Every generation has its carrier of economic change. Ours is the knowledge economy. Over the last decade we have heard a lot about globalization. Today we know that the planet is integrated as never before. But even a hundred years ago, international trade was driving national economies. The difference now is the pace and scale of economic integration. Today, we are integrated in real time.
Knowledge flows globally and unequally, unchecked and instantly, so that as a broker clicks the computer in New York, capital moves in Tokyo. An order arrives in London, and production schedules change in Bangkok. A financial crisis occurs in East Asia, and jobs are soon lost in Brazil. But the phones - when they work - don't ring very often in far too many places in Africa.
Geographic boundaries have not disappeared politically but they are eroding economically. We are in a profound transition to a global economy. Global markets exist for some industries but not for many others. Some countries and firms are taking extraordinary advantage of the opportunities generated by globalization, while others are suffering from it.
The knowledge economy has flourished, driven by the communications revolution that has released information from spatial and temporal constraints. The knowledge economy is now also a networking economy. Like the shift from the agrarian to the industrial economy, the rise of the knowledge economy is changing many of our assumptions and transforming the world of work.
It is certainly changing the business of the organization I lead, the International Labour Organization. For over 80 years we have served as the world's only multilateral institution jointly governed by employers, workers and governments. Our job is to understand each revolution in production - how it creates a new pattern of work, new rules, new winners, new losers, new institutions - and provide the negotiating space to come up with society's "rudder," with the most fair and just way forward balancing the interests of all stakeholders in the world of work. That has been our historical mission. The fact is that most social and labour policies worldwide are based in different ways on ILO conventions, of which today there are one hundred and eighty-three.
The changes are large
We see striking new economic and social phenomena in the knowledge economy. Let me mention just a few:
* New types of firms and new competitive strategies. Major global companies, such as Nike or Cisco Systems, are networked firms, built upon knowledge, not the direct production of goods.
* New ways for people to organize and new means of advocacy. Workers, citizens, consumers and civil society activists are using the internet in creative ways to further transnational goals.
* New education and training possibilities. Educators and policy-makers have embraced distance learning.
* New ways for families and people to interact. The internet and wireless communications are changing many patterns for personal relationships and communities.
* New and more knowledge is built into ordinary consumer products. "Smart" appliances are found in more homes and workplaces.
* New forms of economic activity including e-commerce. Many types of work become location-free, and move readily to where skills and capabilities are available.
In the end, everyone is affected. For example, e-commerce changes the pattern of trade and market prices and thereby affects everybody, including those without access to the internet. We need to understand this carambola process. Are we headed towards a global digital divide, or is this really a global digital opportunity, as was suggested in the report of the World Economic Forum to the Okinawa G-8 meeting? I believe it will not depend on the technology itself but on the rules governing its development, use and access. Fair rules will mean enormous opportunities for all; if they are biased against weaker countries, firms or peoples, the full global potential of the knowledge economy won't be realized and frustrations will set in.
Opportunities and dangers
Is the promise of the knowledge economy too good to be true? Yes and no. The opportunities are clearly enormous. And the dangers are equally evident. Both look dramatically different depending on where you sit.
The opportunity: Information and communication technology (ICT) is opening new markets, creating new occupations, such as web designers, or new types of "infomediaries" and so creating new jobs. ICT also encourages job creation by lowering barriers to entry. Creativity and innovation matter, not physical equipment or capital investment.
The danger: Jobs are destroyed as people are replaced by computers with little attention given to retraining and skills recycling. Automation, rationalization and inducements to mega-mergers also leads to job loss. Some even talk of "the end of work".
The opportunity: New technologies can be used as an instrument to achieve personal goals and work can be better adjusted to the needs of family and life. It expands career opportunities and makes job search a click away. It can interconnect individuals and stimulate them to achieve new goals. It can free individuals from routine tasks to concentrate on more varied and creative work.
The danger: New technologies are increasing the pressure on workers to work anywhere and everywhere. ICT fragments the labour market, may pay less and put an end to employment security. ICT can also lead to isolation and stress as individuals work in different times and places, glued to computer screens, overloaded with information and demands.
