UK: BOOKS - CAPITALISING ON KNOWLEDGE - Sir Geoffrey Owen examines an alternative blueprint for a 'third way'.

UK: BOOKS - CAPITALISING ON KNOWLEDGE - Sir Geoffrey Owen examines an alternative blueprint for a 'third way'. - Living on Thin Air: The New Economy

Last Updated: 31 Aug 2010

Living on Thin Air: The New Economy

Charles Leadbeater, Viking £17.99

Metal-bashing is out, and knowledge-creation is in. One of the cliches in current management literature is that the successful companies of the future will depend not on their skills in manipulating objects, but on their ability to harness the creativity of employees. The role models are the fast-growing software and biotechnology firms, in which teams of highly qualified 'knowledge workers' collaborate in non-hierarchical ways to generate new ideas.

Another strand in this literature is the emergence of the so-called network firm - Nike, the sportswear company, is a well-known example, because it concentrates almost entirely on product conception and design, while contracting out manufacturing and distribution to others. The key assets in this type of company are not their factories or machines, but the talents and imagination of their staff.

Does this represent a natural evolution of the capitalist system, or is it something entirely new, calling for fundamental reforms in the way companies and national economies are organised? Charles Leadbeater, a former Financial Times journalist closely associated with Demos, the New Labour-inclined think-tank, holds to the latter view. He thinks the world has entered an era of 'knowledge capitalism', distinguished from previous eras by 'the spectacular growth of organised science, the consequent acceleration of technological change and the speed at which new ideas are translated into commercial products'.

The challenge for policy-makers, he says, is to devise institutional arrangements which will promote the innovations made possible by scientific advance, while ensuring that their social consequences are benign.

A central theme in Living on Thin Air is Leadbeater's belief that collaboration and trust are essential lubricants in the creation of knowledge, both within companies and society, and he regards the old model of the shareholder-owned and stock-market-driven company as inappropriate for the knowledge-based enterprises which will be playing increasingly important roles in the economy.

Like some other Blairite thinkers, Leadbeater is enormously impressed by the dynamism of California's Silicon Valley, which he sees as a model of the network-based industrial system, with firms competing and collaborating with each other in a never-ending search for new products. But entrepreneurial vitality, in Leadbeater's view, is not enough. The downside of Silicon Valley's success is its lack of a 'civic culture'; it is also a highly unequal society. Leadbeater's ideal world appears to be one which would combine the adventurousness and risk-taking of Silicon Valley with social inclusiveness.

How this Utopia is to be brought about is not at all clear, but on one point Leadbeater has no doubts: market forces alone will not do the trick: 'A free market society would put us at the mercy of the impersonal and capricious forces of the financial markets, widen inequalities and underinvest in the long term and the public goods on which we all rely,' he says.

Moreover, whereas markets and private property are a good way to organise an economy which is largely made up of physical objects, they may not be the best way to organise one that is knowledge-driven, he argues. And governments have a vital role to play as the facilitators of the knowledge-creation process.

The book, as a blueprint for a post-capitalist society, is unconvincing.

Leadbeater dismisses too easily the possibility that the capitalist system, in something like its present form, is flexible enough to accommodate the technological and organisational changes he describes.

But, unlike some other attempts to define a 'third way' between socialism and capitalism, this book contains some fresh and provocative ideas, which managers, politicians and public officials will find interesting - even if they find the overarching thesis implausible.

Sir Geoffrey Owen, former editor of the Financial Times, is a senior fellow at the LSE. His book on postwar Britain, From Empire to Europe, will be published in November.

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