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Esko Aho: Creating an Innovative Society

Sitra's president Esko Aho accepted the Carl Bertelsmann Prize 2006 in Gütersloh, Germany. Read Aho's speech at the Awards Ceremony.

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Creating an Innovative Society

“On behalf of the Finnish Government, I would like to thank the Bertelsmann Foundation for the honour given to Finland. On behalf of Prime Minister Matti Vanhanen, it is my great pleasure to accept the Carl Bertelsmann Prize 2006 for efforts to improve employment conditions among older people in the Finnish society.

Unfortunately, due to his many responsibilities related to the Finnish EU Presidency, Prime Minister Vanhanen could not take part in this prestigious awards ceremony today.

Prime Minister Vanhanen expresses his deepest gratitude to the Jury, the Working Committee and the Bertelsmann Foundation. He regards the prize as an honour to Finland and recognition for the purposeful and long-term work done in the Finnish welfare system for aging people.

The Bertelsmann Foundation is an internationally well-known foundation in social and economic issues and its expertise cover a wide range of areas. Across Europe, the Carl Bertelsmann Prize is considered a distinguished award especially for employment and welfare.

Ladies and Gentlemen, I would first like to focus on the Finnish experience in improving the well-being of aging people. Then, I will take a broader view on the impact of our demographic challenges in creating a more innovative Europe. Finally, I would like to conclude by describing our preliminary plans for the use of the prize money.

This year’s primary theme in the Bertelsmann Foundation has been Älter werden – Aktiv bleiben, Active Aging in Economy and Society. The theme is highly relevant when keeping in mind the demographic revolution that Europe is about to experience in the coming years.

The Carl Bertelsmann Prize 2006 is awarded to Finland because of the accomplishments in the National Programme for Aging Workers, FINPAW, and its follow-up projects VETO, TYKES and NOSTE.

The Jury has considered the FINPAW programme an excellent example of a social project that has focused on strengthening lifetime learning and ensuring working ability regardless of age. This has, in a very practical way, contributed to the fact that older people are able to grow older and stay healthier while still working and improving their working skills and abilities.

The FINPAW programme has an interesting history. The liberalisation of the capital market in the late 1980s led to excessive lending and financial speculation. The burst of this bubble coincided with the collapse of trade with the Soviet Union and the recession in our Western export markets.

Finland was hit by a major economic crisis in the early 1990s. In 1991, our annual GDP dropped by seven percent. The financial crisis together with the high unemployment rate forced my government to execute radical economic and social reforms. In spite of a rapid recovery, which started in 1993, special efforts were required to improve employment.

Originally, the FINPAW programme targeted improving the chances of older workers in the labour market. Later, it also had an impact on wider social issues: lifetime learning, the well-being of employees in the work, and social and industrial relations.

How do we explain the success of our efforts? What is the secret of the Finnish model?

Firstly, good governmental governance has made it possible to implement some radical social and pension reforms. Democratic and open decision-making processes have contributed the broad acceptance of structural and social changes.

Secondly, right from the beginning of the FINPAW, the programme has been based on a close and productive cooperation between social partners including the government, labour market organisations as well as educational, research and scientific institutions.

Thirdly and finally, there has been intense inter-ministerial collaboration between the Ministry of Social Affairs and Health, the Ministry of Labour and the Ministry of Education. This has strengthened implementation processes and improved results.

The most convincing accomplishment of the whole FINPAW programme is the significant decline in the unemployment rate between the ages of 55 and 59. The rate has declined from over 20 percent in the mid-1990s to just 7.3 percent in 2004.

The Jury considers the FINPAW a unique and outstanding social innovation. In Europe, we also urgently need innovations, not only economic and social but technological and institutional as well, to improve our global competitiveness and guarantee the sustainability of our social model.

Ladies and Gentlemen, there is an urgent need for reforms in Europe.

I had the privilege to chair a group of four independent experts that submitted its report on innovation policy, titled “Creating an Innovative Europe”, to the European Commission in January this year.

The primary purpose of our group was to examine the concrete ways to improve the performance of the European Union and its member countries in science, technology and innovation. In Lisbon in 2000, EU leaders set an ambiguous objective to make Europe the most dynamic and competitive market area in the world by 2010 and that way secure economic growth and stability in the future.

To be provocative, this is nothing new under the sun. In 1961, the 22nd Party Congress of the Communist Party of the Soviet Union believed that they would catch up the American living standard by 1980.

