Lisbon Council Action Plan Europe 2020

An
Action Plan
forEurope2020
Strategic Advice for the Post-Crisis World
Introduction Ann Mettler Foreword Wim Kok Education, Skills and Employment
Andreas Schleicher Turning Indicators into Action Enrico Giovannini The
Innovation Imperative Martin Schuurmans Getting the Macro Right Alessandro
Leipold Towards a Sustainable Society Harry Verhaar Social Innovation Geoff
Mulgan Europe in the Digital Age Žiga Turk The Innovation Imperative Martin
Schuurmans New Waves of Growth Mark Spelman Entrepreneurship Sören
Stamer Europe and the World Parag Khanna Introduction Ann Mettler Education,
Skills and Employment Andreas Schleicher Foreword Wim Kok Turning Indicators
into Action Enrico Giovannini The Innovation Imperative Martin Schuurmans
Getting the Macro Right Alessandro Leipold Towards a Sustainable Society Harry
Verhaar Social Innovation Geoff Mulgan Europe in the Digital Age Žiga Turk
The Innovation Imperative Martin Schuurmans New Waves of Growth Mark
Spelman Entrepreneurship Sören Stamer Europe and the World Parag Khanna
Stamer Europe and the World Parag Khanna Introduction Ann Mettler Foreword
Wim Kok Education, Skills and Employment Andreas Schleicher Turning Indicators
Lisbon Council Policy Brief
An
Action Plan
forEurope2020
Strategic Advice for the Post-Crisis World
Stamer Europe and the World Parag Khanna Introduction Ann Mettler Education,
Skills and Employment Andreas Schleicher Foreword Wim Kok Turning Indicators
Stamer Europe and the World Parag Khanna Introduction Ann Mettler Foreword
Wim Kok Education, Skills and Employment Andreas Schleicher Turning Indicators
Authors:
Enrico Giovannini, Parag Khanna, Wim Kok, Alessandro Leipold, Ann Mettler, Geoff Mulgan, Andreas Schleicher, Martin Schuurmans, Mark
Spelman, Sören Stamer, Ziga Turk and Harry Verhaar
The views expressed in this publication are those of the authors alone, and do not necessarily reflect the position or opinion of the Lisbon Council,
the European Commission or any of their associates.
The Lisbon Council would like to thank the European Commission’s Education, Audiovisual and Culture Executive Agency for its support. With
the support of the European Union: Support for organisations that are active at the European level in the field of active European citizenship.
2
Introduction
If Not Now, Then When? do what it purportedly set out to do, and
I can think of no better time than today,
right here and right now.
It is in that spirit that the publication
you hold in your hands was conceived. It
is a collection of essays by extraordinary
by Ann Mettler individuals who have brought about real
change in their field of activities and
disciplines. They are doers and
innovators, practitioners and experts. The
themes are purposefully wide-ranging,
reflecting the broad and interdisciplinary
nature of the Europe 2020 strategy. The
foreword by Wim Kok, former prime
minister of the Netherlands and author
of the Kok report on the midterm review
of the Lisbon Agenda, sets the scene
Ann Mettler perfectly for the ensuing articles, putting
is executive director the current crisis in a global context and
of the Lisbon Council. reflecting on some of the key lessons to
be drawn from a decade of experience
with the Lisbon Agenda.
For nearly three years, Europe has been consumed with crisis
management and setting up new structures to underpin a better economic
governance system. While these reforms were certainly necessary in the ‘One cannot fight
wake of the ongoing financial crisis, it has had the unfortunate side effect
that other important issues, such as how to bolster drivers of sustainable economic decline with
economic growth, kick-start job creation, sustain a leading edge in process. It can only be
innovation and align budgets to purported policy goals have seemingly
fallen off the list of political priorities. fought – and won – with
With political leaders and the media utterly preoccupied with every action and commitment.’
minutia of the debt crisis and its institutional and political repercussions, it
is perhaps not surprising that last year’s launch of the Europe 2020 Strategy
went virtually unnoticed. Hard to believe but it has had even less cachet
than its predecessor, the ill-fated Lisbon Agenda. The low-key launch is now One cannot overstate the importance
causing some confusion as plans for an entirely new Competitiveness Pact of coming months and years in
have emerged, seemingly unconnected with the Europe 2020 agenda, which safeguarding our prosperity, our values
itself is supposed to be the EU’s economic development blueprint for the and our place in the world. The Europe
coming decade. And once again, instead of focusing on implementing a 2020 Strategy will be key in delivering
strategy that has been painstakingly negotiated and agreed by all 27 member the sustainable growth, employment and
states, our attention is diverted towards designing another plan that is innovation we need, and we hope that
supposed to shore up competitiveness. But if recent history has taught us the reflections, actions and
anything, it is that one cannot fight economic decline with process. It can recommendations on the coming pages
only be fought – and won – with action and commitment; with strategy and will serve as an inspiration to pro-actively
endurance; with vision and united strength. At some point, Europe has to build and design a better future.
3
Table of Contents
Introduction: If Not Now, Then When?
by Ann Mettler 2
Europe 2020 – Then, and Now
by Wim Kok 4
Education, Skills and Employment
by Andreas Schleicher 6
Turning Indicators into Action
by Enrico Giovannini 10
The Innovation Imperative
by Martin Schuurmans 12
Getting the Macro Right
by Alessandro Leipold 14
Towards a Sustainable Society
by Harry Verhaar 16
Social Innovation
by Geoff Mulgan 18
Europe in the Digital Age
by Žiga Turk 20
New Waves of Growth
by Mark Spelman 22
Entrepreneurship
by Sören Stamer 24
Europe and the World
by Parag Khanna 26
Action Plan for Europe 2020: Lisbon Council Policy Brief
4
Foreword
Europe 2020 – Then, and Now
Wim Kok is former prime minister of
By Wim Kok The Netherlands.
The discussion about Europe 2020 and even in social security, which was
the plans for a new Competitiveness Pact particularly hard for me given my
need to be looked at against the backdrop background as a trade unionist. I made
of a world that is changing at record sure, however, that I never blamed
speed. The rise of new economic Brussels for these policy decisions, but
powerhouses will continue, and many explained again and again that these
countries and regions around the globe measures were good for the country
will have to grapple with political because a delay or even absence of reform
uncertainties. Will today’s struggle for would put too heavy of a burden on
democracy and liberty in the Middle future generations.
East take hold or not? Can China’s I believe that this approach is still
centrally planned economy be reconciled relevant today. Of course European
with economic freedom? While it is of leaders have the right to disagree with
course impossible to predict what the one another and to pursue their own
world will look like in 2020, one national interests, but they have a joint
assumption can be made with near responsibility to move Europe forward as
certainty: individual countries of the ‘We need to stop thinking well; to focus not only on immediate
European Union, even the large ones, only of what is necessary crisis management but also on long-term
will be less relevant at a global level. challenges, be it the ageing of our society,
Only united, focused and concerted as a last resort, and the decline in competitiveness or reining
action to raise the European Union’s instead do what is in public spending.
economic game, with the help of the Against this backdrop, one of the key
Europe 2020 strategy, would make a necessary for our people issues on which the Europe 2020 strategy
profound difference in mitigating the to become masters of needs to urgently focus is facilitating a
otherwise inevitable reduction of global better, more coherent link between what
influence, both economically and their own future.’ citizens in member states consider to be
politically. Sadly enough, current in their interest and the priorities of the
developments do not seem to suggest EU agenda. Until now, all European
that Europe will be able to meet this agendas have been seen as too abstract
challenge easily. Put simply, the productivity has created serious and isolated to be in the national interest.
European spirit is not what it was 10 or imbalances. As I know from my own This is not only because European
15 years ago. New efforts are urgently experience as both a prime minister and institutions seem very removed from the
needed therefore if Europe wants to finance minister, high debt levels can be lives of most citizens but also because the
organise itself in a way that would dealt with as long as a country is able to communication effort has utterly failed.
sustain our global standing and rebuild generate a level of sustainable economic If you consider, for instance, the long
trust and confidence. This is a crucial growth of about 2-3% a year. While time horizon – 2010 for the Lisbon
moment for European and national some countries in Europe will manage to Agenda and 2020 for the Europe 2020
leaders to rethink what needs to be done achieve such growth rates, others will strategy – it is understandable that most
and how to do this. probably not. It is this divergent growth people lose interest. It would be
Comparing the situation today to path within the EU in general and the preferable to make it more explicit that a
2004, when I was in charge of producing eurozone in particular that has become strategy for the year 2020 also tackles
a report on the midterm review of the extremely worrying. immediate issues, and in particular
Lisbon Agenda, the situation is much Then, as now, there appears to be a focuses on three challenges which for me
more serious, mostly because of the structural lack of connectivity between are very much part of an interconnected
aftermath of the financial crisis.1 Even what is said in Brussels and what is triangle.
though the crisis didn’t originate here, perceived as being urgent in the member First, the need for financial solidarity,
it has had a profound impact on Europe states. I remember when I was finance meaning that joint efforts to ensure the
and has forced many issues to the fore. minister in the early 1990s, when the sustainability of the euro and the
Budget deficits in most countries have Netherlands had to reduce its public eurozone are seen as being in the
reached unsustainable levels, while a lack deficit to meet the Maastricht criteria. self-interest of the EU’s stronger
of competitiveness and lagging Unpopular measures had to be taken, economies as well. Establishing a

