancement.

It is then that our country could move forward in the economic development arena for its future generations.

At the same time, what remains an important tool for developing countries is innovation and technological advancement. Among other things, this requires creating a nation’s pool of highly skilled people in science and technology.

The writer has an MSc in Local Economic Development from the London School of Economics and Political Science, UK.

Published in Dawn, The Business and Finance Weekly, July 16th, 2018

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