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The Technology of economist and philosopher
In 1776, Scottish economist and philosopher, Adam Smith wrote the masterpiece, ‘The Wealth of Nations’- actually ‘An Inquiry into the Nature and Causes of the Wealth of Nations”. By coincidence, the United States Declaration of Independence was adopted the same year, making the American colonies independent and thus no longer a part of the British Empire.
America has since evolved to dominate the old British Empire in virtually every aspect of human endeavors, except perhaps, social welfare. The Yankees figuratively were discipled by Dr. Smith who believed in free market and made his argument that ‘capitalism’ will benefit mankind than any other economic structure. He laid this foundation at the onset of industrial revolution and provided the basics for modern economics.
Smith made his case about the ‘invisible hand’ and why monopoly and undue and unfettered government regulations or interference in market and industry must be discouraged. He was of the opinion that prudent allocation of resources cannot happen when states dominate and over interfere.
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In that old time, America farmers could grow cotton, but would not process it. It has to be sent to England where it would later be imported into U.S as a finished product. Understanding that this decision was not due to lack of processing ability, you will appreciate Smith’s argument that market must be free.
His theses were clear and were very influential; they provided the same level of fulcrum to Economics as Isaac Newton’s Mathematica Prinicipia to Physics. Or in modern times, Bill Gates’ Windows to the information economy.
While reading Smith’s book and understanding the time frame it was written, one cannot but appreciate the intellectual rigor in that piece. Before technology was penetrated in en mass across the regions of the world, he noted that all nations could compete at par in agricultural productivity. The reason was absence of division of labor in any subsistence farming system in the world. A farmer does everything in the farm and is not an expert in most.
Discounting fertile land, rain and other factors that could help farmers, all the farmers, from Africa to plantations in Alabama, the level of productivity was similar. Why? No specialization was employed in farming business at the time.
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Fast track forward when the industrial revolution set forth. The British Empire became an engine of wealth creation through automation. It was a quintessential period of unrivalled human productivity which resulted to enormous wealth created in the empire. Technology not only helped speed process execution, it helped in division of labor.
Interestingly, Dr Smith had noted that except agriculture where productivity was flat because of lack of division of labor, other industries were doing just fine. And in those industries, there were organized structures which enabled division of labor. For instance in the construction industry, there were bricklayers, carpenters, painters, and so on; but a farmer was a farmer.
As you read through Wealth of Nations and observe the 21st century, it becomes evident that technology was so influential in the last few centuries. It has changed our structures and created a new business adaptation rules like outsourcing which is indeed a new breed of division of labor.
From accumulation of stock and pricing, as explained by Dr. Smith, we see today a world where technology is shaping everything in very fundamental ways for wealth creation. In this era, it has become technology as technology translates to wealth. So, nations that focus on creating, diffusing and penetrating technology will do well.
Why? It is about national technology DNA. The more passionate and innovative nations are triumphing at the global business scene. Give me Japan and I will give you electronics. Talk about United States, I will share biotechnology and pharmaceutical technologies, and indeed every major technology. Give me China, and I will give you green technologies.
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So, as nations continue to compete on the technology paradigm, we see at the highest level of success measurement an embodiment captured by technology capability. When nations are understood from the lens of their Technology Readiness Index, Knowledge Economic Index, we see that countries have become technology competing nodes. In some really poor countries with no (effectual) technology, they do not have a node and are unplugged in the sphere of global wealth creation.
Simply, it will be difficult to separate the health of any modern economy from its technology. It goes beyond the wealth of that nation to its survivability. The most advanced nations are the technology juggernauts while the least developing economics barely record any technology penetration impact. For the latter, it is like still living in the pre-industrial age Dr. Smith discussed on agriculture and division of labor where processes were inefficient.
Perhaps, this explains the efficiency in developed world in both the public and private arenas. The more technologies they diffuse, the more productive they become. In other words, show me the technology and I will tell you where the nation stands in the league of countries. Interestingly, the invention of steam engine changed the world and powered the industrial revolution. The invention of transistor transformed the 20th century and is fuelling the new innovation century.
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It seems that major scientific breakthroughs bring major great countries. Let me emphasize here that some old kingdoms that ruled the world such as the old Babylon, Roman Empire, and Pharaoh’s Egypt; there have been associated knowledge base that put them ahead. You cannot disassociate good crop production in River Nile to the mastery of Egyptians in inventing some sections of geometry for farming. Some of the old wars had been won by developing constructs that enabled efficient transportation of soldiers to battleground. There was science and nations were winning by using that knowledge.
In conclusion, the world has been living on technology and it is indeed defining our competitive space. As nations compete, it is technology that shapes the world with wealth as the major byproducts, in some cases. I make this case because some of the best technologies had been invented for non-wealth reasons (yes, directly). Examples include Internet and radar technologies which have created wealth and spurred commercial innovations but have military origins.
There could not be any more powerful way of examining national competitiveness than understanding the technology of nations. Yes, wealth has since morphed to technology and all competitions and wealth creation could as well be seen from technology viewpoint. And in this piece, I aptly replace Dr. Smith’s ‘wealth’ with ‘technology’ to have The Technology of Nations.
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Technology is the leader of the enterprising world. And it leads using a constitution. Unlike the traditional political structure, this constitution is Algorithms written by engineers, scientists, etc and not congressmen and politicians.
The global competition is largely who has the best technical group to write the best one; in this case, Algorithms, that comprise of patents, technical processes, tools, and so on. As a nation develops, adopts, applies and diffuses appropriately the contents of this constitution, it elevates the lives of its citizens. The more innovation a nation pursues, the more it refines this constitution.
Economists have shown a correlation between Knowledge Economy Index (KEI), productivity and standard of living. The challenge for any nation is to improve its KEI number. Doing that involves good education, economic regime and other variables that help to improve technology capability.
The age of natural resources dominating global commerce and industry is gone. What matters now is creating knowledge and applying it. Some nations will create, others will merely consume. But wealth is concentrated at the creative stage and nations that focus on consuming, without creating technology will not prosper.
Even with abundance of natural resources, which in many instances, the consuming nations cannot independently process without the knowledge partners will not change this trajectory of limited national wealth without technology creation.