5
properly functioning European Financial their society; and they deserve to be told made people too often fearful, defensive
Stability Facility (EFSF) falls under this of future challenges that need to be and protectionist.
priority. Second, we need stricter rules tackled now if we hope to sustain our We must realize that the future can
for the Stability and Growth Pact to way of life for future generations. also hold many opportunities; that we
ensure the responsible handling of public This is a moment when we have to can be relevant and sustain many of our
finances. And third, we need a much take an honest look at ourselves and achievements if we shore up our
greater commitment to shore up realise that many people are simply fed competitiveness; that we need to organise
competitiveness, also with the help of the up; they are fed up with ever more ourselves better at the European level,
Europe 2020 strategy. summits and nice speeches; they are fed driving forward an understanding that
But these are not unique insights or up with the lack of implementation. there is no inherent contradiction
new revelations. We have always known People in Europe used to think that they between the national and European
that implementation was Europe’s weak would leave behind a better future for interest. And this necessitates that the
spot, so the question of enforcement is their children. Generally speaking, that Europe 2020 strategy has a credible
key. One of the best ways to compel is less often the case. There is a prevailing governance and implementation strategy;
countries into action is by naming and feeling both among citizens and political that it is able to connect the present to
shaming, but that has been, and leaders that a plateau has been reached in the future; and that it is not isolated from
continues to be, highly controversial in terms of social achievements and rights, the day-to-day priorities of our citizens in
many member states. On balance, one and clinging on to that status quo has this post-crisis world.
must conclude that the member states
have until now not demonstrated a real 1. Wim Kok et al., Facing the Challenge: the Lisbon Strategy for
ability or political appetite to monitor Growth and Employment: Report from the High-Level Group
(Luxembourg: European Union, 2004).
their own performance. The European
Commission could of course perform
this role, but it does not have an
unmitigated track record of success in
this area either. In order to enhance its
credibility, it might be worthwhile to
consider including external and
independent experts in its assessments.
If I have one piece of advice for
European leaders it is the following: the
best way to deal with difficult,
interconnected issues is to be as forward-
looking and open-minded as possible. If
you consider, for example, the outlook
for the global economy, and the rise of
the new economic powerhouses, then it is
necessary not only to protect our current
position in a defensive manner but also
to work pro-actively towards a better
future. This can mean shifting budget
priorities around, so that leaders have the
financial resources to invest in areas
where tremendous benefits can be reaped
from a first-mover advantage, for instance
in eco-innovation. Or it can mean being
courageous and tackling necessary social
and economic reforms. If we enact active
labour market policies today, or raise the
retirement age commensurate with our
increasing life expectancy, we can save
ourselves a lot of problems in the future
For those who say that countries don’t
have the luxury of being forward-
looking, I say, consider the alternative.
We need to stop thinking only of what is
necessary as a last resort, and instead do
what is necessary for our people to
become masters of their own future.
People deserve to have an active stake in

