78
International Journal of Management and Economics Fundamental
https://theusajournals.com/index.php/ijmef
VOLUME
Vol.05 Issue03 2025
PAGE NO.
78-86
DOI
10.37547/ijmef/Volume05Issue03-12
Dialectic of the Relationship between the Knowledge
Gap and Economic Diversification
Mohammed fadhel Yaser alshnawah
a
a
Department of Management, College of Administration and Economics, Al-Muthanna University, Al-Muthanna, Iraq.
Received:
22 January 2025;
Accepted:
26 February 2025;
Published:
28 March 2025
Abstract:
Economic knowledge constitutes one of the most important pillars on which economic development
depends across various economic sectors. The latter utilizes a set of factors that ensure its continuity and the
sustainability of proper operations. According to the latest research papers on economic diversification and its
relationship with innovation and technological development, the researchers sought to elucidate this relationship
by examining the most significant economic developments. Education has long been considered a critical factor
influencing the economic growth of any country. Education can be defined as the process of acquiring knowledge,
skills, values, beliefs, and habits that help individuals develop their personalities and improve their social and
economic status. The relationship between education and economic growth is a complex issue that has been
studied by economists, policymakers, and sociologists for many years. In this section, we will explore the various
aspects of the link between education and economic growth, and why education is considered a key driver of
economic development. Education is regarded as an important investment in human capital development. Human
capital refers to the knowledge, skills, and abilities possessed by individuals that can be used to create economic
value. Education is a fundamental element in human capital development because it provides individuals with the
knowledge and skills necessary to participate in the labor market and contribute to economic growth. Education
also helps increase labor productivity, which can lead to higher wages and improved living standards. Furthermore,
education plays a crucial role in promoting innovation and technological advancement. It equips individuals with
the knowledge and skills needed to develop and apply new technologies, which can result in innovation. Innovation
is a key driver of economic growth, as it helps increase productivity, reduce costs, and improve the quality of goods
and services.
Keywords:
Education
،
Economic Growth
،
Human Capital
،
Innovation
،
Economic Development.
Introduction:
Iraq exhibits characteristics similar to
those found in developing countries, including low
living standards by general metrics such as income,
education, health, low private savings, reduced
production and productivity, limited productive
capacities, weak industrial linkages, and a shortage of
skilled labor. However, Iraq, unlike most developing
countries, possesses a significant portion of the
requirements for economic growth. Iraq has the
financial resources required for high levels of
investment and imports, as well as abundant natural
resources and raw materials, such as crude oil, natural
gas, phosphate, and sulfur, alongside vast agricultural
land and water resources essential for abundant
agricultural production. Moreover, Iraq is characterized
by a relatively low population density. What most
distinguishes the Iraqi economy is its increasing
dependence, since the 1920s, on the extraction and
export of crude oil. After the establishment of the Iraqi
state and its independence in 1921, the economic policy
in Iraq during the period between the beginning of
commercial oil exploitation and the generation of oil
revenues for the government in 1932, on the one hand,
and the significant increase in oil revenues and the start of
their utilization for public projects in 1950, on the other
hand, was scattered and incoherent. In reality, it was little
more than general data reflecting the limited priorities
and desires of the government at that time. The term
"economic diversification" was not commonly used in
most developing countries, and external influence was so
strong that these countries were neither free nor
independent in their economic policies.
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International Journal of Management and Economics Fundamental (ISSN: 2771-2257)
One of the main reasons for the ineffectiveness of
economic policies was the state of political instability,
as reflected in the rapid changes of governments and
the other events witnessed by the Iraqi economy.
Additionally, the absence of a competent and trained
civil administration capable of formulating and
implementing economic policies, along with the
widespread corruption and nepotism, also weakened
these policies. In the 1950s, government economic
policies differed from those of previous decades.
