Introduction

The social investment perspective depends on correctly understanding the characteristics of the economy as a basis for identifying appropriate policies for promoting growth and competitiveness. In this chapter we start from a characterisation of the current phase of capitalism as a ‘globalising learning economy’, where the speed of adaptation and innovation is seen as crucial for the competitiveness of firms (Lundvall and Johnson, 1994; Archibugi and Lundvall, 2001). While the concept ‘the knowledge-based economy’ is associated with the need to invest in research and in the formal education of scientists and engineers, the learning economy signals the importance of institutional design in relation to labour markets and national education and training systems. We shall provide evidence to support the view that social investments in the form of expenditures on further education and training and in support of flexible labour markets combined with security (flexicurity) play a crucial role in sustaining the learning economy.

We build on previous research linking the dynamics of learning at the firm level to the innovative performance of national economies. In particular we build on work showing:

• • that innovation requires a combination of science-based and experience-based knowledge (Jensen et al., 2007);

• • that innovation thrives in countries where a big proportion of the employees are engaged in work activities involving problem solving and learning (Arundel et al., 2007);

• • that the dramatic differences within Europe in how people learn at the workplace reflect differences in national institutional settings in relation to education and labour markets (Holm et al., 2010).

We also present evidence indicating a link between social investment, social capital, income inequality and organisational learning. Countries with a high frequency of organisational learning supported notably by social investments in education and training tend to display low degrees of income inequality and high degrees of social capital. Egalitarian income distribution goes hand in hand with equal access to jobs offering opportunities for learning and creative problem solving.

The learning economy

The concept ‘the learning economy’ refers to a specific phase of capitalist development where a combination of factors such as globalisation, deregulation of finance and the widespread use of information and communication technologies speeds up the rate of change in different dimensions (on the demand-side user needs change rapidly and on the supply-side there is acceleration in the creation, diffusion and use of new technology) (Lundvall and Johnson, 1994).