6 Andreas Schleicher is director of the
Programme for International Student
Assessment (PISA)1, education
Skills, Education and Employment: policy adviser of the secretary-general
of the Organisation for Economic
Europe’s Next Frontier Co-operation and Development (OECD)
and a member of the Lisbon Council’s
Board of Advisers. He writes here in a
By Andreas Schleicher personal capacity.
The case for a better skills policies is consequence of a lack of responsiveness

clear. Never before have skills been as on the part of education and training
central to the prosperity of nations and providers to information about skills
better life chances for individuals as demand.
today.2 Skills contribute to economic The transition to a low-carbon,
growth directly through increased environmentally sustainable economy
productivity3 and indirectly by creating also belongs to the drivers of the changes
greater capacity to adopt new in the mix of skills that countries
technologies and ways of working and require. But, even beyond that, labour
spurring innovation.4 Up-skilling plays a markets are becoming increasingly
key role in countering earnings complex and dynamic. Today, labour
inequality. Adult education and training markets are characterised by growing
have a significant impact on both worker convergence of occupational sectors and
productivity and wage levels.5 rising job and occupational mobility,
Conversely, poorly skilled people, skills and rapid decreases in the lifetime of
shortages and mismatches are domain-specific knowledge. All of this
increasingly costly (see Figure 1). ‘Never before have skills requires individuals to upgrade their
One of the reasons why skill shortages been as central to the skills more regularly to adapt to
often do not translate into better changing patterns of work and learning.
learning outcomes is the lack of a prosperity of nations and It also requires better data on skills and
common language through which skills better life chances for changing skill demands within existing
are identified, recognised and jobs and changing aggregate skill
communicated from those who use them individuals as today.’ demands resulting from shifts in the
to those who produce them. Resulting occupational composition.
skill mismatches can occur at both the OECD evidence shows that skills are
individual level – when a worker would economic costs. Skill mismatches are unequally distributed within our
be more productive in another position sometimes caused by ineffective societies and substantial numbers of
– as well as at the aggregate level – when signalling of labour market demands to people do not even reach minimum
there is a general surplus or shortage of education and training providers and to levels of basic skills.6 Furthermore, while
specific skills. Both lead to high individuals, but they are often also the some countries have managed to
Figure 1: How Lack of Foundation Skills Translates into Economic Disadvantage

Adjusted odds ratios showing the risk of experiencing economic disadvantage, by number of foundation
skill domains with low performance, adults aged 16 to 65
3,5 id not receive investment

D
income in last year
3,0
Unemployed
2,5
In lowest two quintiles
2,0 of personal income
1,5 eceived social assistance

R
in last year
1,0
0,5
0,0
0 1 2 3 4
Number of skills domains with low performance
Source: Adult Literacy and Lifeskills (ALL) Survey, 2003-2007

Odds are adjusted for age, gender, education, parents’ education, and labour force, occupational, income, immigrant and language status.

