Friday, January 15, 2010

My comments in the public consultation on the future of "EU 2020" Strategy

My comments to Commission working document COM(2009) 647 final (Brussels, 24.11.2009):
“CONSULTATION ON THE FUTURE "EU 2020" STRATEGY”


(submitted today)


I. General Comments

In my opinion (henceforth: IMO) the working document contains many valid points but nevertheless a wider approach would be merited rather than focusing to such a large degree on Knowledge and the introduction of a “5th freedom”. IMO the 2020 Strategy should contain a much wider socio-economic or even wider, a systemic model, for the EU, internally and in the world in the 2020 horizon. My comments relate to elements of such a model.

1) Knowledge and research in their widest sense:
Whereas research by academic and other organisations is indeed a valid asset for the EU, research and its products are only one of the elements of that lead to innovation that leads to growth and employment. IMO Knowledge must encompass all sorts of sources of new thinking and is not always correlated to academic or other traditional sources of new ideas and thinking or new knowledge. Hence, IMO, the need for a pluralistic view with respect to EU 2020 on “research, knowledge, applications”. Eg pluralism is an ”innovation” in terms of people's mindset or worldview (as opposed to uniformity) in Europe.

2) Not focus, a model:
The working paper states: “The Commission considers that EU 2020 should focus on key policy areas where collaboration between EU and Member States can deliver the best results, and on improved delivery through better use of the instruments at hand.”
I beg to differ. A strategy cannot focus on key areas, a strategy by definition must encompass a total – systemic view of all aspects and dimensions and hence, policy areas. A strategy must present a model. Thus IMO it is imperative (see II. Analysis) that while maintaining a pluralistic and subsidiarity respecting view, the EU (institutions and member states) needs to discuss and develop a new model that includes not only socio-economic modeling parameters but a full systemic model of the EU.

3) Services at the core:
It is IMO crucial that it is realised that not only in the EU but also the US and other OECD countries, manufacturing is a minority contributor to both GDP and jobs, and that Services contribute some 75-80% of GDP and jobs. That we live in Services era.

4) Intellectual Products and “industries”:
In addition, the role of intangible goods/products aka “intellectual products” (music, film, TV and other content, literature, etc) is emerging as a driver for growth and jobs, especially if one considers the scenario of an emerging less materialistic Society that may, partly, be the result of the Climate Change challenge that humankind faces as well as evolution in personal tastes, lifestyles and “philosophy”.

5) From Knowledge to Growth and Jobs?
Not to under-estimate the view that knowledge is valuable per se, for a citizen, human, consumer, but under what conditions does it lead to a job or a venture that results in growth and jobs?


6) Market Access is crucial
a) Global market access:
Is the key competitive asset nowadays in the world knowledge or market access? And do WTO rules adequately address market access problems? Can they? What good is knowledge or production of a good, service or intangible good when the company, especially in the cases of micro and SMEs, does not have real access to the market where such product or service is needed and/or wanted by the consumers? And whereas the Internet does help access and delivery, it is not panacea.

b) Intra-EU – inter-state Market Access:
Of course the EU needs to have its own academic and research capacity, taking advantage of EU economies of scale via an effective “single market” for knowledge producers (and knowledge workers). But while this 5th freedom is being deliberated, how about the 3rd (Services) and the 4th (jobs, work)? With so many languages “at work” in the EU's national job markets, how many types of workers or professions can treat the EU as “their” single market for employment? How many micro and SME companies?

7) A real and “working” single market of the EU, especially for micros and SMEs
Of course, the linguistic issue is not the only factor that prevents the existence of a real EU single market in many jobs and professions and economic activities. The reactions to the traveling plumbers in the 2005 EU referendum in France etc and the various reactions to the adoption of the “Services” directive (the deadline for its transposition expired 31.12.2009) show that the EU single market is not yet a reality. But it must become one, for many crucial reasons.


II. Analysis


1) The role of Services and Micros and SMEs
We (in the EU and other parts of the world) live in transitional world from an industrial to a meta (post) industrial era. Already, in many states of the EU and the EU as a whole, manufacturing is but a small contributor to GDP and jobs. Services, ranging from financial and telecoms to bars, hotels, restaurants, barbers – hair salons, as well as plumbers constitute 75-80% of GDP and jobs.

The production of manufactured goods, which was already migrating to Japan and other Asian countries, after 2001, with the entry of China to the WTO, has accelerated greatly both in the EU and the US as well as other “mature” OECD countries/economies.Yet many policy analysts and makers, media, and other people, including the public opinion, continue to visualise (cognitively associate) manufacturing and plants as well as large corporations when they think of the word “business”, instead of Services and Micro and SME companies. This must change. EU policies need to be conceived and designed with a Services and Micros and SMEs EU economy in mind. That new mindset must be part of the EU 2020 Strategy.

