Leveraging human capital to rebound from this downturn
One of the pillars upon which our modern economy rests is this: growth flows from improving our stock of knowledge. That is, as we know more we grow more. Consider both current and historical technological advances we have witnessed and become beneficiaries of: the mechanisation of agriculture, the electrification of our cities, and countless transportation options. Let us not forget antibiotics, space travel and the internet. The list could go on.
The thread that is common to all of these advances is research. The effort of enquiring and curious minds. Where progress can be won through say the pursuit by the stereotypical inventor alone in their garage, or by the collaborative academic effort of a team that spans many time-zones. And it is because of this progress, generally speaking, that the way life is lived in developed nations is far more advanced than what it was many decades ago.
The question that seems to be on many lips is about our post-pandemic future. What can we do now to prepare our economy for growth once this pandemic is over? Do answers lie in the same approach that we took to economic affairs prior to this current recession, or can we pivot to the opportunities that beckon? Are we brave enough to set aside old dogmas and tired biases?
The suggestion here is that we should pivot to improving our stock of knowledge. That we devote more time and effort to producing new knowledge. Which will, in turn, lay a foundation upon which growth will be driven in the years ahead.
Two ways of looking at a research-led recovery
Consider two perspectives of this particular driver of growth. First, the returns that can be realised by investment in research. Australia has a network of formal partnerships between government, business and academia called Cooperative Research Centres. Formal analysis of these centres several years ago found that for every $1 dollar invested in this program, $3 has been returned. And in a similar vein, a report by our Chief Scientist in 2016 found that over a 30 year period the Australian economy was about 5% larger as a direct result of investments into just one field of scientific endeavour - biological sciences.
The second consideration is that of employment. People who measure and analyse this component of economic affairs estimate that for every manufacturing job that is created another 1.6 jobs are created. And for every high skill job created in high tech industries, another 4.9 jobs are created. Our research effort can indeed lead to these types of employment outcomes.
So, why this focus, and why now? In essence, it takes time to reap the rewards from the effort that goes into “improving our stock of knowledge”. While “shovel-ready” projects can produce economic growth in the short and medium term, economic growth arising from research necessarily takes longer to realise.
And we can scale up the research effort now to position ourselves for success in a post-pandemic world.
Here’s one reason why this is important. If we reflect upon the story of our economy in recent years, we can see a strong relationship between an increase in our GDP and an increase in our population. And so, because of the pandemic-related barriers to immigration our growth will suffer. Thus, absent any significant and durable nation-wide economic stimulus, prospects for improvements in our standard of living over the period ahead are problematic.
Knowledge and technological intensity is key
How do I know this will work? Although it seems to be a concept easy to grasp, what I have found in my PhD research revolves around the growth story of inner and outer suburbs – the economic growth that expanding outer suburbs experience peters out as land fills up. Simplistically, as the population grows in these outer suburbs, their economy grows. But, as the population growth slows so too does their local economy. We can understand this in practical terms, as available land for housing reduces, there is less opportunity for population growth and hence a reduction in construction activity.
Some inner suburbs, on the other hand, do have growth story to tell despite the lack of population growth. The suburbs that are experiencing economic growth are seeing it because of the nature of their local economies. Their economic growth is reliant upon the knowledge and technological intensity of the industries that call those suburbs home. An industry profile that is missing from outer suburbs.
These inner suburbs are growing because they are knowing more. They are putting effort into producing, distributing and applying knowledge. Their stock of knowledge is increasing.
Finally, what can be done? From a producing knowledge perspective, it may be as simple as supporting a local university academic or researcher who has been working on a great idea. Or even creating an internship position for an early career researcher to work on a business problem you have. From a distributing knowledge perspective, it could be teaching or mentoring groups that focus on the latest advancements and discoveries in a particular field of industry or science. And, from an application of knowledge perspective it could take the form of starting an innovators club.
In summary, the pathway to our post-pandemic economic success will in part be built on improving our stock of knowledge. As we know more, we grow more.
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Photo by David Levêque on Unsplash
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