7
improve their skill base over time, others developing more advanced and specific drop-outs represent another group at
have stagnated or even declined. types of human capital (see Figure 2). risk. Key policy actions for this group
Avoiding the waste of talent requires Making optimal use of existing skills include early interventions to support
ensuring access to education for all, both and preventing attrition of skills due to young people at risk of leaving the
to attain the right level of initial lack of use and inactivity is as important education system without a recognised
education and to maintain the possibility as producing the right skills. Economic qualification as well as measures to assist
of upgrading and extending skills over a losses arise from a sub-optimal young people in finding jobs and
lifetime. utilisation of skills – in other words, measures aimed at removing the barriers
With a rapidly rising demand for from a mismatch of individuals’ skills to entry in the labour market. To
skills, countries can no longer rely on and skills requirements in the labour activate older workers, coordinated
education and training systems that sort market. OECD evidence suggests that policies are needed too, including
individuals. Put simply, countries – skills are developed, sustained and even reforming pension schemes, increasing
including those in Europe – need to lost at various stages of life depending on the retirement age and introducing
improve their skill base throughout the whether those skills are trained, used or age-discrimination legislation. But
population and capitalise on the full neglected at work or home through encouraging greater investment in
potential of all individuals. This requires education and training.7 Not using skills training of older workers is also
governments to ensure that skills are at all in case of unemployment or imperative. Last but not least, women
developed in effective and efficient ways underemployment can lead to skills represent the largest underutilised
through lifelong and life-wide learning, atrophy and a diminishing stock of human capital pool in OECD countries.
and to ensure responsiveness, quality available skills in people. Over the past decades, female
and flexibility in provision. To achieve Policies can assist in improving the educational achievement has increased
this, policies need to do better at match of skills demand and supply by significantly and, for the younger
meeting the individual needs of people establishing national assessment and cohorts, it has overtaken that of men.
wherever they learn, to look into new qualifications frameworks to ensure Over the same period of time, female
ways to take learning to the learner and transparency and systems for recognition labour force participation rates have
to examine new forms of educational of non-formal and informal learning and increased but the gender gap remains
provision. There is also need for a more experience as well as of foreign diplomas. substantial: on average in OECD
appropriate mix of academic and Availability of data and evidence and the countries, only about 60% of women are
vocational programmes that reflect use of labour market information for employed or looking for work compared
student preferences and employers’ students, parents, employers, with 80% of men.
needs, with vocational training government, and education providers – In many countries, skills policies are
providing immediate employability and for instance through career guidance – still piecemeal. Significant gains can be
basic transferable skills to support are tools to improve the match. achieved by joining efforts at all levels
occupational mobility. Targeted policies will be needed in and investing tight public budgets
The basis for developing talent and support of groups that are marginalised effectively and efficiently. There is need
building a skills pool remains acquisition in the labour market. The integration of for a coordinated “whole of government”
of cognitive foundation skills. Literacy immigrants and minorities into the approach that involves different
and numeracy are especially important labour market remains an issue of major stakeholders, in particular the social
tools for continued learning and for concern in many countries. School partners, in the design, delivery and
Figure 2: Number of Cognitive Foundation Skills Domains with Low Performance and Human Capital Acquisition
Adjusted odds ratios showing the risk of experiencing disadvantage in human capital acquisition, by number of
foundation skill domains with low performance, adults aged 16 to 65
6,0 S econdary schooling

not completed
5,0
as not participated
H
4,5 in post-secondary schooling
ottom half of users on ICT

B
3,0 engagement index
2,5 as not participated in adult

H
education or training
1,0
0,0
0 1 2 3 4
Number of skills domains with low performance
Source: Adult Literacy and Lifeskills (ALL) Survey, 2003-2007

Odds are adjusted for age, gender, education, parents’ education, and labour force, occupational, income, immigrant and language status.