Despite huge resources devoted for science and technology, the Soviet model clearly failed and the whole social system collapsed.

The lesson of the Soviet case to be learnt, is clear: economic progress is not about planning and making strategies. The creation of global economic, technological and social leadership is about implementing.

The long-term perspectives of the European social model are not bright. We suffer from low productivity growth, weaknesses in ICT applications, a widening deficit in R&D investments and a low market share in globally fastest growing sectors.

Unfortunately, that is not all. We will also experience a demographic revolution that will make required structural, economic and social reforms even more urgent. According to the Eurostat, by 2050 the working population in the European Union area will decrease by 52 million people.

This long-term perspective of Europe resembles the one of climate change. The evidence may be weak today, but when it will become obvious, then it will be too late to act.

It is easy to agree with the view that the success of Europe is dependent on science, technology and innovation. That is what the Lisbon process has also meant.

The crucial challenge is, however, to change our traditional paradigm. It has been extremely difficult for Europeans to understand that transformation from resource-based to knowledge-driven societies will not be possible without radical changes in our traditional social model.

Our expert group proposed a four-pronged strategy to create an innovative Europe. The key words are market creation, substantially increased financial resources for R&D, mobility, and finally, entrepreneurship.

The most challenging area is the requirement of mobility. We Europeans prefer stability to mobility. The predictability of future, the exclusion of risks and the security of life are what we highly value.

In the present and future circumstances dynamism, risk-taking and flexibility should, however, be included into the European social model.

A common misunderstanding is that increased mobility would be in direct conflict with the European tradition of equality and therefore, it should be neglected. By contrast, the promotion of mobility creates new opportunities to overcome the present rigidities of the European social model: high unemployment rate, huge public sector deficit and increasing social unrest.

Ladies and Gentlemen, a well-functioning national innovation system has three layers.

Research and development resources constitute the core. The second layer is made up of application, transformation, the higher productivity of traditional manufacturing and service production sectors by the means of knowledge, and the most modern technologies.

The third layer is extremely relevant for the role of aging population and the requirements of social reforms. I would like to define this as a proper ecology for innovation. The role of ordinary citizens is often forgotten in the designs of the national innovation system.

Individuals are not outsiders but primary actors in an innovative society. Their role is crucial both on the supply and demand side. Therefore, the better education and skills citizens have, the more innovative society is.

This ecology requirement, in my opinion, gives Europe the great opportunity to compete with the United States, China and India. An innovation-driven economy or society cannot be based on 50 percent or even 75 percent of the population. In the long term, this innovation race will be competition between whole societies, with a total of 100 percent, not parts of them.

Ladies and Gentlemen, in creating an innovative Europe, Finland and Germany can play a crucial role.

Finland, as the present EU Presidency, has its own national record in the successful implementation of the technology strategy. We have taken the role of an initiator. Germany, on the other hand, has its economic and political power to push through decisions required for the future of Europe during its Presidency from January 2007.

Ladies and Gentlemen, Finland wants to be one of the leading nations in creating an innovation-driven future.

For this reason, let me finally describe you our plans for the use of the Carl Bertelsmann 2006 Prize.

We are very delighted to inform you that Finland will establish a new national prize for innovative practices in employment and social policy. We plan to use the prize money of 150,000 Euros for establishing a new national prize to promote social innovations. The aim is also to link additional national funds to the Bertelsmann Prize. My own institution, Sitra, the Finnish National Fund for Research and Development and the Finnish Work Environment Fund (TSR) have both committed to allocate additional 150,000 Euros for this purpose.

The preliminary definition of the new national award is as follows. The prize will be given for such activity or innovation that has greatly promoted the well-being at work of older employees, supported their coping with and staying on at work or improved their working conditions or employment opportunities.

The activity to be rewarded must also be closely linked with practise and preferably can also be applied even on a larger scale. The focus is thus on providing and sharing best practises. The prize also aims to influence people’s attitudes and contribute to maintaining discussion on the issue in society.

The decision on the prize to be awarded annually or every second year will be prepared in a group of experts in which both co-financiers are represented together with the Ministry of Social Affairs and Heath. The prize will be presented by a representative of the Finnish Government and the first award will be granted in autumn 2007.

Ladies and Gentlemen, on behalf of Prime Minister Matti Vanhanen, let me once again thank the Bertelsmann Foundation for the great recognition to our country. We feel privileged to have been awarded the Carl Bertelsmann Prize 2006. We wish all the success for the Bertelsmann Foundation and its crucial work.”

Esko Aho

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