Developing Human Capital in the Knowledge Economy

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Not so long ago, the term “knowledge economy” was an abstract concept, disconnected from the reality of day to day business and economics, which determine the fortunes of individuals, organisations and communities. The term was treated with scepticism by ordinary people, in the same way as other fads of management jargon, that are peddled to sustain the lucrative juggernaut of the business literature industry.

The advent of the knowledge economy has since become a lot more tangible. Countries all over the world are planning and positioning their internal productive resources in order to compete successfully in the global knowledge economy. The growing importance of knowledge, as opposed to the traditional factors of production, is changing the nature of economic exchange everywhere in the world. The organisations that are able to master the production of knowledge and its conversion to tradable goods and services are topping the charts of economic growth and success.

At the level of government, the countries that have effective knowledge production systems record higher and more sustainable levels of economic growth. In fact, the income differences between the rich and poor nations of the world can, by and large, be explained on the basis of knowledge disparity. This observation is borne out by successive Human Development Reports of the United Nations Development Programme and the World Development Reports of the World Bank.

A knowledge economy is an economy in which the creation of knowledge and its application in the production of goods and services provide the basis for wealth creation and socio-economic development.

In a knowledge economy, knowledge does not only join labour and capital as a factor of economic production; it is the most crucial component. In the knowledge economy, knowledge is important not for its own sake but in so far as it is applied in creating new products or services, improving production efficiencies or developing completely new production pathways. When knowledge is applied in these economically meaningful ways it is referred to as technological innovation.


How is the knowledge economy related to human capital development?

To start with, human beings are bearers of knowledge and technical know-how. The most valuable asset of any business in a knowledge economy is its human capital.

The success of any business depends on its ability to develop, organise, synergise and deploy its human capital, i.e. the knowledge, skills, competencies, attitudes and other individual and collective human attributes of all its workers, towards building an enduring competitive advantage.

This is achieved through human capital development.

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