8
funding of skills systems. As the and incentivise learning. Governments nations to anticipate the evolution of
boundaries between the place where can use regulation and taxation to labour demand, promote skills
individuals learn and the location where encourage financial institutions to acquisition, ensure equity in access to
they use their skills becomes blurred, develop new financial instruments that learning, deploy talent pools effectively,
governments will need to build new allow learners to access opportunities make sure the right mix of skills is being
relationships, networks and coalitions when they need them most, including taught and learned, give workers the
between learners, providers, through lowering cost, reducing risk and opportunity to adapt their skills
governments, businesses, social investors smoothing repayments. For learning throughout their working life, and
and innovators that bring together the beyond universal education, education develop more efficient and sustainable
legitimacy, innovation, and resources and training systems need to find ways approaches to the financing of learning
that are needed to make lifelong learning to share the costs among government, and training, including identifying who
a reality for all. employers and students based on the should pay for what, when, where and
Governments will also need to respective benefits obtained. how.
evaluate the mixture of learning
providers (public, private, and third
sector organisations) and individuals
who provide content, learning
opportunities, and instruction to
learners of all ages, as well as the ways in
which countries can make investing in
learning cost-effective for individuals
and their employers. This can happen by
setting public funds for training for
those out of work to incentivise learning
or through regulation and taxation to
encourage financial institutions to
develop new financial instruments that
allow learners to access opportunities
when they need them most. This
includes finding ways to encourage both
employers and students to participate in
workplace training, to ensure that such
training is of good quality, with effective
quality assurance and contractual
frameworks for apprentices. It also The OECD has set out to tackle many 1. OECD, PISA 2009 Results: What Students Know and Can Do
includes engaging employers and unions of these issues through the development (Paris: OECD, 2010).
2. See Chapter A of OECD, Education at a Glance 2010 (Paris:
in the design and provision of vocational of a Skills Strategy that seeks to assist OECD, 2010).
3. Guido Schwerdt and Jarkko Turunen, Changes in Human
training and providing career guidance countries in improving economic and Capital: Implications for Productivity Growth in the Euro Are
accessible to all, informed by knowledge social outcomes through better skills and (Münich: Ifo, 2007) find that the contribution of labour quality
(i.e. educational attainment and labour market experience) to
of labour market outcomes. their effective utilisation.8 The Skills labour productivity has increased over time, accounting for up to
one-fourth of euro area labour productivity growth. See also
The rising demand for skills also Strategy will build on the Programme OECD, Growth Project (Paris: OECD, 2003); Barbara Sianesi and
John van Reenen, “The Returns to Education: Macroeconomics,”
implies that all stakeholders must be for International Assessment of Adult Journal of Economic Surveys, vol. 17(2) 2003; Eric A. Hanushek
prepared to mobilise more time and Competencies (PIAAC), a first-of-its and Ludger Wößmann, How Much Do Educational Outcomes
Matter in OECD Countries? (Massachusetts: National Bureau of
money for learning. The mixed provision kind international survey to measure Economic Research, 2010); Serge Coulombe and Jean-François
Tremblay, “Literacy and Growth,” The B.E. Journal of
of lifelong learning may demand new how the availability of key competencies Macroeconomics, vol. 0(2) 2006.
funding models to make it easier to in the adult population, together with 4. OECD, The OECD Innovation Strategy: Getting a Head Start on
Tomorrow (Paris: OECD, 2010); OECD, Skills for Innovation and
invest in learning. Investment in their effective utilisation, translates into Research (Paris: OECD, 2011).
5. OECD, Promoting Adult Learning, Education and Training Policy
learning needs to be cost and tax- better life chances for individuals and (Paris: OECD, 2005); OECD, The OECD Employment Outlook
2004 (Paris: OECD, 2004).
efficient for individuals and their nations. 6. OECD and Statistics Canada, Learning a Living: First Results of
employers. For those out of work, Strong and shared growth the Adult Literacy and Life Skills Survey (Paris: OECD, 2005).
7. ibid..
funding needs to be accessible to support increasingly depends on the capacity of 8. OECD, Towards an OECD Skills Strategy forthcoming.