Technological Changes and Knowledge
The scientific and technological advancements in the
second half of the 20th century have led to successive
developments and the intertwining of technological
applications. Progress in electronics, integrated circuit
technology, computers, software, and communications
has facilitated the rapid transmission, classification,
and analysis of data across multiple sectors such as the
economy, banking, industry, defense, agriculture,
medicine, and the environment. Technological
advancements in computers, microprocessors, and
software have contributed to the development of
communication networks and enabled the exchange of
information between computer networks. In recent
years, these networks have evolved to connect
computers globally through the emergence of the
internet, enabling the transfer of data, graphics,
images, and sound in digital formats. The beginnings of
the scientific and technological revolution were
accompanied by space exploration and the launch of
communication satellites. The internet networks,
combined with a system of communication satellites,
have led to the development of what is known as the
"Information System Super Highway" to transfer
information at high speed and density. Other
developments include the use of new materials like
optical fibers for terrestrial communication networks
and the increasing use of microwave networks for more
cost-effective communication transmission
【
Basseem,
2006, p.11
】
. These advancements have led to a
convergence
between
the
worlds
of
telecommunications and information. For example, the
collaboration between global television networks, print
and audio media, and computer and software
producers has made it possible to broadcast
information and education to both developed and
developing countries. This has enabled broad sectors of
individuals and groups to shape the media through the
exchange of opinions and expertise via the internet. All
these developments have created an unprecedented
leap in information and knowledge, resulting in
immense economic gains and significant human and
social development. The economic gains are reflected
in the form of material returns resulting from improved
information. At the same time, human and social
growth is achieved through learning, participation, and
direct employment. Thus, the information technology
revolution and its various applications have given rise to
what is termed the post-industrial society, a society that
generates added value derived from information and
knowledge
【
El-Bawab, 2011, p.65
】
. For example,
financial institutions, banks, and industrial and
commercial companies have benefited from the rapid
transmission of intensive data, information, and
knowledge between their branches worldwide. This has
led to significant economic returns, as:
A) It became possible to support managerial and financial
decision-making by utilizing the available capabilities for
linking automated accounts, exchanging programs, data,
information, and images, and transmitting them in large
quantities instantly to multiple locations simultaneously.
B) Financial information could be transmitted moment by
moment and exchanged between stock markets, banks,
shareholders, and companies, thereby supporting local
and global investment and development activities and
encouraging savings to be directed toward better
investments, which in turn supports investment and
development
C)
【
Taylor, 2002,
】
. Millions of dollars have been saved
through the transmission of this vast amount of
information and advertisements over communication
networks, which are more cost-effective. These savings
have been reinvested to achieve effective competitive
capabilities, while also providing a significant service to
consumers by saving time in searching for more affordable
alternatives.
D) Experts and consultants, including economists,
engineers, and scientists, have been able to expand their
consulting services and supervisory capacities by being
able to connect instantly with their partners via the
internet and mobile phones, thus maximizing the benefits
of their knowledge and expertise.
Development and Knowledge
Human development is essential for technological
development and knowledge. Human development
encompasses health, nutrition, education, training, access
to knowledge, innovation and creativity, achieving a
better standard of living, participation in the social,
economic, and political life of society, employment, and
poverty eradication.
This section explores how technological changes have
influenced human development in various ways and how
this human development, in turn, has improved
individuals' abilities in knowledge and innovation,
significantly impacting the development of various
technologies and knowledge.
We will also examine some negative effects on human
development resulting from technological and knowledge
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International Journal of Management and Economics Fundamental (ISSN: 2771-2257)
advancements and discuss ways to address these
effects.
The Health Sector
Perhaps the most prominent example of the positive
and negative uses of technology and knowledge in
health is the Nobel discovery of nitroglycerin and its
therapeutic properties for heart diseases, followed by
the development of dynamite for use in mining, which
was far removed from its original therapeutic purpos
【
Human Development Report, 2011, p.48
】
. Another
example highlights the dangers of technological use,
raising both an economic and humanitarian issue by
blending severe harm with undeniable benefits. The
industrial chemical compound known as DDT was used
as a pesticide, saving much agricultural production. It
also helped control typhoid epidemics during World
War I. However, by the 1960s, its detrimental effects on
human health became apparent, and environmental
groups successfully convinced governments that it
caused irreversible environmental damage, leading to
its ban.
