In common with other developed economies, Britain has advocated the creation of a high-skilled, high-waged economy by upgrading the education and skills of its workforce. The creation of world-class skills is assumed to be a route to economic prosperity, reduced income inequalities and social cohesion. Such policy prescriptions rest on the idea of a knowledge economy where innovative ideas and technical expertise hold the key to the new global competitive challenge. While Britain’s workforce can no longer rely on low skilled manufacturing jobs to provide a living wage, as these jobs migrate to low-cost economies in Eastern Europe and Asia, it is commonly argued that Britain is well placed to become a ‘magnet’ economy, supplying the global economy with high skilled, high waged workers.

But the recent success of China and India in moving into the production of high value-added, high-technology products has caused political leaders and their advisors to re-evaluate the global economic challenge. The OECD recently acknowledged that emerging economies including China and India were moving up the value chain to compete with Western companies for high-tech products and R&D investment. 

Under the re-evaluation that has accompanied this new insight, a win-win scenario emerges, not through the quality of the high-tech goods produced in the West but through the ability of Western economies to introduce change, innovation and productivity growth. The policy implications are to support innovation and entrepreneurship by producing ‘more highly skilled workers’ through education and training policy focused on life-long learning, in order to sustain a shift toward more high value-added activities that might remain within the economies of the OECD.

Prime Minister Gordon Brown (2008) recently announced that the UK had entered a ‘global skills race’.  Within this race, education, knowledge and skills assume ever-greater importance. The challenge is to outsmart other national economies - whether established or emerging - in the ‘knowledge wars’ of the future.