Knowledge Economy Development and Political Economy Innovation

Author: Pang Jinju
Publisher:
Publishing Date: July 1, 2003
Features: As a key research base in humanities and social sciences jointly established by the Ministry of Education and Nankai University, the Center for Political Economy under the Ministry of Education's major project "Innovation in Political Economy for the 21st Century" was entrusted in 2000. After nearly three years of effort, the project was basically completed, and the "Innovation in Political Economy for the 21st Century" series now presented to readers is the main part of the project's final. Additionally, as research outcomes of the project, multiple papers were published, internal research reports were written, and some important viewpoints and ideas derived from the research were incorporated into the core curriculum textbooks for higher education in economics titled "Political Economy" for the 21st century. During the project's research process, we placed particular emphasis on two points: First, compared to past centuries, what factors will have the most significant and profound impact on the economic activities of the 21st century and the subsequent development of political economy theory; second, what changes political economy theory should and could undergo under these influences, achieving those innovations. These two points actually constitute the research focus and center of this book. Regarding the first question, based on the analysis of the complex and numerous phenomena that emerged at the turn of the 20th century and the early 21st century, this book argues that the information revolution and the rise of the knowledge economy are the most far-reaching and revolutionary events affecting world economic development. They have already, are currently, and will continue to exert a substantial impact on the economy and even various fields of human society, leading to significant transformations in economic and social relationships. In the face of such transformations, many traditional political economy theories may appear inadequate, making the emergence of new theories inevitable. The significance of the information revolution is largely consensus among scholars, with little disagreement. One scholar wrote in his work: "In the long history of humanity, nothing has ever had as great an impact on social development and progress as information technology." He cited a group from the Aspen Institute, which was initiated and organized by the Aspen Institute to study information issues, discussing the future impact of information technology in the article "Knowledge Economy: The Essence of the Information Age 21st Century." They stated: "Information and technology are replacing capital and energy as the primary assets for creating wealth, just as capital and energy replaced land and labor three centuries ago. Moreover, the development of technology in the 20th century transformed labor from physical to intellectual. This phenomenon arises because the global economy has become information-intensive, and information technology possesses unique economic attributes."① Regarding the knowledge economy, people's understanding has evolved over time. In the early 1980s, American scholar Alvin Toffler proposed that knowledge holds significant importance in the national economy; John Naisbitt suggested that knowledge is the driving force of the socio-economy; and in the 1990s, C. Winsege and W. Bramma jointly proposed the concept of the knowledge economy. However, there is no unified understanding of what constitutes the knowledge economy. Some scholars define it as an economy where knowledge is the primary resource and characterized by knowledge intensity, grouping human economic development into three stages: agricultural economy, industrial economy, and knowledge economy. The agricultural economy is resource-based on raw materials and labor-intensive; the industrial economy is resource-based on energy and capital-intensive; the knowledge economy is resource-based on knowledge and information and is knowledge-intensive.② Many scholars, however, view the U.S. economy of the 1990s as a typical example of the knowledge economy, leading to the frequent use of the terms "knowledge economy" and "new economy." The concept of the "new economy" first appeared in a series of articles published in the U.S. magazine Business Week on December 30, 1996. It refers to an economy that is sustainable, inclusive, and based on information revolution and global markets, with continuously adjusted and optimized industrial structures, and a mature modern market economy system characterized by "market + institutions." Some scholars distinguish between the broad and narrow definitions of the new economy. Broadly speaking, the new economy refers to the new state of the U.S. economy after 1990, shaped by the combined effects of technological progress and globalization, characterized by sustained high growth, low inflation, and low unemployment for over nine years—a phenomenon that previous economic theories (which posited an inverse relationship between unemployment and inflation) could not explain, hence the term "new economy." Narrowly speaking, it refers to the "new technology industries," such as information and networking industries. Former U.S. President Bill Clinton once stated in a public speech that the new economy is a knowledge-based knowledge economy, particularly one based on modern high-tech industries and characterized by knowledge intensity. Whether broadly or narrowly defined, technological progress and economic globalization are integral to this concept.