Conversely, developing countries like Sri Lanka used
small amounts of DDT to combat malaria, which had
caused 2.8 million infections and 7,300 deaths,
reducing the cases to just 17 without any fatalities.
Similarly, 23 other countries, including India and those
in Latin America, continued to use DDT as a cost-
effective solution to combat malaria, which causes over
a million deaths annually despite its known risks. In
2001, the United Nations Environment Programme
signed an international agreement banning its use,
except for public health purposes. Alternatively,
biotechnology has been misused to produce dangerous
viruses, such as the HIV virus and flesh-eating bacteria,
and genetically modified plant strains that cause
allergies or disrupt the natural balance of bodily
functions. Some of these viruses and bacteria are easy
to produce and do not require advanced laboratories or
equipment. Nevertheless, a successful partnership
between the United Nations Development Programme
and the Japanese government resulted in the
production of rice crops with yields increased by
approximately 50%, with a reduced growth cycle of 30
to 50 days. The new rice crop was richer in protein and
nutritional value, resistant to disease, drought, and
pests, and did not require fertilizers. Similarly, Egypt
managed to increase wheat production by 17.89% per
acre in 2000 compared to the previous year, thanks to
scientific research that developed genetically modified
and improved wheat varieties to withstand salinity and
drought. However, concerns about the health, food,
and environmental risks of genetically modified foods
have led to the halting of sales of tomatoes, potatoes,
and other products in Europe. It is evident that the
advancement of knowledge and technology, especially in
biotechnology and genetic engineering, has had a
significant impact on human health.
Therefore,
scientific
research
and
technological
applications must transparently reveal the benefits and
risks to strike a balance between utilizing their advantages
and mitigating their dangers.
Education
A
knowledge-based
economy
requires
constant
development, which can only be achieved through
education. With the spread of computers, the internet,
and the emergence of distance learning and television-
based education, individuals' ability to learn has become
much easier than before. Obtaining information no longer
requires as much time as it did in the past. Education in a
knowledge-based economy has also evolved into
"learning through work." This approach encompasses
both formal education and the ability of individuals to
acquire and apply modern theoretical and analytical
knowledge to develop their skills and expertise
【
Organization for Economic Cooperation, 1996, p.16
】
.
(Sassoon, Joseph)
1- Indicator of Education:
Education is considered one of the key indicators of
sustainable development. The literature on sustainable
development has highlighted the importance of education
as a tool for achieving cultural progress and linking the
needs of the labor market with education. Education is
also recognized as a fundamental human right aimed at
improving the standard of living (Al-Jawarneh Wesoss,
2015:85). This indicator is associated with the essential
requirements of sustainable development. The level of
education correlates with the economic and social
progress achieved by any society. Human resources
contribute to real human development through various
types of education and training. The growth experiences
of some developed countries demonstrate that the impact
of education on economic growth translates into an
increase in production (Al-Battat & Al-
Mas’oudi,
2020:103). It reflects a measure of literacy rates among
adults in a population, the percentage of individuals
enrolled in different stages of education, and the number
of those graduating (completion rates). Furthermore,
there are several indicators for measuring education
(Hammadi, Feb. 11-14:137), including:
A. Government spending on the education sector.
B. The actual number of students present in the education
sector.
C. The share of education spending from the Gross
Domestic Product (GDP) and the outcomes of education.
D. Student graduation rates (completion rates).
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International Journal of Management and Economics Fundamental (ISSN: 2771-2257)
Number of Schools and Universities:
The continuous increase in spending on education is
one of the major responsibilities faced by economists
concerned with regulation and economic affairs. This
increase is not limited to one country but is seen across
various nations. Education spending has become a
growing percentage of the state budget and national
income compared to spending in other economic and
social sectors. These percentages vary from country to
country, depending on their level of development and
the progress they have achieved. Investment in
education is considered an investment in the individual
and society because it contributes to the country's
growth and advancement. Building an advanced
educational production base and providing suitable job
opportunities contribute to increasing the national
output, making it a tool for development. This happens
when individuals can contribute to increasing national
production through the development of their scientific
capabilities, which are based on the level of education
they have received. In Iraq, education is a fundamental
factor for the advancement of society, and it is a right
guaranteed by the state for all Iraqis, as stipulated in
Article (34) of the 2005 Constitution (Iraqi Constitution,
2005: Article 34).