In addition

2) SWOT:
The EU does not exist in a vacuum, it is part of a planet. What goes on on it is affected and affects the EU. I propose to take a look at two basic scenarios regarding this global environment and the implications for an EU 2020 Strategy.


Scenario 1 “Global De-stabilisation - A self-reliant EU”

Globalisation has not managed to gain the support of the majority of the “people” in many if not all parts of the world, including the EU. The inability to reach an agreement in the Doha round of WTO talks since 2001 is indicative of the “globalisation-skeptic” public opinion pressures on politicians and policy makers in the US, the EU and other members of the WTO.

What is more, the staple foods supply and prices crisis in 2008 brought a realisation of the risks of global trade reliance of countries for the provision of basic (staple) foods.

Similar realisations came about due to the oil price crisis in 2008, on top of the challenges of the Climate Change issue. As a leader in addressing the Earth and humankind risks from global warming, in this scenario, the EU may have to take a radical approach in its relations with the rest of the world in order to “convince” them to commit to sufficient cuts in Greenhouse Gases (ghg), after the failure in Copenhagen in December 2009. This may include departure from the WTO and multilateral trade agreements and almost total reliance on bilateral and maybe Regional Trade agreements (which have been popping up in recent years anyway, as a hedging tool to the problems in multilateral trade systemics). The entry into force on 1.1.2010 of the China – ASEAN 6 RTA is, too, indicative of the complexities of trade and business systemics and dynamics.

An EU 2020 Strategy thus IMO has to incorporate the ability of the EU to rise up to the challenges of such a “self reliant EU” scenario.


Scenario 2 “Global dynamics and a Global EU”
This scenario assumes that in spite of some of the concerns listed under scenario 1, world systemics and dynamics in the next 10 years will be such that will not require a self-reliant EU (in staple foods, energy, basic need manufactured goods etc) . That world trade will remain more of less active at the 2010 levels or that even a Doha round WTO agreement will be reached in the coming 12-24 months. That progress will take place in COP15 climate change commitments. And that countries and the EU can thus depend on the world markets for procuring many of the goods that they need (energy, staple foods, manufactured goods that address basic needs, etc) instead of producing them inside the EU.

Whereas it is common sense that the remaining in the EU manufacturing activity must switch into “green”, it is not clear whether EU green industries can become a means of re-activating manufacturing capacity in the EU ie compete with green industries from developing economies including China and their products, both at “home” (the EU single market) and globally.

In such a scenario as No. 2 (which is more or less the assumed scenario in the Commission's working paper, except maybe for the role of green tech industry), the key question becomes:

What can the EU produce and market competitively both internally (in its market) and globally? Knowledge? Or is EU produced knowledge the “wooden walls” that will save and move the EU economy forward? Being an academic and research powerhouse, in recent decades, did that prevent the US from losing most of its manufacturing base? Are there factors that differ in the EU's case and for the next 10 years? IMO, a 2020 strategy must address this issue.


3) The digital economy. Not a panacea for growth and jobs, not even close:
The bursting of the mainly US dotcom bubble in the last 1990s did already demonstrate the limits of the digital economy. Did it teach lessons?

Who has made money so far in the digital economy? I am not familiar with any concrete studies but my educated guess is that these are the “providers” as well as 2-3 specific types of content as well as some of the online content that is provided by traditional – offline – mainstream print and some electronic (TV based) media (newspapers, magazines, etc).

And various studies have shown that online commerce usually requires offline marketing or reputation building as well, and is focused on certain low risk products (eg books). So whereas the internet has become and will remain and probably expand as a source of free information, it is questionable whether it can significantly help EU based micros and SMEs market their products in other member states and globally. One should also study the diversity of fiscal regimes (sales taxes, VAT, etc) among EU and non-EU countries and their effect on the ease of micros and SMEs to do intra-EU and global business (sales).

4) From How to Why:
It is my opinion that in the last century, the key question – decision factor was “how” (knowhow). The 20th century led to astonishing developments in technology and its applications. But IMO, 10 years (10%) into this new century, my view that the key question is “Why?” (instead of “How?”) seems to have been validated.