Regarding the characteristics of the new economy, scholars both domestically and internationally have conducted extensive research. American scholar Stephen Sheppard proposed six characteristics of the new economy: substantial growth in real GDP, rising corporate operating profits, low unemployment rates, low inflation rates, an increase in the ratio of total imports and exports to GDP, and a rising contribution of high technology to GDP growth. Federal Reserve Chair Alan Greenspan also provided a general description of the characteristics of the U.S. "new economy." He said: "It is becoming increasingly difficult to deny the profound differences between recent economic conditions and the typical post-war business cycle. Not only has economic expansion reached record lengths, but it has also been stronger than expected." From their descriptions, it is evident that the primary manifestation of the "new economy" is steady, moderate, and appropriately paced economic growth. Chinese scholars have summarized the characteristics of the new economy as follows: 1. The new economy is a knowledge economy. The growth of the economy in the new economy primarily depends on the production, dissemination, and application of knowledge, making knowledge the most critical factor of production. Although capital remains an important resource, its importance tends to decline; knowledge products will be increasingly applied in social life, and capital will ultimately evolve into a function of knowledge. 2. The new economy is an innovative economy. First, innovation in concepts. In the era of the new economy, information technology and the internet have changed the way humans interact, eliminating geographical barriers and breaking traditional continuity, thus requiring new perspectives to observe and understand the development process of things. Without updating concepts, one may be left behind by the new economy. Second, innovation in operational models. This includes systems, behaviors, and organizational structures. Only through continuous innovation in operational models can the economy and society remain vibrant and dynamic. Third, innovation in technology. Only through technological innovation can new market demands be continuously created, new production and competition induced, and economic development propelled forward. 3. The new economy is a digital economy. In the old economy, information was in analog form. In the new economy, information exists in digital form. When information becomes digitized and communicative through digital networks, a new world emerges, where diverse forms of information can be synthesized and created, profoundly impacting many aspects of business and human life. People will be able to communicate across time and space. 4. The new economy is a network economy. On one hand, more and more companies are restructuring and adjusting around the network economy; on the other hand, from invention and design, production and sales to after-sales services, all stages are increasingly interconnected with the network.③
We believe that the knowledge economy, as a category in economics, should be a summary and theoretical abstraction of economic phenomena. This summary and abstraction are not limited to describing a single economic phenomenon but are more importantly to provide a framework and tools for analyzing the impact of this phenomenon on the entire economic system, economic development, and economic operations. In this sense, this book assigns the following meaning to the knowledge economy: the knowledge economy is a knowledge-intensive economy based on modern information technology. Understanding the knowledge economy is most important to grasp two key points: First, the knowledge economy is a product of the technological revolution, emerging from the application of information technology as a marker of scientific and technological advancement in the economy since the 20th century. In this sense, the knowledge economy is synonymous with the information technology revolution and belongs to the category of productivity. Second, the knowledge economy is an economy where knowledge is the primary factor of production. Since information technology is the most important driving force of the knowledge economy, and mastering and applying information technology require knowledge, relative to labor-intensive and capital-intensive economies that have emerged in human economic development, the knowledge economy is knowledge-intensive, where the role of knowledge is more significant than ever before, making it the most important factor of production. The impact of the knowledge economy on social and economic development and political economy theory is revolutionary and profound. In the process of the knowledge economy's development, phenomena such as economic globalization, the rapid growth of virtual economies, and the emergence of the "new economy" in the United States at the end of the 20th century are all significant manifestations of the knowledge economy's influence. However, deeper and broader impacts have yet to fully manifest or may not have fully manifested yet. Studying these already apparent phenomena and revealing the potential impacts of the knowledge economy is precisely the task this series attempts to undertake.
