The role of Science, Technology and Innovation (STI) in Economic Growth

Economics and STI.

We know that economic growth is the subject of economics research. To explain the economic growth, the economists in each period were always trying to find out the factors that decision to the growth.

- During the period of the classical economists, to explain the social and economic development of that period, the economists have referred to the emergence of a "capital" and "capitalism" and their role in investment in production, leading to the impulse for the development of society. Also during this period, Karl Marx had to be "the first of the classical thinkers who stressed Technological change as a driving force in history" (tutorial lecture by Professor Claes).

- By that time the neoclassical economics, the economists emphasize on the inputs of production such as "Land", "Capital" and "Labour" and that the alternative between "Capital" and " Labour" in the Cobb-Douglas production function is the basis for growth. A factor that today is known as the activities of STI had not been grouped as factors explaining economic growth. Until the time when the results of the test by R.Solow and later by E.Denison were announced, people understand that the activities of STI has a significant role for economic growth, although that contribution is very difficult to measure (led by information from a lecture by Professor Claes and Tunzelmann’s book).

- When the evolutionary economics occurs, the activities of STI have been determined that they have actually contributed significantly to economic growth. Based on inspiration from the concept of "Creative Destruction" in the previous period of J.Schumpeter, the economist in this school considered that the companies and firms always have to conduct innovation to overcome the selection of the market, then continue to exist and develop (information from a lecture by Professor Claes and Tunzelmann’s book). For companies and firms have little or no innovation often, they will encounter many challenges of the market so prone to failure and destruction.

The economic crisis and the role of STI

I want to use the information in the lecture by Professor Claes and Tunzelmann’s book on the findings of N.Kondratiev (Long Wave Theories) and J.Schumpeter (Creative Destruction) to talk about the link between economic growth after each period of crisis with STI activities.

Accordingly, an economic cycle for the N.Kondratiev was extended from 50 to 60 years, called the Long Waves, go through the four phases: prosperity, recession, depression and recovery. Absorb the theories of N.Kondratiev, J.Schumpeter discovered "counter waves", ie in each cycle when the economy fell into depression phase, the development of STI activities becomes very strongly. J.Schumpeter called that development is "Creative Destruction" and this innovation brings new things (new products, new management and production methods, new markets or new resources etc...), promoting investment activities, making the economy more vibrant active to go out of the crisis and return to growth period.

In the history of the world economy, the following markers can be considered to illustrate for the findings of N.Kondratiev and J.Schumpeter:

- In 1771: the industrial revolution.

- In 1829: the textile industry and the railways.

- In 1875: the period of the chemical industry, electricity and steel.

- In 1908: the period of the oil, automobile and mass production.

-In 1971: the period of information technology.

(Quoted by http://en.wikipedia.org/wiki/Kondratiev_wave).

Conclusions.

We can see that STI activities inextricably linked to economic growth. The economists are the people who tested this includes economists that initially did not consider factors such as science and technology is one of the reasons for the economic growth.

        Economics is a field of activity is always highly competitive, with the input of resources is always limited. To survive and development, economic institutions always need to capture growth through efficient use of resource inputs, providing outputs which are innovative and competitive. The investment in STI activities is a solution to that problem. At the national level, the identification and appropriate investment for STI activities will promote the growth of key economic sectors, accompanied by the growth of entire economies, thereby sustain development for that country. Besides, we know that in every period of economic crisis, the activities of the STI is the hope to create a new dynamism for the economy to overcome the depression. Clearly, the role of STI activities for economic growth is huge. Today, we know that the development of STI activities in each country is the one of the criteria to assess the level of economic development in those countries.

Truong Chi