June 2006

Innovation: More effort needed in Europe

The EPMA will be promoting excellence and innovation in its Awards
competition in Ghent later this year. But a group chaired by former
Finnish Prime Minister Esko Aho and sponsored by the European
Commission has concluded that current Europe-wide efforts to
innovate are simply not enough. It also came up with a thought
for career politicians that may be unpalatable…

Reports on Europe's need to innovate make regular appearances in and around EU institutions, but no sooner have they been published than they are relegated to the back of the shelf. Of course, while the treatment recommended in each of these reports are, at best, only attempted half-heartedly, problem resolution is pushed further and further into the future.
Last autumn, the European Council met at Hampton Court, outside London, to discuss how Europe can address the problems, fears and opportunities of economic globalisation. One result of that summit meeting of heads of government was that Esko Aho was asked to chair a group making recommendations on accelerating initiatives to boost research and development and innovation performance.

The group's report calls for a Pact for Research and Innovation, "to drive the agenda for an innovative Europe". Its recommendations focus on three complementary areas: Making the market more innovation-friendly; ensuring resources are focused on high-quality, productive R&D; and increasing mobility of human resources, finance and knowledge. The report concludes with the assertion that large-scale action must be taken now, "before it is too late".

Esko Aho: "For the first time with this report we have said without any hesitation that we are not going to reach the Lisbon goals (for action on growth and jobs, set out in Lisbon in 2000) on current trends.

"We have called for a Pact since we need action on a whole package of measures. If you look at the problems in discussions of the proposed Services Directive you can see what happens when you try to take decisions separately. When measures are considered on their own it is very easy to make objections, so you have to look at the whole structure.
"We have taken the single market programme from the late 1980s and early 1990s as a model. It needed synchronised, simultaneous efforts across Europe. And the process would have been impossible without agreement and commitment. Of course, different people had objections to different specific proposals, but everybody understood that they would have to accept negative consequences in some areas in return for benefits in others."

Another former Prime Minister, Wim Kok of The Netherlands, who reported in 2004 on progress towards the Lisbon Strategy, warned of the dangers of spreading efforts too widely. But Aho says that: "In combining social and technological objectives it is very important that we focus only on those efforts that are needed to improve innovation.

"I think it was a mistake in the Lisbon Strategy to combine efforts to invest in R&D and increase innovation with maintaining social stability. While we need to invest in R&D, at the same time we need 'mobility', not stability."
The report suggests that around one in 10 researchers should change jobs every year, moving between research, industry and government. "This kind of mobility does not exist in Europe, and that is an obstacle to innovation," he says. "And it is something, of course, that should not be confined to researchers."

One reason that Aho was asked to write this report is that he headed Finland's government in the early 1990s, when the country achieved an impressive economic turnaround from the depression set off by the collapsing Soviet Union. Unemployment quadrupled to almost 20 per cent and GDP fell sharply. Today, however, the foundations laid by the Aho government's are recognised as having helped Finland rise to become one of Europe's most innovative countries.

He says: "It is easier to make major changes when people understand the need. In fact the changes in Finland were the model for our report. AT that time all four parts of the approach in this report were realised in Finland. We invested in R&D; we were able to create new markets, both internally in sectors such as ICT and externally through joining the EU. We had strong mobility in both private and public sectors because of economic restructuring, and, finally, our values and attitudes changed in parallel to economic changes."

But while these policies were successful in the context of the Finnish economy, a country with around 5 million people, translating them to the context of the whole EU - with getting on for 100 times the population of Finland - is no easy task, as the Aho report notes. "This requires a huge act of will and commitment from political, business and social leaders.

"While this commitment has been promised repeatedly by politicians over recent years within the context of the Lisbon strategy, the lack of progress gives a strong indication of how well these spoken commitments have been transformed into action on the ground.

The big fear for politicians is the impact of unpopular policies in the ballot box, but politicians should understand that all governments will sooner or later loose and election.

"It is much better to lose and election having tried to do something big, having tried to make major reforms. What is needed in Europe is an understanding that we will have a crisis because of declining competitiveness and demographic changes if we do not take action now."

Esko Aho

Esko Aho was Prime Minister of Finland from 1991 to 1995 at the head of a right-of-centre conservative administration. His government faced deep economic recession in the early 1990s and its harsh cut and save policies allied to deeply unpopular plans to cut unemployment rates saw it roundly defeated at the 1995 election. Esko Aho failed to win election as the country's president in 2000 and retried from active politics. He now heads Sitra, the Finnish National Fund for Research and Development.