Esko Aho: Global Competitiveness and Frameworks

European Presidency Conference on Innovation and Clusters
22-23 January 2008, Stockholm, Sweden

Global Competitiveness – European Challenges and Frameworks

Europe has a long and glorious history as a forerunner in science and technology. Investments in research and education built the foundation upon which our continent became industrialised. This in turn established the basis of our current welfare societies.
Success was achieved in precisely this order: science, technology, industrialisation and only then the much-discussed European social model.

In the year 2000, the European Union adopted the Lisbon Strategy. Its ambitious goal was to return the continent to its position as a global pioneer of creativity by making it the world’s most dynamic and competitive economic region. This revitalisation was to be achieved while respecting the European social model – and indeed with the aim of preserving it.

We can already see now that the target date of 2010 set for this venture will not be met. There has been progress, but nowhere near enough for the EU to seriously challenge the United States or to maintain its know-how edge over China and India.

So what is the problem? Why are we dragging our heels in implementing the Lisbon agenda?

The basic weakness lies in the framework of this implementation. There has certainly been plenty of rhetoric, but far too few concrete steps. There is a more underlying issue as well: Europeans have a hard time understanding and – above all – accepting that our social model must change if we intend to become the world’s leading economic region.

The discussion over the closure of the Nokia plant in Bochum, Germany, illustrates the views of the general public as well as the logic of many political leaders. In raising this subject, I do not do so as a Finn in order to defend Nokia and its decision-makers. I primarily look at it from my vantage point as chief author of the report on ‘Creating an Innovative Europe’, drawn up for the European Commission in 2006.

The debate over the closing of the Bochum factory and the conclusions that have been drawn from it reveal Europe’s weaknesses. We still imagine that in the contemporary global environment, innovation and the ability to create something new can live side-by-side with stability. We devote plenty of attention and resources to preserving the old, while the creation of the new and its needs are left on the back burner.

So far, Europe has been an undisputed winner in globalisation. This will not remain so unless we can quickly create new competitive advantages to replace those which we are inevitably losing. Trying to hang on to the old merely slows down and hampers the acquisition of new competitive edges.

As we shifted from an agrarian society to an industrial one, we understood the importance of mobility. The same mental and social problems remained, but we were able to invest in the new and create the vitally-important infrastructure and social framework for industrial development.

The shift from an industrial society to an information-based one calls for exactly the same process: a transfer of resources from the old to the new, spending on infrastructure and tailoring social frameworks to fit the moulds required by knowledge and know-how.

I believe in Europe’s possibilities. Now we must simply dare – both at the Union level and within our own member states – to carry out the reforms needed to improve our standing in the global competition for expertise.

In the future, Europe will still need a strong industrial base – but it cannot be preserved through protectionism or by postponing necessary changes. We must be able to create new strengths. The most important sources for these are science, technology and innovation – listed in the Lisbon Strategy.

Two years ago, the panel I led presented a four-point agenda to help build an innovative Europe. These ideas are even timelier today.

First, Europe must create open, functional markets for new, innovative products and services. In the global economy, market demand is the most important driver of creativity.

Secondly, we must be able to follow through on our promises to invest more heavily in research and development. The examples of individual member states show that R&D investments pay off slowly. If additional funding is delayed, within a few years we will not only regret the head start gained by the US and Japan – we will also have to meet the challenges of China and India.

The third challenge is to achieve mobility, as I mentioned earlier. Ultimately, this is a question of attitude. Why do we always see change as a bigger risk than maintaining the status quo?

The fourth challenge is fostering entrepreneurship and risk-taking. Innovation always includes risk – just as failure always includes opportunity.