9

10
Enrico Giovannini is president of the
Turning Indicators into Action: Italian National Institute of Statistics
(ISTAT). He previously served as chief
Getting It Right This Time statistician of the Organisation for
Economic Co-operation and
Development (OECD). He is a member of
By Enrico Giovannini the Lisbon Council’s Board of Advisers.
What made the European Union’s policy programmes like Europe 2020.1
Lisbon Strategy different from the run Therefore, it is important to learn from
towards European Monetary Union past mistakes and be sure that indicators
(EMU) during the 1990’s? The question are turned into action at all levels. In this
is far from being irrelevant. In fact, while perspective:
EMU will be indeed remembered by • It is not enough to compile “league
historians as one of the most successful tables” based on a list of indicators
political processes in the world, the chosen at the end of long negotiations
Lisbon Strategy has long been considered aimed at making all countries happy, i.e.
a failure. In both cases, there were clear relatively easy to achieve;
objectives shared by all political parties, • It is not enough to share indicators
strong political commitment and support among the “usual suspects” (i.e. policy
from public opinion. Actually, one could experts) without reaching out to citizens;
say that the consensus on the need to • It is not enough to choose only “input”
strengthen economic growth, maintain indicators to monitor policies (for
social cohesion and respect the example, the ratio between R&D
environment in Europe was even higher ‘Indicators must be as expenditures and GDP) without any
than the agreement on the need to create close to people and as link to the final outcomes relevant for
a common currency. So what was people.
different? well and regularly used by In the case of EMU, which was seen as a
We could spend a lot of time media as possible to make financial issue, it was justified to use
discussing all possibilities, but one indicators that could represent economic
difference is quite clear. The efforts made them central in the public convergence and stability of public
by candidate countries to get into the discourse.’ finance. But for an ambitious, all-
EMU was focused on a few targets, encompassing strategy like Europe 2020,
measured through statistical indicators indicators must be as close to people as
that could be easily understood by people possible, as widely disseminated as
and actually used by several governments possible, as shared by stakeholders as
to measure progress towards the target by all components of the society can play possible, and as well and regularly used
(3% for public deficit, inflation rate, etc.). a crucial role in improving policy making by media as possible to make them
But the Lisbon Strategy was supposed to and increasing accountability, especially central in the public discourse. Only in
be monitored by a plethora of indicators when they deal with the final outcomes this way can indicators play the role they
agreed by a group of experts without a that matter to people. are supposed to play, i.e. to assess
serious engagement of stakeholders, The whole debate on “Beyond GDP” progress towards targets.
unstable over time, kept hidden to public is about this issue. Indicators that do not This does not apply just to the Europe
opinion in some countries and rarely relate to people’s lives are seen as 2020 strategy, but also to other EU
used in public communication and irrelevant or, even worse, unfaithful policies. For example, a strong proposal
national debates. descriptions of what is happening, has been recently advanced as part of the
As the Nobel Prize Winner Amartya undermining democratic debates and new cohesion policy currently under
Sen once said, “to discuss about pushing citizens away from politics. On discussion. The proposal is to focus the
indicators is a way to discuss about the the contrary, indicators that can be process of setting targets and monitoring
ultimate goals of a society.” Indicators are understood and seen by a society as a using outcome indicators discussed and
particularly valuable if they are shared shared vision of where it wants to go (as agreed at national level with the broadest
and used by all parts of society to assess when José Luis Rodriguez Zapatero possible engagement of stakeholders.
progress towards targets and evaluate the indicated that his target was for Spain to Outcome-based indicators are clearly
success or failure of policy makers. In a reach a value of GDP per capita higher one of tools for improving the
world where we are bombarded by data than the Italian one) can represent a functioning of democracy and policy
every day, as demonstrated by hundreds booster for policy reforms. making, as can be seen in several
of initiatives around the world, statistical Of course, indicators per se are not the “political choice” models based on game
indicators chosen through the panacea of all policy problems, but they theory. For starters, indicators can help
involvement of stakeholders and shared represent a key ingredient of long-term in reducing the information asymmetry

11
between voters (the principals) and laws through statistical indicators and framework. But in the medium term, it
politicians (the agents) which lead the finally vote using this information. will be necessary to change the current
latter to implement the most convenient Maybe this will happen in the future. status of Eurostat and of national
policies for them, and not necessarily the But what could happen right now is for statistical offices, turning the European
policies sought by the former. These Europe to start using indicators Statistical System into a new European
models demonstrate that an election differently. We could call on System of Statistical Institutes, like the
system alone is not enough to select the governments, enterprises, associations European System of Central Banks,
best politicians, while the possibility for and citizens to contribute to Europe whose powers and independence should
citizens to observe, through indicators, 2020 in a new way, using indicators like be similar to those currently enjoyed by
the outcome of policies can be a key tool never before to mobilise public opinion the European Central Bank and national
to help them select the best politicians. to push decision makers in the right banks. Only in this way can we be sure
In this sense, indicators are clearly vital direction. A European communication that the “Greek case” will not be repeated
to the functioning of democracies in the strategy based on statistical indicators and the trust in statistical indicators will
information age. could reach, for example, young be the highest possible, as it should be.
Of course, indicators can be used for generations using language they Statistical indicators are relevant only
propaganda, but this is why they should understand, including new visualization if they increase knowledge and contribute
be widely disseminated to all and interactive techniques, to build to actions. In this sense, they can play a
stakeholders and used in public debates. knowledge of where Europe and key role in political processes, especially
Statistical offices in charge of producing individual countries stand now, of where in democratic societies. On the other
indicators should be protected from they want to go and whether they are hand, the production of statistical
political interference. The selection of getting there. indicators must be done in such a way
indicators should be made through open Because of its importance, statistics that their reliability and trustworthiness
consultation of the different components have to be produced and disseminated is recognised by all components of
of society (as the UK is doing to select according to professional and scientific society. This may require institutional
the dimensions of well-being most criteria, free from political interferences. changes that should be put on the agenda
relevant to citizens). Indicators to The European Statistical System, which of future developments of the European
monitor strategies like Europe 2020 are comprises Eurostat and national Union. Turning indicators into action is
too important to be seen as a tool for statistical offices, has to be strengthened possible – and it is necessary now to
experts. They should be seen as a key part both financially and institutionally. The ensure a better life for current and future
of the strategy. “Greek crisis” has demonstrated the risk generations.
Eric Schmidt, the chairman and that the weakness of a single statistical
former CEO of Google, once said a day institute can be for the entire Union.
will come when people will use the Therefore, additional measures have to be
Internet to evaluate how taken to strengthen the System. In the
parliamentarians voted on proposed short term, these measures can be 1. A nn Mettler, Innovating Indicators: Choosing the Right Targets for
legislation, assess the outcome of those developed within the current legal Europe 2020 (Brussels: The Lisbon Council, 2009).