Regarding the second question, in the context of the knowledge economy's emergence and development, traditional political economy theories alone cannot provide convincing explanations for the new economic phenomena within it, making the innovation of political economy theory a historical imperative for economists. There are different understandings of political economy in academia. Some believe that political economy is an independent discipline that should be strengthened and refined based on current developments. Others argue that political economy is no longer adaptable to the demands of the times and should be replaced by economics or modern economics. We adhere to the former view and oppose replacing political economy with economics or other disciplines, for the following reasons: First, as a science that primarily studies social production methods and the corresponding production relations and exchange relations, political economy has an undeniable responsibility to provide theoretical foundations for other economic disciplines and to offer theoretical guidance for modernization efforts. From the perspective of practical needs, whether it is explaining major economic phenomena in the global economy or guiding China's ongoing reforms, development, and modernization, there is often a lack of deep-seated theoretical analysis that reveals the essence and laws of economic phenomena, and strong theoretical support often appears insufficient at critical junctures. This underscores the necessity of strengthening the construction of political economy and developing the discipline. Second, the practice of building New China for fifty years, especially the more than two decades of reform and opening-up, has proven that the major theoretical foundations guiding China's reforms and modernization are not the results of any single department of economics or other economic disciplines, nor are they the products of Western economics, but rather the progress of political economy theory research. Continuing to develop political economy and striving for more theoretical advancements is a great historical mission bestowed by the times. Third, economics is a vast scientific discipline that includes theoretical economics such as world economics, Western economics, economic thought history, and economic history, as well as applied economics such as finance, international trade, industrial economics, and regional economics. Replacing the discipline of political economy, which primarily studies production methods and economic relationships and whose fundamental task is to provide basic theories, with such a vast discipline is not appropriate. From the perspective of scientific development trends, while disciplines will increasingly intersect and integrate with the development of information and knowledge economies, this integration is built on the foundation of disciplinary refinement and in-depth research, not on simple replacement of disciplinary divisions with comprehensive integration. Fourth, although the original political economy did indeed have shortcomings such as overly narrow research objects, outdated content, and a certain degree of detachment from reality, these shortcomings fall within the scope of reform and should not lead to the cancellation or replacement of political economy with other disciplines. In fact, since the reform and opening-up, especially after 1992, China's political economy has expanded significantly in both research objects and content compared to the past. While this expansion may still be insufficient, with this foundation, persistent exploration can undoubtedly lead to greater advancements. In fact, the proposal to replace political economy with economics was already raised as early as the mid-19th century. At that time, with capitalism having developed considerably, two criticisms of existing political economy emerged: One was that Marx and Engels criticized the research scope and methods of existing political economy, giving it the new mission of studying "capitalist production methods and the corresponding production relations and exchange relations." The other was that Herman criticized the misleading name of political economy and suggested renaming it wealth theory or the doctrine of meeting human needs, with Macleod proposing to call it economics.④ Subsequently, after long-term development, in the West, many scholars have become accustomed to using the concept of economics, effectively replacing political economy with economics, which is also referred to as Western economics or modern economics in China. In the East, a large number of scholars, through repeated setbacks and explorations, have upheld and developed political economy to this day. Nearly 200 years have passed since history reached this point, and there is no need to return to the starting point of the debate over political economy. Since classical economists paved the way for the development of political economy, we have every reason to build upon the achievements of our predecessors, uphold and innovate, and advance the construction of political economy to a new stage.
Regarding the issue of inheritance in political economy. The rise and perfection of any discipline are a process of inheritance and innovation. The development of political economy to this day is primarily the result of inheritance. Without inheriting the wisdom of predecessors, it is likely that the discipline would still be stuck in rudimentary concepts and principles, or even lost in the wrong path. To continue developing political economy, the fundamental starting point remains inheritance. Otherwise, completely discarding existing achievements would neither align with the laws of scientific development nor with the principles of epistemology, likely resulting in wasted effort and half-baked results. To inherit, the first clear stance must be that all scientific achievements of existing political economy must be inherited while discarding its dross. Here, "all" includes both Marxist political economy and Western economics. The emergence and development of political economy, from its first use of the term "political economy" by Frenchman Mont in 1615 to the present, have spanned nearly four centuries, during which countless inheritances and developments have occurred. Petty used the concepts of "political economy" and "political anatomy" to describe his analysis of the Irish economy, Quesnay used the concept of "political economy" with dual meanings of "management, control, natural rules" and "economic organization" to establish the Tableau économique, and Smith regarded political economy as a discipline studying the nature and causes of national wealth. Marx inherited the scientific components of bourgeois classical political economy while discarding its unscientific components, establishing scientific