Economist says technological innovation is no longer enough in world economy

The world economy is entering its fourth industrial revolution and technology will be at the heart, says a leading economist.

According to Klaus Schwab, executive chairman and founder of the World Economic Forum, the world is shifting from being an information society to one that uses data more intelligently.

Technological innovation is no longer enough. Countries, companies and individuals will need to exploit their knowledge more smartly if they are to succeed in the new 'Intelligence Society,' he says.

'We are moving into a society which will be driven by well networked individuals, where people are empowered. It's not just intelligence in the sense of technological innovation, it's also about empowering people so that they become a lot more creative than in the past,' Schwab told delegates at the SAS Forum International in Geneva today.

Schwab says the IT industry – and more broadly the global economy – will undergo major changes in the next 10 years as economic and political power shifts away from the United States to China and India.

'There are four billion university graduates coming out of China and India each year and there are 13 times more students graduating in engineering and science in these countries compared to the US where the numbers are decreasing,' he said.

With 140,000 software engineers located in Bangalore alone, regions like California's Silicon Valley with just 120,000 developers will be hard pushed to keep the crown for IT leadership unless it innovates, says Schwab.

The growth of the Chinese economy and increased use of electronic goods will also put massive pressure on the world's energy supplies.

'Our economic model will come under pressure with the rise of big consumer nations, such as India and China. If we assume the same energy consumption in China as we see in the US then China will consume all the world's energy output by 2040,' said Schwab in his keynote speech.

European and US governments and businesses need to rethink their approach and give more attention to education and training if they are to compete with Eastern nations, he says.

'The countries with the highest educational levels are the most competitive in the world. You need to invest in the people not in the jobs. We need to enact the necessary reforms in order to compete, but most importantly we need to change the mindset,' said Schwab.