12
Innovation and Entrepreneurship:
Twin Pillars of Future Success Dr. Martin Schuurmans is chairman of
the European Institute of Innovation and
By Martin Schuurmans Technology (EIT).
Current European innovation efforts are right timing for the customer. Few new
insufficient if Europe wishes to maintain European companies play a role in the
a key role on the global economic stage. year-upon-year renewal of the Fortune
As Europeans, we have not been able to Global 500 list of the world’s largest
compete effectively with the United companies.7
States and Japan, and countries such as Entrepreneurship (combined with
China, Brazil, India and Russia are higher education) and better
catching up fast. This is not earth understanding of customers, markets and
shattering – we have heard this before. sales channels are the key drivers of
What is shocking is that we have innovation. Recently, US President
analysed and discussed this development Barack Obama appealed to his country
to great lengths, but have yet to take the to “out-innovate” and “out-educate” the
concrete actions necessary to reverse world (first and foremost China) in order
these trends. to restore economic prosperity and create
Measures are being put into place to jobs “to make America the best place on
address this. Europe 2020 and the recent Earth to do business.”8
communication on Innovation Union in ‘Unless everyone starts to Put simply, Europe needs to embrace
particular are steps in the right recognise innovation as entrepreneurship and education for
direction.1 What we at the European entrepreneurship as well as the flexibility
Institute of Innovation and Technology the encompassing factor of an environment conducive to
(EIT) and the Directorate-General for for research, education entrepreneurship. However, we live on a
Education and Culture at the European continent where failure is often shameful
Commission are trying to achieve with and industry with and risk is preferably avoided. Thus, we
the EIT is contributing, however humbly, entrepreneurship in the primarily educate our young people for
to the re-energising of Europe’s employment and safe retirement rather
innovation efforts. However, unless more driver’s seat, Europe will than to become an employer and a risk
people recognise innovation as the key continue to stall.’ taker building new companies.
goal of research, education and industry Like the United States, Europe needs
with entrepreneurship in the driver’s seat, to focus on out-educating its youngsters
Europe will continue to stall. to empower them with a different set of
Few can argue with the fact that Europe, R&D spending was still at 2.01% “know how and why” skills and attitudes
Europe is very good at science. Taking of GDP in 2009 in the European Union (rather than knowledge only) and should
the medical field as an example, we see as a whole. This compares with 2.77% for example integrate engineering and
that half of the Nobel laureates originate (2008) in the US, 3.6% for Sweden, entrepreneurship education. Successful
from Europe.2 So why do so many of the 2.8% for Germany and 2.2% for France.5 entrepreneurs need to be offered the
global players in the pharmaceutical In comparison, China invested 1.7% of right incentives (from mentoring to
arena originate from the US?3 In reality, its gross domestic product on R&D in pre-seed or venture capital to growth
Europe only invests about one-sixth of 2009 and aimed to invest 2% by the end capital) to enable innovation to thrive; in
what the US spends on supporting the of 2010.6 The continued emphasis in the short to “out-innovate” their competitors,
growth of SME’s beyond, say, €5 million EU on the 3% Lisbon target is very much as our friends across the Atlantic have
turnover.4 Supporting entrepreneurship supported by the EIT. While it is true vowed to do.
does not end after a company has been that more spending will not We often ask ourselves why our most
set up. Resources need to be made automatically lead to more innovation, talented students and researchers decide
available for successful entrepreneurs to Europe is simply missing the boat when to follow their dreams in the United
take their enterprise to the next level. it comes to the foundation of new States. The answer is simple: these young
Europe has a significant gap in funding companies based on game-shifting students and researchers are attracted by
for further growth of small- and technologies. Moreover, the product and an environment which encourages and
medium-sized companies. services resulting from EU industry pushes them to succeed – not one that
Despite the ambition of the original R&D, despite the best intentions, stifles them in rules and control limiting
Lisbon Strategy, agreed in 2000, to set a oftentimes do not reach the market their flexibility to win over innovation
research and development target of 3% in because they lack the right mix or the opportunities.