5) Adding up and knowledge:
And it is in this era and state of dynamics that has brought to the surface the problems resulting from deficits in elementary education in many developed economies/countries. The realisation of the deficit in logic, maths and other very basic and very crucial skills that are needed as a necessary foundation for further education (including higher education) that can lead to wise/smart decisions and hence growth and jobs. In other words, IMO, the “polyvalence” (French term ) required for citizens and “workers” of this Services, globalisation, fast paced, volatile, era, is put in peril not by the absence of higher education but due to deficits in those basic skills. In other words, in many developed countries one can meet people who are well informed and/or have received a higher education but do not possess the fundamentals (logic, wisdom) etc to turn information and knowledge in results. A recent study in one of the EU member states showed that many consumers do not know enough maths to compare prices when shopping (1)! That skills gap sounds more menacing and more crucial than knowledge per se.


III. Basis for an EU2020 Strategy:

1) Genuine Single EU Market – Freedoms No. 3, 4 and 5!
The EU institutions and the member states (MS) must take all necessary measures to alleviate practical and technical barriers to a genuine EU Single Market not only for capital and goods but for tradeable Services and jobs as well, including one for academic and research jobs.

In the latter, the existence of a genuine Single Market – space for researchers and new ideas will have multiplier effects in the cumulative knowledge capital of the EU.

In addition, this 5th freedom must be inclusive all of types of new ideas and knowledge creation, both typical and atypical.

The EU institutions and the member states must take actions to preserve all official languages of the MS while at the same time promoting the use of a single language, already spoken as mother or foreign language by 50+ per cent of the EU population (2) in the workplaces around the EU as a means of enabling a real single market for as many job types as possible.

2) An EU minimum wage!!!???
Maybe an EU minimum wage, decided either by the European Social partners (via negotiations, see European Social Dialogue, or the EU institutions (a Treaty amendment may be needed for that or not) is a necessary offset for true mobility of Services, free lancers and workers. After all, many EU MS have one (others only have sectoral ones), and even the US has a minimum wage (federal, plus each state can have its own, equal or higher than the federal one). An EU minimum wage could be part of a EU2020 Strategy and make social acceptance of “traveling servicemen”


3) A knowledgeable, a smart or a wise EU?
Which of the three assets is most crucial and more realistic for the EU in the next ten years? IMO it is wisdom. That requires action by the EU and MS in the elementary education area. As well as realisation of the value of experience. In recent years, the older workers have lost their job market appeal in favor of a trend that values ability to deal under pressure and think on one's feet over experience and wisdom. With evident negative results, around the world, especially in the US and the EU (see also point 9 below).

4) Entrepreneurship and the diverse sources of innovation:
IMO the EU needs an entrepreneurial “culture” as badly as the US needs real healthcare reform. As a general rule, EUropeans are not “into” risking or venturing. That is more part of the traditional “American Dream” model. They tend to prefer security (risk adverse) in economic matters. How many Europeans express their creativity via development and marketing of a new product or service that will try to satisfy the need and/want of a certain target market?

A few years ago, I was involved in an online discussion with a few other European. When I made the argument that in this Services era, one does not mean much financial capital to start a company (as opposed to a manufacturing company) and that one could use friends and relatives as investors – stockowners, one of the other participants remarked: What!! Exploit my friends and relatives and risk their money?
The above comment shows, IMO, the lack of Unternehmergeist. So much for Schumpeter's “wild spirits”! One can only compare this with the line from the American film “Tucker”: “It is the idea that counts Ed, and the dream”. That is, IMHO, “entrepreneurial culture” (or spirit). And ideas can come but need not come from academic research or other forms of “typical” Research, but merely from the good old mind of the creative, thinking out of the box, entrepreneur. And in an era when most companies are in Services, the money needed to put that idea and dream to a test, “build it” and see it they “come”, is relatively little.

Back to Europe, let us not forget the well known French song, sang among others by Alain Delon, in which the singer says that he wanted to become a poet, an artist, and instead, alas, he became a businessman!!!

What should be challenged, IMO, is Schumpeter's “Mark II” theory, that the actors that drive innovation and the economy are big companies which have the resources and capital to invest in research and development. It is my personal experience as well as impression from reading papers and press reports that in the last few years, big corporations have focused more on procedures that mostly require execution and little creativity at the local (national) markets level, thus shifting the profile of the manager to much younger and less experienced persons able to withstand pressure rather than the older model of the experienced manager, thus creating employability problems for many 55+ or even 50+ managers first in the US and then in Europe and elsewhere. In addition, cost minimisation pressures due to competition from low wage cost countries has further pushed many US and European multinationals to rely more and more on uniformity and procedure rather than experience and knowledge. In a “survival of the cheapest” world.