The opportunity: The knowledge economy is widening and upgrading skills. Most ICT-intensive enterprises need workers with multiple skills.
The danger: ICT may also lead to de-skilling as personalized knowledge is devalued. It may even downgrade skills to single task machine-tending.
The opportunity: ICT can empower people by providing greater individual flexibility and freedom of choice. It allows them to leverage their own knowledge with easy access to information. It allows people to come together as never before and thus has a strong democratizing potential.
The danger: ICT allows privacy to be invaded and more opportunities for surveillance and control.
Many issues concerning the knowledge economy are yet to be tackled. Is the call centre a major new source of opportunities for income and employment, or is it, as has been said, the 21th century sweat shop? Can the knowledge economy be a source of polarization or of exclusion? By 2005, 80 per cent of the technologies currently in use in European industry will be different from those used in the previous decade. But, within the coming decade, 80 percent of European workers would have received their formal education and training over a decade ago. How will this play out in the future?
Many people lack the knowledge or the qualifications, or cannot adapt to change. Older workers may not be given a chance; school dropouts and child workers are unable to acquire the skills they need. Young people have to construct careers in a turbulent and fragmented labour market.
Finally, and above all, the reality of leapfrogging is paralleled by the gulf between North and South. Of the 330 million people on line earlier this year, less than one per cent live in Africa. Connectivity matters for development. But the developed world has 50 phone lines per 100 people, and low income countries only 1.4. The informal sector and the rural sector are left on the margins. Despite some spectacular progress in developing countries, the gap is widening.
The potential gains are substantial
The impact on economies worldwide is already large. In industrialized countries, the ICT sector is the most dynamic sector in terms of growth rate, contribution to GDP growth and employment growth. In the US, employment in the internet economy rose from 1.6 million to 2.3 million between 1998 and 1999. The top 50 IT firms in the world employ 3.5 million people. These new activities still generally employ less than five per cent of the labour force even in industrialized countries, but the growth rate is impressive. A wide variety of countries are taking advantage of the opportunities. For instance, Romania's software industry now has 50,000 employees.
All the evidence suggests that this is a virtuous circle for the economy as a whole. In the "new economy", technological progress drives productivity improvements. That could mean less jobs, but in reality, with the right macro-economic policies output grows faster than productivity, and the outcome is the creation of jobs and wealth. The US did it first, but many European economies are now on the same path. The knowledge economy has the potential to deliver non-inflationary growth - because costs are falling - and offers a route to full employment.
What about developing countries? Obviously the penetration of information technology is much smaller. But there is plenty of evidence that they, too, can benefit. The Indian software industry has been growing at 40 per cent per year over the last five years. It may only account for one per cent of GDP but it accounts for seven per cent of growth of GDP and 34 per cent of growth of exports. And it is creating jobs - 2.2 million jobs are forecast by 2008. In Africa, call centres have been developing apace. Security surveillance of banks in Geneva is carried out from North Africa. Women in Bangladesh villages use mobile phones as a major new source of income. So leapfrogging is not a myth. And the global market in IT skills is starting to create new opportunities for migrant workers. The recent German decision to offer visas for 20,000 immigrant IT workers is just one example. It might be that these technologies can stem the "brain drain" migration in the long-term by taking work to people rather than people to work.
All of this can happen because the market is open. Returns to risk-taking are high, and entry costs are low. But the impact goes beyond the market. The knowledge economy offers new possibilities for self-fulfilment. Some have even talked of the digital empowerment of civil society.
The challenge
The global economy is so often presented to us as a fait accompli, in which there is nothing one can do but adapt. I believe that what is irreversible are the breakthroughs in technologies. But the technology does not predetermine the social consequences. There are many possible ways we can share this planet, depending on vision, values, leadership and political will, institutions and policies. None of these is cast in stone.
Our generation's task is to make sure that this monumental shift to a more globalized knowledge economy actually works better for people and their families. If, as the United States' Declaration of Independence says, "..we hold these truths to be self-evident, that all people are created equal and are endowed with certain inalienable rights - life, liberty, and the pursuit of happiness...", then how do we pursue happiness in a world so deeply embedded with inequality and injustice?