political economy. From the history of political economy's development, it is evident that its emergence and growth are the crystallization of human wisdom, the result of later generations inheriting from predecessors and continuously innovating and developing on that foundation. Clearly, without inheritance, there would be no political economy of today. Currently, there are two tendencies in the issue of inheritance: One tendency is to believe that political economy can only inherit Marxist political economy and not Western political economy. The other tendency is to believe that political economy can only import Western economics while Marxism political economy is outdated. Both tendencies are one-sided and must be overcome. It is undeniable that political economy must inherit Marxist political economy, and the reason is that Marxist political economy is scientific. It not only reveals the general laws of economic system changes and market economy development but also reveals the specific laws of the capitalist system and provides scientific methods for political economy research. However, to deny the need to inherit the scientific components of Western political economy due to this is one-sided. Although Western political economy, due to certain class, cognitive, and methodological limitations, contains many unscientific components, it cannot be denied that it also includes summaries of long-term practical experiences and provides some scientific methods and relatively realistic conclusions in many aspects, especially in the study of market economy operations and development. Absorbing and inheriting these scientific components is beneficial to the construction and development of political economy. When Marx was creating the scientific political economy of the proletariat, he could objectively inherit the scientific components of bourgeois political economy. Why, then, when developing Marxist political economy and building a political economy with Chinese characteristics, can we not inherit the scientific components of Western political economy? As for the tendency to believe that Marxist political economy is outdated and can only rely on Western economics, this is even more one-sided. As mentioned above, many principles, viewpoints, and methods of Marxist political economy that were once scientific remain scientific today, and these scientific components, as the basic content of political economy, still retain vitality and guiding significance. Moreover, Marxist political economy, after being tested by practice after Marx, has continued to develop with the advancement of practice. For the developed Marxist political economy, although it still needs further refinement, overall, it is not outdated. The reason it cannot be blindly copied is that the basic research object of Western economics is the developed market economy based on Western private ownership, and the conclusions it draws are more suited to the conditions of Western developed market economies. For a market economy developing under socialist conditions like China, while it can draw on the general theories of the market economy, blindly copying it would inevitably lead to many unintended consequences due to differing economic conditions. Based on the above understanding, I believe that existing political economy should make special efforts to innovate in the following aspects: First, innovating in the understanding and handling of the relationship between the special and the general. Here, "special" refers to the two different socio-economic systems of capitalism and socialism, while "general" refers to the commonalities that exist in different socio-economic systems. In the face of the knowledge economy, efforts should not only be made to analyze the new changes in the economic systems of both capitalism and socialism but also to focus particularly on analyzing the common challenges faced by the two systems and the strategies and measures to address these challenges, so as to learn from each other and achieve common development for humanity. Second, striving to reflect the development of practice and propose new viewpoints and explanations for new economic phenomena caused by the knowledge economy. On a global scale, the information revolution and knowledge economy have led to economic globalization and regionalization, technological advancements and adjustments of fundamental contradictions in developed capitalist countries, changes in economic cycles, the transformation from planned to market economies in socialist countries, the theory of the primary stage of socialism, the basic economic system, distribution system, socialist market economy, and socialism with Chinese characteristics, etc. For these new phenomena and issues, it is necessary to analyze them objectively and provide relatively scientific explanations, striving to reach a new theoretical level.
Finally, it should be noted that the "Innovation in Political Economy for the 21st Century" series includes "Knowledge Economy Development and Political Economy Innovation," led by me; "Research on the Transformation of Property System in China," by Associate Professor Xie Shiquan; "Technological Progress, Income Distribution, and Human Capital Formation," by Dr. Xu Xuejun; and "Research on Financial Risk Problems in China's Economic Transformation," by Dr. Qin Haiying. This series does not aim to establish a completely new and comprehensive system but rather seeks to implement the above understanding, taking the knowledge economy as the background and conducting thematic explorations on three levels of economic issues: one level is the exploration of institutional aspects; another is the exploration of theories of economic operation; and the third is the exploration of theories of economic growth and development. Despite the hard work we have put into these explorations, they remain preliminary. Due to limitations in our capabilities, errors and shortcomings are inevitable in the book, and we welcome criticism and corrections from readers. The significance of this book does not lie in how many theoretical problems it has already solved but in proposing a topic for joint exploration by the theoretical community and practitioners: where should political economy go in the context of the information technology revolution and the knowledge economy it has generated? Economist and Nobel laureate Douglass North once said: "We are creating a world unprecedented in human history. The information revolution of the past 25 years has had a profound impact on the world, transforming every aspect of human life. At this time, while learning from past experience, we must also be cautious about how much we can rely on it. It must be clear that we face a world unlike any other in history, and we cannot find absolute guidance from historical experience."⑤