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The New Economy

The Knowledge Economy in Northwest Michigan - Beginning to Define What It Means To Us

Presented by Bill Palladino – Northwest Michigan Council of Governments

What is the Knowledge Economy?

The knowledge economy is a term used to acknowledge a new form of economic function.  It recognizes the new world of global business, and the increased importance of information transfer.  At the turn of the last century we began to define the economy as an industrial economy, one whose riches were mainly based in manufacturing products and providing services around these products.  Agricultural and industrial economies have relied upon labor, capital, and machinery as the foundation of their bottom lines.  That definition served us well for over a century.  It is plain to see that things are changing.

The knowledge economy recognizes the importance of its predecessor, and moves that paradigm to a new level.  Knowledge is now of discernable value in the marketplace on its own.  The concept of intellectual property was non-existent, or at best vague, in the heyday of the agricultural and industrial economies.  Today it is knowledge that acts as a currency to drive industry.  The assets of a Microsoft or a Hewlett-Packard cannot be measured by strictly counting the boxes rolling off the assembly line bearing their logos.  If you were to ask an executive from one of these companies what their greatest asset is, they would likely point to a skinny 20-ish kid wearing khaki pants and a t-shirt.  The combined knowledge of the workforce is what companies count on to keep them on the cutting edge of a swiftly changing community of information. 

This is not new thinking, nor should it be considered radical or otherwise antithetical to prosperity in this new industrial age.  The Milken Institute, an economic think-tank located in Santa Monica, California, states, “in the knowledge economy, the skills, experience, and innovation potential of the workforce have greater value than the capital equipment or even capital itself.” [1] These ideas have been around for a while, but it has been difficult for those of us immersed in the old way of doing business to accept and comprehend their importance.  In their own report on the knowledge economy, the state of Ohio says, “a successful business must access, create, and utilize knowledge to sustain competitive advantage and must also provide the required training, information technology, direction and motivation to its employees to ensure that they build new knowledge value.” [2]

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