Being endowed with natural resources does not weaken an economy's capacity to innovate and grow, contrary to many claims. A nation can have large mining or agricultural industries and still be not only prosperous but innovative, continually finding new ways to improve products and services.
That is the message of a new CEDA research paper, Innovation and Growth in Resource-based Economies.
The paper, by innovation expert Professor Keith Smith, is the latest in a series produced by CEDA's Competing From Australia project. The project explores how Australia is adapting to the new global economy.
It is often claimed that high dependence on resource industries - like coal, iron ore, oil or grains - helps keep economies stuck in low-growth activities.
But Innovation and Growth in Resource-based Economies points out that several of the richest and/or fastest-growing economies have unusually large resource sectors, including Canada, Norway, Sweden, Finland, New Zealand, Australia and the Netherlands. Professor Smith argues that these countries have rested their economic development on their resource industries.
The paper says while resources are not typically seen as "high-technology", "low technology" industries make up the bulk of economic activity - and these "low-tech" industries continue to grow, innovate and use sophisticated knowledge. In fact, the paper notes, these lower-technology industries are responsible for most of the innovation that happens in economies.
It also points out that many of the Australian economy's features - a smaller manufacturing sector, a large services sector, low levels of formal research and development spending, a technology trade deficit - are typical of rich resource-based economies.
"This work says abundant natural resources are in no way an obstacle to Australia's growth," says CEDA chief executive officer David Byers.
"Indeed, this report suggests our resources industries can not just fuel economic growth, but help make Australia a more innovative economy.
"Australians need to understand the degree of technological and engineering knowledge and creativity required to find, develop and produce our natural resources.
"For instance, people too often think of mining as a dig-it-up, ship-it-out activity. We sell ourselves short when we think of the resources industries that way. Their work in unlocking the potential of Australia's resource base is far more sophisticated."
Innovation and Growth in Resource-based Economies is written by Professor Keith Smith, who holds the Chair in Innovation at the University of Tasmania. Professor Smith is co-founder of the Australian Innovation Research Centre in Hobart, and previously worked at the European Joint Research Centre in Seville. He has written previously for CEDA on innovation.
More details of CEDA's Competing From Australia project can be found at the CEDA Web site.
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