the process. If the world's demand for petroleum drops, most petroleum producers will lose unless they have diversified into other products that involve less use of resources and higher value. Most international oil companies are investigating this strategy. Indeed, British Petroleum and Shell are already following such policies. Monsanto is doing the same within the chemical industry.
The main point is that nations do not develop on the basis of resource exports. At the end of the day, development can make all better off. The trend is inevitable, and the sooner one makes the transition to the knowledge revolution, the better. The data and a conceptual understanding of how markets operate lead to the same conclusion. Economic development cannot mean, as in the industrial society, doing more with more. It means achieving more progress with less use of resources.
The knowledge revolution could develop in different ways, depending on how our institutions and policies unfold. As already explained, knowledge has the capacity to amplify current discrepancies in wealth because knowledge sectors can lead to natural monopolies such as those due to the adoption of operating systems (Microsoft's Windows is a case in point) or other standards. Knowledge sectors could amplify the differences in wealth between the North and the South. If that occurs, the low prices of resources from developing countries will persist, because they result in part from the necessity to export at low prices in a difficult international market climate. It has been shown that with current institutions of property rights, anything that leads to more poverty will lead to increased resource exports from developing countries (Chichilnisky 1994a).
However, knowledge sectors will flourish in nations that have skilled labor. Several developing nations are or soon could be in that position; examples are the Caribbean area and Southeast Asia and many areas in Latin America (Harris 1994).
The main issues here are
• abandonment of the resource-intensive development patterns that those nations have followed for the last 50 years, with the support and encouragement of the Bretton Woods institutions, such as the World Bank and the International Monetary Fund; and
• establishment of the institutions (property rights and financial markets) that could lead them to overcome the mirage of resources as a “comparative advantage,” help avoid the heavy stages of industrialization, and move directly (“leapfrog”) to the knowledge society.
Heavy accumulation of capital (financial or physical) is not needed for most knowledge sectors. Indeed, most new technologies were developed in small firms within the United States (the proverbial “garages” in Silicon Valley), and software production in developing nations is labor-intensive and requires relatively little