We know only too well the global figures of inequality that have been bandied about: where 1.2 billion people are living on less than a dollar a day; 250 million children are working; twenty percent of the world's population consume eighty percent of the world's resources; and more than a billion people are unemployed or underemployed. Nobody defends these facts or figures. On the contrary, we say that we want a different reality. But it is in the movement from saying to doing that we get stuck. If we agree that we want a different tomorrow, what is it that we can do today?
I believe we need to create the consciousness and movement to make decent work for all a basic issue. When I was organizing the Social Summit, I asked people, "What are your main problems?" Most said "poverty and social exclusion". And when I asked them what was their solution, they replied, "work - whether self-employment, wage employment, or other forms of livelihood". In essence, they wanted the dignity of work. We must create the consciousness that work is the core of personal dignity and a basic foundation of family stability. To get it right, we all have to pitch in together - governments, business, workers' organizations, scientists, religious leaders, NGOs, local authorities, international organizations. We need to abandon our piecemeal approaches and develop an integrated vision and strategy. That is why I have called for a global coalition for decent work.
The knowledge economy has a tremendous potential to support social development and to create decent work. The task of policy makers and of other actors is to ensure that the knowledge economy works for people. Of the many important things we can do, I suggest that we can reach this goal through six strategic interventions.
1. Creative and accelerated investment in life-long learning, education and skills development.
Education, skills and learning were always high on the priority list. In the knowledge economy they become the prime determinant of success or failure, inclusion or exclusion.
We already see skill shortages emerging in many industrialized countries. The OECD estimated 600,000 vacancies worldwide for workers with ICT skills. Training systems have to respond fast if business is not to be stifled. While the best training occurs on the job, information from many courses will someday be available on the internet, thus dramatically reducing the cost of training and increasing potential access.
But the need for education applies not only to technology specialists, but across the board. Everyone, young and old, has to cope with new demands. And as the pace of change accelerates, this means constant renewal of skills throughout life. Life-long learning in the knowledge economy is intrinsically linked with long-term productivity, worker mobility and well being. Yet no society has in place really effective institutions for learning beyond the age of twenty-five. Public policies are needed to ensure that the social and economic goals are simultaneously achieved.
If nothing is done, it is most likely that the countries with the best educated people today will benefit most. A major new effort is required to support education systems in the developing world. There are some exciting examples to follow. In Brazil's urban slums, the Committee to Democratize Information Technology (CDI) has created community-based Computer Science and Citizenship Schools, which train more than 25,000 young students per year in ICT skills that give them better opportunities for jobs.
2. Pursuit of gender equality
Technological change offers opportunities for promoting gender equality, but unless deliberate efforts are made to support this, the old biases will persist. At the end of last year, only 29 per cent of the workforce in the US technology sector were women.
One of the major developments of the knowledge economy is the growth of teleworking. There are now nine million teleworkers in Western Europe alone. This has created new opportunities for women, but there is a cost. Family responsibilities are combined with paid work, and because of gender differences in family and work, women end up acquiring new tasks on top of the old. I believe that there is a high road for teleworking, which includes greater gender equality, but it requires organization, representation, and real concern for the rights of the workers concerned.
Creative approaches to the knowledge economy can lead to major new opportunities for women. The Grameen Bank has made Bangladeshi rural women selling services via mobile phones a popular success story. Less well known is how he has promoted women's property rights by making them a condition for housing credit. But these advances need to be expanded and strengthened to make work in the knowledge economy an effective means of weakening stereotypes and opposing discrimination.
3. Support for entrepreneurs and their employment-generating, socially-productive enterprises.
The key actor in the knowledge economy is the entrepreneur - social and business entrepreneurs who create profit-making and non-profit enterprises. New products and services, new markets and new firms are emerging fast because of these risk-taking men and women.
Some business people and managers, however, are in difficult waters. They face increasingly complex competitive environments and find the idea of competing globally absurd, if not terrifying. I sometimes see certain types of managers calling for flexibility in the labour market because they don't have what it takes to compete successfully in the new economy. It is an easy way out but it won't save the company in the long term.
