Instead of seeing technological progress as something in which a country or company will have nothing to gain unless it controls the process, cooperation today is very much at the core of the discussion. In the past we had the ''lead dog" approach: the scenery only changes for the lead dog in the sled of technological progress. You had to believe in that to be the top dog or you were lost. More and more we believe that cooperation has an important role in this process.
Where do developing countries fit in this scheme of things? My talk today will focus on answering this question.
I suggest here that, from the point of view of the world economy and from the point of view of science and technology, what happens in many developing countries will be vital, not only for their own development, but also for the future of the world economy. So I begin my talk with a vision of the future qualified by the obvious caveat: "He who predicts the future is bound to be wrong even when he happens to be right."
I present three issues. First, globalization is here to stay, but globalization not only in the sense of an increasing interdependence in terms of trade and investment, but also interdependence in terms of knowledge flows.
What is really new in the world economy today are the possibilities that we have to exchange knowledge and information in amounts that were impossible just a few years ago. In this context, there is a kind of discontinuity in the way the world economy can operate.
Second, the world economy is becoming more and more knowledge intensive. And knowledge has become a major determinant of how to explore comparative advantage in an effective way.
The concept of comparative advantage is probably the only economic concept that is both true and nontrivial. There is no doubt that we have to discuss dynamic comparative advantage, and this is not an easy subject. What I will do is focus on the opportunities generated by international knowledge flows.
Consider international trade flows. If we focus on R&D intensity, by 1965, most products that we would characterize as R&D-intensive products were responsible for approximately 11 percent of world trade flows; now they account for roughly 25 percent. So there are a lot of opportunities.
The third point that I would like to make is that we are moving into an economic system that is increasingly disciplinarian. Countries that make mistakes pay dearly for those mistakes. The recent experience of Mexico is a good example in this context. So interdependency and its consequences will continue to increase. Countries will have less freedom with respect to policy choice in this global economy.
At the core of this global economy are service links. And the services trade is growing very fast. (However, there are many problems with the statistics. I recommend the recent World Bank report called Global Economic Prospects, in which the growth of trade in services is reviewed.) We find significant growth, particularly in the so-called "private services" category which consists of typically knowledge-intensive activities.