Spending on education is considered an investment in
human capital that contributes to economic
development and progress, as it is difficult to imagine
the continuity of any educational system without
financial allocations ensuring its sustainability. Table
No. (1) illustrates this.
In 2005, education spending declined, reaching
1,472,788.2 million dinars, accounting for 5.58% of total
expenditures, compared to 2004 when spending was
1,802,610.9 million dinars. This decrease was due to the
deteriorating security situation, with a focus on military
expenditures. From 2006 to 2014, there was a rise in
public education spending, reaching 2,051,914.3 million
dinars in 2006, accounting for 5.28%, and continuing to
increase until 2014 when it reached 2,621,688 million
dinars, accounting for 8.80%. This rise in education
spending was attributed to oil revenues generated from
the export of crude oil. However, public spending on
education fluctuated, with a decline in 2015 when it
reached 9,874,555.6 million dinars, accounting for
14.02%. The state of education in Iraq faced a significant
collapse, as the UNESCO report indicated that 2 million
children were out of school, and 14,000 teachers were
displaced due to sectarian and ethnic wars in several areas
such as Kirkuk, Diyala, Baghdad's Belt, Salahuddin, and
Anbar. These statistics were compiled before the
liberation of provinces from ISIS control. Additionally, the
illiteracy rate in Iraq rose to 6 million citizens, nearly 20%
of the population (Al-Shammaa, 2017.14p). In 2017, public
education spending decreased to 3,907,899 million dinars,
accounting for 5.17%. In 2019, it increased to 5,053,840
million dinars, accounting for 4.52%, compared to 2018,
when spending was 4,121,195 million dinars, accounting
for 5.09%. In 2020, public spending on education reached
3,991,824 million dinars, accounting for 5.24%, due to the
dual crisis (health crisis and declining oil prices). Most
projects were halted, and public revenues declined,
leading to the reduction of public spending, particularly
investment spending in all sectors.
The Amount of Public Expenditure on Education and Its Percentage of Total Public Expenditure for the Period
(2004-2020) (in Million Dinars)
Percentage
of Public
Spending
on
Education
)
Growth
Rate
%
Public
Spending on
Education
Public
Spending
years
4
3
2
1
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5.61
-
1802611
32117491
2004
5.58
-18.29
1472788
26375175
2005
5.28
39.32
2051914
38806679
2006
6.99
32.98
2728653
39031232
2007
8.32
81.15
4943190
59403375
2008
10.02
6.56
5267520
52567025
2009
9.43
25.63
6617860
70134201
2010
9.95
18.51
7842843
78757666
2011
8.74
17.23
9194187
105139576
2012
8.48
9.91
1
E+07
119127556
2013
8.8
1.05
1
E+07
115937762
2014
14.02
-3.3
9874556
70397515
2015
13.72
4.34
1
E+07
75055865
2016
5.17
-62.07
3907899
75490115
2017
5.09
5.45
4121195
80873189
2018
4.52
22.63
5053840
111723523
2019
5.24
-21.01
3991824
76082443
2020
Columns: - *Columns (1, 2) * are based on data from the Central Bank of Iraq, Statistics and Research
Directorate, statistical bulletins for various years. - *Columns (3, 4) *
are the result of the researcher’s work.
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Years: -"The percentage of public expenditure on the education sector."
This increase in the share of public spending on
education from total public expenditure does not
necessarily indicate an improvement in the quality of
education in the country, nor does it provide a clear
indicator due to the imbalance in the general budget.
