Issue 17 summer 09

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Anneli Pauli is the deputy director-general of DG Research of the European Commission, responsible for the development of the European Research Area. She is also chair of the Scientific and Technical Research Committee of the European Union. During 2007 and 2008 she was the deputy director-general of the Commission’s Joint Research Centre. Prior to that, Pauli was vice president of the Academy of Finland and secretary general of the Research Council for Environment and Natural Resources in Finland. She has worked for the Finnish Ministry of Environment, the Water and Environment Research Institute, the Nessling Foundation, universities and been a member of numerous national committees dealing with science and technology policy, as well as science and society.

How can Europe’s R&D and innovation policy best respond to the global challenges that now face us?

The European Union has championed R&D and innovation over the past few years, in an effort to move to a knowledge-based economy. Of course there cannot be research and innovation without a strong education system, which is why education has become such an important part of the policy mix for a knowledge-based economy.

The European Commission, working with member states, associated countries, academia, industry and other stakeholders has been developing its policies in all three areas.

We’re integrating innovation policy into many other areas

In education, we’re modernising the universities and improving links between education and research. This means giving universities more autonomy, expecting more accountability, and encouraging them to diversify their funding. We’ve taken steps to improve researchers’ career prospects by encouraging cross-sector and cross-border mobility and demanded better working conditions and social-security regimes.

In research, we’ve increased public research funding through the Seventh Framework Programme, and worked with industry to shape the research agenda through initiatives such as the 36 European Technology Platforms and the five Joint Technology Initiatives. We’re also developing the European Research Area to ensure that knowledge can circulate as freely in the Union as goods, people, services and capital.

Of course, member states must spend their public research money as they see fit. However, a framework to do this in a structured manner can improve the impact of their investments, which is why we work with as many stakeholders as we can on international science and technology co-operation.

In innovation, we’re integrating innovation policy into many other areas, particularly through the creation of the European Institute of Innovation and Technology, and the Lead Market Initiative.

The crisis

So what impact will the financial crisis have on research and innovation policy?

First, it seems likely that even the most committed companies will cut their investment in research and innovation, at least for this year.

If Europe’s investment in knowledge decreases, we will lose jobs and output

Private investment in research and innovation accounts for about 70% of total R&D spending in OECD countries. So any reduction in private investment will make public investment even more important. We must use our public R&D spending to give long-term confidence to enterprises, and find ways to help them continue their R&D work. If Europe’s investment in knowledge decreases, we will lose jobs and output, and run the risk of not preparing adequately for the future.

It’s going to be tough, with fierce competition between sectors, researchers and research bodies for funding. But this may trigger structural change and could even help create more public/private partnerships and new models for co-operation.

The scarcity of funds will also increase demands for more efficient and effective R&D. Researchers are likely to be asked to show that their research will benefit society. Yet we have to remember that the most profound new ideas often stem from fundamental research, and that we must take risks to explore these frontiers.

The response

We need to lay the foundations for a resurgent economy

I am convinced that investment in R&D and innovation can stimulate demand, increase growth in a sustainable way and create jobs. We need to act decisively to lay the foundations for a resurgent economy. There are plenty of challenges we can usefully address.

How about climate change and energy security? We have ambitious targets for 2020: 20% greater energy efficiency, a 20% contribution from renewable energy sources, and a 20% reduction in greenhouse gas emissions. These will demand a lot of research and innovation and are likely to form the basis of major future industries.

The International Labour Organisation estimates that the global market for green products and services, meaning technologies and know-how for energy saving, green transport, recycling and water management, could be worth €2 trillion by 2002. The European Commission has estimated that the turnover of ‘green’ industries grew 7% between 1999 and 2004 in the EU15 countries, and accounts for 2% of GDP. This growth is likely to have accelerated over the past five years.

So continuing to invest in R&D and innovation could turn the current crisis into an opportunity that will help us prepare for the upturn. This won’t happen by itself - we need continuous investment in the EU, the member states, associated states and the private sector. We’re trying to lead by example.

One way we’re doing this is through the Seventh Framework Programme (FP7). Another is the Risk Sharing Finance Facility, which is jointly financed by FP7 and the European Investment Bank. It aims to make loans for R&D and innovation projects available to small to medium-sized enterprises and to research infrastructure projects. Many sectors have already received funds this way.

All kinds of investments suffer during a recession. But there have been examples, such as South Korea and Finland, where sustained public investment in R&D and innovation during recessions has borne dividends during subsequent upturns.

Concerted action

Traditionally, macro-economists will not prioritise support for research and innovation in an economic crisis. Short-term, demand-led recovery plans tend to take priority. So what is to be done?

It would be unfortunate if member states act alone. A wave of subsidies, protectionism and reduced research spending would take us deeper into recession. We need to act together: the EU, member states, associated countries, business, the research community and civil organisations.

The importance of European and international co-operation, competition and co-ordination is increasing. A balance between these three has to be found to optimise win-win situations. We need to take action across a whole range of policy areas and we need consistency and coherence.

We need to keep investing in people and modernising labour markets, while unlocking the potential of our SMEs and investing more in research and education. And we need to look at flexible security, childcare, lifelong learning, reducing red tape and modernising public administration and universities, as well as increasing the mobility and career prospects of researchers.

We also need to strengthen competition in Europe’s service sector. We also have to push ahead with a new generation of research infrastructure. All of these are important elements of our research and innovation policy. Each element reinforces the others. Lack of progress in one area holds back the rest.

Facing the challenge

The current financial crisis only makes the challenges that Europe faces more intense. In the 21st century, companies are as likely to find the cheapest places to innovate as they are to find the cheapest places to manufacture. But wise companies care about quality as well as cost. This can be to Europe’s competitive advantage.

We have to think hard about the role that public authorities play in supporting research and innovation, especially in today’s climate of macroeconomic fragility, frozen liquidity and great uncertainty. Given the current aversion to risk, public funding needs to play a stronger role.

Dennis Gabor, the Hungarian scientist who won a Nobel Prize for inventing holography, said: “The future cannot be predicted, but futures can be invented.”

I agree, but go further: the future is ours to invent together.

Anneli Pauli

Deputy director-general of DG Research at the European Commission
anneli.pauli@ec.europa.eu

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