A LATECOMER to the world’s industrial party, Ireland is attempting to jump from the agrarian era straight into the information age. This feat is being facilitated greatly by foreign direct investment that embodies the best of American technology and know-how.

Since the information or knowledge economy is well established in America, it is likely we have imported a good deal of it in the form of world-class multinational companies. That is one reason why our productivity has been consistently high.

The transition to an information economy is far from complete, but that part already accomplished probably has been made easier by not having to deal with old-industry baggage. This was quite an issue in Britain, where problems were encountered in exiting from coal, steel, textiles and car manufacturing.

Clearly we have much further to go up the value-added chain to protect ourselves from the competitive effects of low-wage economies in eastern Europe, Asia and Latin America. Official pronouncements on the subject have been both optimistic and florid.

Introducing Ahead of the Curve, a strategy document, the tanaiste, Mary Harney, said the government visualised the country “as a unique reservoir of knowledge and intellectual capacity with a strong research and innovation-driven base”. But to make such a strategy work, we have to be prepared to accept, and work through, the type of “creative destruction” that can give rise to social and political tensions.

We all appreciate the creative part of the equation, but when it comes to destruction, the closure of older industries is usually accompanied by upset, union difficulties and pressure on government to find replacement jobs. The manufacturing base is shrinking.

Forfas has found that employment in the sector is down 13% from its peak in 2000. The number of jobs in the sector fell by 31,000 in the five years since, breaking a 30-year record of expansion. In the same period employment in services expanded 21%.

Easing the pain for those affected by job losses in manufacturing means greater adaptability as well as more safety nets involving retraining and upskilling. Labour market flexibility is essential for this process to work, but one wonders if social partnership is equipped to deliver this.

In moving towards the information age, we need to be careful not to throw the baby out with the bath water. There are many old industries that could be upgraded. James Dyson, the eponymous vacuum cleaner manufacturer, and other innovative entrepreneurs believe that many products can be reinvented and brought to a very high level.

Many American commentators now regret the disappearance of much of their traditional industry and believe that if product development had taken place on a sufficient scale, then America’s balance of payments deficit with China would not be so large.

If we are serious about getting to the top of the knowledge tree, however, in niche areas at least, then we will need to copy less and innovate more. This is the big challenge that needs to be confronted. It is made even more urgent by the fact that already some of the larger Chinese cities are relocating their older industries to rural parts and moving up the value chain. In these cities, wages are only twice the national average, which means they are still extraordinarily low by western standards.

Against this background, this month’s Leaving Certificate results are doubly disappointing. Of the 51,000 students who sat the exam, 8.8% failed maths, 15% failed ordinary level chemistry, 13% failed biology and 9% failed physics. Added to all of this is the declining interest in science subjects at third level, and the recent collapse in the number of points required to get into certain third-level subjects. If we don’t fix this problem, we have no business pretending we are candidates for the knowledge economy.

There is evidence that science graduates are not paid as much as graduates in medicine, management, accountancy and law. There is, of course, a tendency for knowledge industries to recruit not at primary degree level but at PhD level and higher. This is what happens in America and we have to accept that as the norm. If post- doctoral graduates are underpaid in Ireland, then we must find out why as a matter of urgency.