There are two key issues. The first is employment creation. Enterprises need open markets and public support for infrastructure and skills and entrepreneurship. But business success is also a function of their own internal capabilities. Increasingly a firm's main asset is its knowledge, and much of that knowledge is held by its workers. The winners in the knowledge economy, and those that create jobs, will be learning organizations which recognize that and make it the foundation of corporate success.
The second issue is access, especially for smaller firms. If the knowledge economy is to reach everyone, micro and small firms are key, and new networks give them opportunities to tap the global market. Public policies to support the flows of capital and skills that micro and small firms need to participate in the knowledge economy, especially in low income and informal situations, can shape future work paths for hundreds of millions.
4. Fostering voice, worker representation and organization
Taking advantage of the spread of democracy and communications technology, people are organizing in new ways, often transnationally, and have plural affiliations. They are increasingly demanding decent work, secure and meaningful livelihoods, as well as new ways to contribute and be productive members of society.
You can't meet these challenges unless the workers concerned can organize and their voice is heard. New types of organization are needed. Teleworkers can not organize in the same way as workers on the factory floor. Networked or virtual firms don't provide a stable working environment for collective bargaining. And the new digital economy raises major new issues for workers, including work intensity, email rights, work and family and skill development. This has led to radical changes in the ways some trade unions operate and the services they offer as well as to a renewed emphasis on organizing.
The global economy also calls for global organization. New global trade union groupings, such as Union Network International, are emerging. We can expect more developments like the remarkable agreement UNI signed earlier this year with the Spanish multinational Telefónica, which covers not only basic rights worldwide, but also questions of skills and access to telecommunications.
5. Strong social protection systems and labour market regulation
New forms of labour market regulation are needed to promote incentives for innovation and change while simultaneously defending rights at work and access.
A crucial area for workers in the new economy is long term security. Protection of income and living standards and protection against unemployment is needed in a more volatile labour market - combining flexibility with security. If jobs are lost more easily, pathways back to employment are required. This is vital for ensuring long-term social legitimacy of the knowledge economy.
6. Poverty and exclusion
Perhaps the biggest challenge of all is tapping the potential of the knowledge economy to eliminate poverty. If the poor are at risk of exclusion, how can the knowledge economy work for them? It won't happen on its own.
It will be critical to bring Third World communications infrastructure up to global standards - and fortunately the possibilities to leapfrog are large. New public policies will also be required, to ensure internet access in schools and communities. There are many specific ways in which information technology can help the poor, by improving the delivery of health services, helping people access the knowledge they need to assert their property rights. And investment and credit policies can give priority to widening the knowledge capabilities of micro and small firms, raising productivity and employment.
The ILO agenda
The challenge is to make the knowledge economy a socially just economy, a source of inclusion and equality, where rights are respected and people's needs met. This is a high priority for the ILO. I believe that we need social dialogue and public-private partnerships to make it work - to make a transition to an economy that can serve everyone's goals. That is why I support this Forum, and others like it, that aim to bring different interests into a common vision.
The ILO promotes such dialogue among employers, workers and governments. At the end of this year a European regional meeting will reflect on the subject; next year there will be a similar debate in Asia. Our next World Employment Report addresses the issues at the global level. And a little more than a year from now, in the Global Employment Forum, all those who can help harness the potential of the knowledge economy to promote decent work, will come together to debate, compare experience and promote solutions.
Let me make a final comment on how the course of the global economy can affect the future performance of the knowledge economy.
After all is said and done, it is a reality, not just a perception, that the benefits of the global economy are not reaching enough people worldwide - in the developed and developing countries. It is affecting the support for open economies and open societies. We need to make markets work for and include more and more families. We need families to feel that there is a level playing field, so that hard work can get you ahead. For the three billion people subsisting on $2 or less a day, this is not the case.
To do so, we need policy creativity all around - in government, business, unions, NGOs, academia, science. We shouldn't be opposing flexibility on the one hand to security on the other, when it is obvious that we need both. We need to go back to basics if the global economy - the knowledge economy - is to succeed. Families need to feel the advantages in their daily lives. That means: decent work for parents, good education for children, basic health for all and a voice in the community.