Europe Innovates by Imitation?

If you have any doubts about the future of Europe then this week was full of omens. First the European press is full about the marvelous Galileo project that will create hundreds of thousands of jobs and will make Europe prosper in the future when this heavenly project is up and running. How we will fly higher than the Americans! Sounds fantastic until you realize that a system that does 95% of Gallileo is already up and running and provided for free by the US government thanks to the US taxpayers: GPS.

As Europeans we can always improve! So we innovate. The latest government innovation is a boat load full of subsidy for a project to ? beat Google. Chirac, the French president, proposed a European project Quaero to form an alternative to Google. I always thought the word innovate had something to do with novel? Both the Gallileo and the Quaero project have a very high me too level.

The European answer to the American dynamism is subsidies. Did you know that the Europen Union is spending ?19 billion from 2002-2006 on the Sixth framework Programme? And this amount will double for the next period.

I have seen the execution of several Europan FP6 projects and I am not very impressed so far. A key requirement for the European subsidies is that participating companies provide 50% of the personnel cost, which requires very detailed bookkeeping. Requirements are so steep, that the bureaucracy can become a significant part of the costs. There are usually no clear deliveries for the projects; the international cooperation is seen as one of the primary goals. Many projects struggle with the languages. An acquaintance (who only speaks French) told me that his cooperation with a German university requires the translation of all documents. How effective is a cooperation when you can not directly communicate? Some projects have a scope that is so large that it has no chance of succeeding. There are companies that see these projects as a way to make some extra money.

At the same time, the EU does not address the key reasons why Europe is so far behind the US economy. The US has a unified market of 280 million people. A product developed in Miami can be sold the same day in Seattle, San Diego, and Boston. Same label, same product, same help desk, same currency, same basic laws. Combine this unified market with the dynamism of the US labor force, the excellent universities, and you have very stiff competition. This is of course very visible in the growth figures that have been consistently much higher over the past decades.

Trying to compete by imitation is not going change this, especially when it needs public money. The EU, and the local governments, responsibility is not to run development projects. Their responsibility is to provide the infra-structure and population that can innovate. They should ensure that we can talk to each other, provide good education of the population, remove unnecessary obstacles in legal rules, improve the (international) labor rules to make it easier to start (and stop) companies. And when that is done, leave the competition to commercial companies.

Peter Kriens

posted by Peter @ Monday, January 16, 2006