When the Commission issued its proposal for the 2013 budget of the EU, probably it did not know how timely the priorities included in it would become. With the good old growth versus fiscal discipline debate reloaded, the question about how much public money should be spent on innovation will probably get increased attention.
Eurostat yesterday published an interesting and useful comparison about the EU and BRIC countries. A quick look at R&D spendings suggests that things are not as bad for Europe as many critical voices suggest. In terms of GDP, the EU still spends much more on this purpose than the BRICS. Moreover, the EU could even increase R&D spendings compared to 2008 levels, despite the economic crisis which shook it much more heavily than its competitors.
But the latter issue is exactly the catch: while EU GDP has increased little from 2003, the BRICs have been booming rapidly. So in the amounts actually spent on research and development, there is a clear catching up process, not surprisingly especially in the case of China. And there is even more: in China the share of business enterprises have significantly risen (from 60% to more than 70%) out of the total national spendings. So in fact, the Chinese Government is relatively pulling back and it is the companies themselves that have been especially opening the purse. This is in my view very often the best sign that things go in the right direction.
A crucial question in the EU will probably be whether we can not only increase public spending on R&D (which is I believe, still needed both at Community and national levels), but also whether the EU can mobilize businesses to follow suit. Let’s just focus on first issue now. The EU’s 2013 draft budget is promising in this regard. Without going into the details of this thick document, it is suffice to say that the Commission has proposed to increase significantly the amounts earmarked for the Competiveness and Innovation Programme and also for Research (FP7) despite the fact that the draft budget as a whole targets savings as much as possible.
At times of fiscal austerity, this is a very strong message to stakeholders. But of course, there is still a long and winding road to the adoption of the budget. No doubt hefty debates will come, since spending on innovation and research is a bit like spending on advertising. As the old bon mot says: half or even more of the amounts spent is wasted, but you never know which half. There will be a lot of temptation to cut back a little on such spendings – whose results are so uncertain and have so little short term visible impacts – for the benefit of something that has more visible and more evident short term gains.
The well known political and economic notion of “time consistency” will be highly relevant here: one cannot have a credible long term policy unless one sticks to it also on the short term. In order to convince innovative minds or businesses to place their activities not in the Silicon Valley or in a booming China but in the EU will require a credible committment that the EU will be permanently and increasingly a place where innovation happens. And a proposal for a budget for next year which steps up innovation and research financing in the current crisis is probably a very good step towards achieving this. A good step, but of course, only a first step.