The question of how to make Europe more “competitive” has come up several times on Debating Europe. Some of you blame the Euro for creating “massive imbalances in terms of competitiveness” between EU member-states (and suggest scrapping the single currency as a solution); others argue that increased competition between different national education systems would help to drive down youth unemployment; whilst others think “privatizing the health care delivery systems as much as possible… will foster innovation and competition”.
Peter, a regular contributor, argues that European economies should take the radical step of cutting defence budgets and investing any savings straight into research. He argues that “by freeing up the defence budget the EU can easily dedicate 8 to 9% GDP to research and education. The only way to sustain prosperity without growth is by investing in innovation.” We asked Carl Bildt, Sweden’s Minister of Foreign Affairs, whether he agreed that Europe needed such a radical re-think of its R&D policies to survive in the global market place.
We need, for a start, to live up to the target set in the Lisbon agenda to spend 3% of GDP on R&D. Today only Sweden and Finland are fulfilling this goal. The EU as a whole spends only 2% of its GDP on R&D.
Europe has been lagging behind the US and Japan for the last few decades, and China is catching up with the EU. This must change. I strongly believe that there is a link between competitiveness and investment – private and public – in R&D. Sweden could actually be seen as making a good case for such a conclusion. Our investment in R&D – close to 4% of GDP – has for many years been substantially higher than our industrial structure and the size of our domestic markets would imply. And we have been, for a number of years, performing stronger and stronger in the global competitiveness rankings.
What we [also need] is decisive “political” investments in a single energy market and a single digital market. These would probably be the two most important contributions European policy-makers could do to enhance European competitiveness.
Last week, we looked at what Europe’s digital future might look like. ICT doubtless offers many opportunities for economic growth, but is there a dark-side to the “information revolution? As well as concerns about privacy and censorship, could “streamlining” European businesses with ICT actually increase levels of unemployment?
As I said earlier: We need a single European digital market. This would mean a lot to create a more competitive business climate. But we are not doing that bad actually. According to McKinsey, France has lost 500 000 jobs since the mid nineties from the expanding internet but also created 1,2 million new jobs. It is a total gain of 700 000 jobs. In the even more advanced ICT countries in the EU, I would expect the ratio between losses and gains in the job market to be even more favorable.
Some European countries are very strong performers in ICT – the UK and Sweden for example. Others are lagging – especially in the South. This gap should be closed and the way to do it is national and European deregulation and investments in the digital infrastructure.
There must be increased productivity in the public sector as well. This is even more obvious in our digital era – the silicon age – which presents so many opportunities to rationalize services. We demand from every Swedish public agency that it should increase its productivity by 2% every year. This makes it impossible to reduce services without cutting staff.
What do YOU think? Do you agree that Europe needs to be more competitive globally in order to escape recession? How should we achieve this? Through massive investments in research and innovation? Or through deregulation and a focus on the benefits of new technology? Let us know your thoughts in the form below, and we’ll take your comments to policy-makers and experts to hear their reactions.
Carl Bildt is Sweden’s Minister for Foreign Affairs. Previously, he was the Prime Minister of Sweden (1991-1994).