How to link the growth and innovation in the time of the crisis

21 June 2012 Author: EIFonline

Pilar Del Castillo, MEP and EIF Chair, gave the opening remarks at the 21 June EIF breakfast debate on "Digital Agenda - Growth and Innovation".

The first speaker was U.S. Ambassador Philip Verveer, Coordinator for International Communications & Information Policy and head of the U.S. delegation to the EU-U.S. Information Society Dialogue. Ambassador Verveer opened by stating that the view in Washington is that ICT offers a crucial opportunity for growth in the midst of these difficult economic times. Verveer went on to talk about the issue of internet governance, noting that some countries are challenging the traditional multi-stakeholder governance model. The Ambassador said that both ICANN and the IETF have performed very well in the past and that the United States sees maintaining the multi-stakeholder approach as critical to preserving the freedom and dynamism of the internet. He suggested that a shift towards a more State-centric governance model would lead to more censorship and repression of dissent. Turning back to the economic potential of internet, Verveer expressed the need to maximize the opportunities presented by technological innovations such as cloud computing, big data, and the internet of things. The Ambassador noted two major challenges: protecting personal privacy and what he termed "the Patriot Act issue". The question of privacy, he said, is essentially how, in the face of ever more pervasive and powerful technologies, can personal privacy be maintained without at the same time crippling the associated services which people enjoy. It is, the Ambassador suggested, a difficult problem to address and one which will require a great deal of time and thoughtful consideration on the part of policymakers. As to the question of the Patriot Act (and the worries of many outside the U.S. what might happen to their personal data if it resides in or transits American territory) the Ambassador asserted that this is a contrived issue. He argued that it is common practice for every country's law enforcement to have intercept and access powers, that there is nothing unusual about the United States' arrangements, and that in fact "every country in Europe and - essentially - every country in the world" has a similar regime. Ambassador Verveer closed by urging his audience to put the issue aside in the spirit of good will and shared values.

Next up was Paul Hofheinz, President of the Lisbon Council. He opened his remarks by noting that this is not the first growth debate he's seen; that in the nine years of the Lisbon Council's existence there were similar debates in 2003, 2005, and now in 2012. "It would be nice", he remarked, "if we could make some progress this time." In the context of a Europe beset by economic woes - eleven percent unemployment, twenty-five million people out of work, and five million of them under the age of twenty-five - it's easy to talk about growth. But, Hofheinz stressed, growth is not a policy in itself but rather a policy outcome. What is needed, he stressed, is a more meaningful debate. Hofheinz then cited a number of studies made by McKinsey, The Boston Consulting Group, and by the Lisbon Council itself which illustrate the substantial contribution of ICT to GDP growth in advanced industrial economies. Citing a recent McKinsey study Hofheinz noted that in Europe as a whole, ICT accounts for above four percent of GDP growth. As more companies continue to embrace new technologies, he argued, this contribution will grow. He noted that, according to another study, if the internet-based economy were considered as a standalone entity it would represent the fifth largest in the world, ahead even of Germany. "Nostalgia", Hofheinz continued, "is not realistic. The world won't go back to how it was before the crisis." The future, he argued, lies with SMEs, firms that are internationalizing, and with the self-employed. How can policymakers meaningfully encourage growth, he asked in closing. Hofheinz urged his audience to embrace internationalism, to complete the digital single market, to encourage young people to get online and educate themselves, and to incentivize the deployment of high-speed broadband.

The morning's final speaker was Dr. Jonathan Cave, Senior Research Fellow, RAND Europe. Dr. Cave half-apologized in opening, stating that as his background was in economics he was inclined to be somewhat skeptical. He asserted that it's critical to draw a clear distiction between economic growth and recovery. Peoples' attitudes towards risk, he continued, are fundamentally different during boom and bust times. The European Commission, he noted, has been pinning its hopes on the internet since i2010 (which eventually became e2020.) Many of these hopes, as expressed in the Digital Agenda, are simply not realistic, he argued. He brought up the stock market Flash Crash of 2010 in which high-frequency trading algorithms temporarily wiped out a trillion dollars in market value. The purported benefits of the internet are, he argued, no more real that that trillion dollars which disappeared one moment and returned the next. Governments, he continued, are accustomed to work off the twin principals of predict and provide. But what do we know about the internet economy, he asked?  One cannot manage the emergent processes that produce true innovation, he asserted. However, he suggested, if you want to change peoples' behavior then providing them with information is more potent than making rules. Turning to the topic of internet governance, Cave referred his audience to the RAND Corporation's recently-concluded FI3P study. On the topic of privacy, he suggested that the confidentiality of personal data isn't the only conundrum. He expressed his concerns about the potential for subtle coercion via behavioral profiling. Back on the topic of the economy, Cave deplored the current hign youth unemployment as a terrible thing. He stressed the profound importance of getting the unemployed engaged with and participating in the overall society as critical part of the recovery process. He suggested that over time traditional notions of firms and jobs may fade away and proposed that the embrace of new technologies, such as additive manufacturing, presents a viable path to recovery. Dr. Cave turned, in closing, to the No Disconnect Strategy, noting that many of the most authoritarian regimes started out with good intentions and that one must be wary of claiming moral superiority or of holding naive ideas about the inherent neutrality of technologies.

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