On the other hand, as many studies have shown, small companies founded by “wild spirits” suffocate under a labyrinth of regulations and red tape, further exacerbated if the company decides to have activities in more than one national markets, even within the EU Single Market. Unless it is realised, at least in the EU (over 42,000 new state laws were passed in the US in 2009!), that over-regulation little affects big companies that have the expertise to deal with it while suffocating small companies, the EU's micros and SMEs cannot become the agent of EU growth and employment that they can be. Let me add to that that studies have shown that small companies often have the most trouble not in adhering to new regulations but in a) understanding them and b) reporting (proving) their adherence to the authorities! That the cal for better regulation in the EU, is so urgent, IMO, that in spite of many initiatives to yield results in better regulation initiatives at EU and member states level, real tangible better regulation results must to made a priority, if micro and SME companies are to contribute even a portion of their potential to growth and jobs in the EU.

5) Which type of “Flexicurity”
Which type of “Flexicurity” will be employed most in the EU? IMO , that is an important part of a EU2020 Strategy. The Scandic countries take pride in claiming that the work “smart” and the Danish flexicurity model that makes it easy for companies to fire (based on the theory that then they are less reluctant to hire) in return for a higher-than-average-tax socio-economic Danish model,

6) Niche EU and niche global Micros and SMEs!
Part of the EU2020 Strategy should IMO also be the realisation that both the EU Single Market and globalisation must “work” for the “small guy” ie the micros and SMEs. That one of the main benefits of the 1992 project as well as WTO “free-er” trade was for niche EUropean and world markets to emerge and a) become the field of focus for EU or globally active Micros and SMEs b) have their niche needs or wants satisfied by products and services whose production/delivery would not make sense within the confines of national markets.

7) Deeper Union in a must – A “TeamEU” mentality
Another part of the EU2020 Strategy should be the raising of awareness that individual member states cannot compete in the global trade, economic, business etc “game” and that TeamEU (a deeper EU, equipped with a single laws to make it easier for citizens and micros and SMEs to “live” and “be active” in the EU (rather than the member state) and a federal tax system to replace the use of bilateral double taxation avoidance agreements between member states based on a … OECD model!) is in the best national interest of the MS and that the EU represents a Union of sovereignties that does not undermine them, at least in their modern, 2010, definition).

8) EU taking advantage of global “talent”
IMO, part of the competitiveness of the United States, until a few decades ago, was it near open door immigration policy (this has changed in recent decades). For many decades the US was the natural destination for anyone in the world who felt suffocating in the confines of his/her native country. The EU should IMO adopt a much more open door immigration policy towards third country nationals who wish to make the EU the arena of realisation of their ideas and dreams, thus partaking in the “EU Dream”.

9) The educated, knowledgeable and wise EUropean:
In the last few years, as a thinker and an analyst of dynamics, I have identified an emerging need and to some extent want for “wisdom”, mainly in Europe and North America. As well as “philosophy”, ie the pursuit of wisdom.
In parallel, more and more people are recognising the value of knowledge for the sae of knowledge, defying the expertise trend that emerged in recent decades and still exists, as far as professional education is concerned. In other words, in the US and in Europe, more and more people wish to “better themselves” via better self awareness and awareness of the world they live in.
At the same time, IMO, a Services economy does need workers who fit the old “well rounded education” type rather than the “expert”.
To that effect there is an emerging retail market for tools and services that offer better information (including news and analysis), more education (the success of international “thematic” TV channels with a high educational dimension to their content comes to mind as an example), as well as more awareness and food for thought.
Addressing the need and wants of such a market, with the EU, as well as in North America and elsewhere, should IMO be part of the “Knowledge industries” dimension of an EU2020 Strategy.

Lastly:

10) The “EU Dream”
The EU can and must pick up the slack created by the changes in immigration policy of the US in recent decades. It can also create many more reasons for anyone who wants to be in the “world league” in his/her “field of dreams”, be it business, sport, arts, etc, to do so in EU clusters rather than American or other ones. Points 1-8 above would contribute to that.


IV. Epilogue

We all live in a volatile world. Risk-free is not the way of Nature. The world needs a Wise “participant”, a participant that will help the world make wise choices and decisions (see eg Global Warming) as opposed to allegedly “smart” ones. TeamEU has the skills and experience to be the wise contributor in the world in 2010-2020. But it needs a strategy to do so. That should be the EU2020 Strategy. An EU that is deeper, “single”, much more self-aware (of its strengths and weaknesses), aware of the world (enlightened) and a thought – ideas leader to the world. But above all, the sage member of the world community.


Footnotes:

1) The Guardian, Tuesday 20 February 2007 http://www.guardian.co.uk/money/2007/feb/20/furthereducation.education
2) According to the "Special Eurobarometer 243" of the European Commission with the title "Europeans and their Languages" Feb. 2006

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