The majority of the expenditure is allocated to the
operational budget at the expense of the investment
budget. After 2003, successive governments sought to
advance the education sector by overcoming the
obstacles facing this sector. Therefore, a set of
indicators will be reviewed, which reflect the
educational reality in Iraq and the impact of public
spending on these indicators, as follows:
1. Primary Education Indicators in Iraq
From the table, it can be observed that the number of
primary school students was (4,334,609) in the
academic year 2003
–
2004, and the number of primary
schools in Iraq reached (13,914). However, there was a
decline in the academic year 2004
–
2005, with the
number of students decreasing to 3,767,369 and the
number of schools to 11,129. The number then
increased during the academic year 2006
–
2007,
reaching 4,150,940 students and 12,141 schools. This
upward trend continued, reaching 5,555,674 students
in the academic year 2013
–
2014, and 15,807 schools.
This increase was attributed to the improved security
situation, the inclusion of data from private primary
schools, an increase in school construction, and better
security conditions for teaching staff. Subsequently, the
numbers declined in the academic year 2014
–
2015,
with the number of primary schools dropping to 10,779
and the number of students to 4,283,044. The decline
was attributed to deteriorating security conditions, the
entry of terrorist groups, and military operations. The
numbers increased again in the academic year 2018
–
2019, with 6,501,053 students and 17,235 schools, due
to political and security stability, as well as the
implementation of projects aimed at building schools
to accommodate the growing numbers and expand the
capacity of educational institutions. However, in the
academic year 2019
–
2020, the number of students
decreased to 6,255,849, and the number of schools to
15,470.
2. Secondary Education Indicators in Iraq
The table shows that the number of secondary schools,
students, and teachers fluctuated due to the unstable
security situation. In the academic year 2003
–
2004, there
were 4,269 schools and 1,571,288 students. In the
following academic year, 2004
–
2005, the numbers
decreased to 3,576 schools and 1,437,842 students, due
to the lack of security, which prevented the accurate
counting of students in some areas. The numbers
increased again in the academic year 2006
–
2007, with
4,109 schools and 1,491,933 students, before declining
and then rising again in 2007
–
2008. The numbers
continued to rise, reaching 7,083 schools and 2,526,133
students in the academic year 2013
–
2014, due to a
relative improvement in security. However, accurate data
for the years 2014
–
2015, 2015
–
2016, and 2016
–
2017 is
unavailable due to the security instability in some
provinces. The number of schools then increased to 7,485
in the academic year 2017
–
2018, with 2,933,539 students.
By the academic year 2018
–
2019, the number of schools
rose to 8,139, with 3,140,110 students.
3. Higher Education Indicators in Iraq
The development of higher education indicators in Iraq
witnessed significant growth after the events of 2003,
with universities spreading across all Iraqi provinces,
reflecting the critical role higher education plays in
achieving economic development in Iraq, as illustrated in
the table. According to Table (2), the number of graduates
rose to 74,676 in the academic year 2003
–
2004, with 17
universities. The numbers continued to increase, with 31
universities and 98,673 students in the academic year
2011
–
2012. The rise continued, with the number of
students reaching 537,085 in the academic year 2019
–
2020 and 35 universities, compared to the 2018
–
2019
academic year, when the number of graduates reached
681,140.
21:08
However, higher education was affected by the COVID-19
pandemic, leading to challenges in managing the
D
a
t
a
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International Journal of Management and Economics Fundamental (ISSN: 2771-2257)
educational process. No solutions or strategies were
developed to address how millions of students would
receive their lessons during that period. Higher
education institutions relied on online learning, but
many students could not access the internet due to
their poor living conditions. Distance learning also had
several disadvantages, including a lack of social
interaction, decreased development of personal skills,
skepticism about the credibility of online education
among employers, internet-related issues, and the
complexity of learning methods for some students.
"The Education Index in Iraq for the period( 2004-2005.)"
years
Number
of
students
Number of
elementary
schools
Number
of
students
Number
of high
schools
Number
of
colleges
Number
of
graduates
2003
–
2004
4334609
13914
1571288
4269
17
74676
2004
–
2005
3767369
11129
1437842
3576
17
74518
2005
–
2006
3941190
11828
1389017
3920
17
74669
2006
–
2007
4150940
12141
1491933
4109
18
75529
2007
-
2008
4333154
12507
1603623
4364
19
67053
2008
–
2009
4494955
13124
1750049
4756
19
69020
2009
–
2010
4672453
13687
1877434
5182
19
73988
2010
–
2011
4864096
14048
1953766
5472
20
93357
2011
–
2012
5124257
14674
2211421
6041
31
98673
2012
–
2013
5351319
15156
2394678
6425
31
99772
2013
–
2014
5558674
15807
2528133
7083
31
100190
2014
–
2015
*
4283044
10779
2032880
4953
35
100848
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2015
–
2016
**
4997052
12973
2442935
6022
35
130488
2016
–
2017
***
5473997
14024
2624140
6605
35
144201
2017
–
2018
6197870
15965
2933539
7485
35
152467
2018
–
2019
6501053
17235
3140110
8139
35
681140
2019
–
2020
6255849
15470
3258718
8612
35
537085
- Source*: Ministry of Planning, Central Statistical Organization, Annual Statistical Report, Education Statistics (2018-
2019).
* Excluded governorates: Nineveh, Anbar, Salah al-Din, Kirkuk.
** Excluded governorates: Anbar, Nineveh.
*** Excluded governorate: Nineveh.
CONCLUSIONS:
1.
Since its establishment and up until 2020, the Iraqi
government
had
a
developmental
orientation,
represented by governmental actions aimed at
reforming the Iraqi economic structure and achieving
economic development.
2. The priorities in the distribution of investment shares
were not based on clear foundations or derived from a
practical study of the realities of the economic sectors in
terms of their capacities or intersectoral effects. This led
to negative impacts on the economic structure, including
bottlenecks and surpluses.
3. The absorptive capacity of the Iraqi economy was one
of the main obstacles to economic development efforts,
making it difficult to achieve structural transformation
towards reforming the economic structure.
4. The Iraqi economy is still suffering from the
dominance of the oil sector in contributing to the
formation of the Gross Domestic Product (GDP), which
indicates the unsoundness of the Iraqi economic
structure.
5. Regarding the role of the state in the new economic
environment: Globalization brought with it several
changes that, in total, reduced the state's role in the
economic life of many developing countries. This shift
followed the extensive role that states had played during
the 1960s and until the mid-1980s, which required
significant resource depletion, high debt, and declining
economic efficiency and competitiveness. This occurred
despite achieving a degree of social justice and stability.
To reform their economies, these countries moved
towards economic liberalization and deregulation, in line
with advice from international institutions. However,
this resulted in a significant reduction in the economic
role of the state without laying the foundational pillars
for this transformation, such as a sound institutional
framework, ensuring the right of various societal groups
to participate in decision-making, freedom of expression,
and the role of media in raising awareness and
promoting a market economy culture. In other words,
the transformation measures were not well thought out,
and there was no comprehensive vision. Economic
policies were formulated and implemented without
referring to a comprehensive strategic framework that
accounted for all aspects (political, social, and cultural),
leading to many economic, social, and even political
crises. These crises impacted sovereignty and loosened
the state's grip on its assets, forcing it to relinquish many
of its essential functions, and gradually shrinking its
influence in favor of global institutions and corporations,
ultimately serving external interests at the expense of
the domestic economy.
RECOMMENDATIONS:
1-It is essential that the goals and policies established are
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fundamentally based on the economic and social
realities of the Iraqi economy, ensuring their
achievability. Otherwise, exaggerating the setting of
goals without achieving the intended results undermines
any effort or initiative to amend the economic structure
towards achieving economic development.
2- Learn from the experiences of previous countries with
economies similar to that of Iraq, which have achieved
results in growth and economic development, especially
considering the resources that Iraq possesses that can
contribute to the process of economic development.
3- Focus on the education sector due to its significant
importance in achieving economic development,
particularly since Iraq has scientific capabilities and a
willingness coupled with governmental capacity.
Additionally, modern technologies should be utilized to
develop this vital sector, given its role in increasing inter-
sectoral linkages.
4-Emphasize the concept of sustainable development
and the necessity that this focus arises not only from
recognizing the environment as a complex and
contemporary issue, but also as a matter linked to
human life and its future. The continuation of this
problem will turn the planet into a center of waste and
gas emissions, making it difficult to live normally due to
the harm to human health and the degradation of nature
in its various forms.
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