13
The clock is ticking. Without further
concrete positive action, it is likely that
by 2020 our children and grandchildren
will be growing up in a “me-too
economy,” with less wealth and limited
hope of catching up with the true global
economic leaders in the USA, China and
(maybe) India.
To bring Europe closer to the “smart,
sustainable and inclusive growth” set
forth in the Europe 2020 programme, I
propose the following three-point
programme:
• Put entrepreneurship at the heart of
higher education. People are at the
heart of any social and economic
transformation. So the EU should
transform the higher education
landscape into one that supports and
encourages the creation, production,
dissemination and communication of
new ideas. Make it a system that fosters
entrepreneurial mindsets so that
entrepreneurs are able to harvest the
fruits of their education. The EIT aims
to do just that with our three
Knowledge and Innovation
Communities (KICs) and their
partners. Our intent is to develop greater trust to ensure greater flexibility incentivized entrepreneurship in all
EIT-labelled degrees as a benchmark for in support of entrepreneurship and European programmes and simplification
this process on a wider European scale. innovation. The harmonisation of rules of rules and tools towards flexibility in
And why not create an entrepreneurship and tools that is currently being support of entrepreneurship. The time to
“passport” for students (graduates, discussed in the EU is a form of act is now.
masters and PhDs) who complete an simplification that can be at odds with
entrepreneurial education fulfilling the flexibility needed for innovation.
certain excellence criteria? The EIT is testing the waters on
• Put entrepreneurship at the heart of all simplification towards flexibility in
future EU funding mechanisms as an several respects. The EIT is moving
enabling tool. Entrepreneurship should towards becoming an engaged investor
play a key role in all European policy rather than a grant giver, has three
programmes. Moreover, the EU must KICs led by a CEO and has started to
ensure greater coherence and work with fewer rules as enabled by its
complementarity between different derogations from the EU Financial
sources of funding available for Regulation. Although this is a good
entrepreneurship under the various starting point, there is a need to go
EU programmes and in different further. After all, from the EIT
geographical environments in Europe. conception in the European institutions
Well-trained people need good tools. to the designation of the first
Europe is doing a commendable job on innovation communities took four
1. For more on the Europe 2020 strategy and the Innovation Union
pre-seed money, but the EU should do years; in that same period Facebook flagship, see European Commission, Europe 2020: A European
Strategy for Smart, Sustainable and Inclusive Growth (Luxembourg:
more to set aside and make available and Twitter emerged! Europe should European Commission, 2010); and European Commission,
significant sums of money to address understand that the key principle in Europe 2020 Flagship Initiative: Innovation Union (Brussels:
European Commission, 2010).
the funding gap for small- and fostering entrepreneurship and 2. “All Nobel Prizes in Physiology or Medicine,” Nobelprize.org
22 February 2011.
medium-sized companies to grow innovation is first and foremost 3. Patrick Clinton and Mark Mozeson, “The Pharm Exec 50,”
beyond €5 million turnover. Maybe a flexibility. Pharmaceutical Executive Magazine May 2010.
4. Nick Clayton, “U.S. Capital Gets Europe’s Tech Stars Up and
passport or EIT label can help here too. European competitiveness would only Running,” The Wall Street Journal 08 December 2010.
5. Eurostat, “Gross Domestic Expenditure on R&D (GERD),”
• Simplify EU programmes and benefit from innovation driven more http://epp.eurostat.ec.europa.eu.
6. “China Spends 1.7% of GDP on R&D: Survey,” ChinaDaily.com
instruments to achieve flexibility in strongly by entrepreneurship through 23 November 2010.
support of entrepreneurship. At the EU better entrepreneurship education; 7. “ The Fortune Global 500,” CNNMoney.com 26 July 2010.
8. Barack Obama, State of the Union Address (Washington D.C:
level, we need less complex rules and embedded, properly funded and White House, 2011).

14
Structural Reform: Alessandro Leipold is chief economic
adviser to the Lisbon Council. He
Key Steps on the Road to Recovery formerly served as deputy director and
acting director of the European
Department at the International
By Alessandro Leipold Monetary Fund.
European leaders meet this Spring at a constructive to super-impose new

critical juncture in the European Union’s objectives in areas where agreed priorities,
renewed effort at enhancing economic the fruit of lengthy deliberations, already
policy coordination and improving exist. Indeed, the risk is that these new
governance in response to the financial initiatives will distract attention from the
crisis. Assembling to debate and discuss established priorities, devalue the process,
European reform as they do each Spring, dissipate the consensus achieved, and
they come together halfway through the generate new divisions: the aggrieved
first European Semester of Policy reactions to the proposed Franco-German
Coordination, a key component of this pact in February bear testament to this
effort. By their own account, the Semester risk. Nor is it efficient to periodically
is designed to “provide a European input entrust President Van Rompuy with new
to national policy decisions, leading to ad hoc tasks, distracting from his original
more effective ex-ante policy co- remit – namely, implementation of the
ordination. This also applies to the Europe 2020 Strategy.
structural reforms and the growth- Second, the listing above also
enhancing elements of the Europe 2020 ‘A growth-enhancing illustrates how removed the process is
strategy.”1 structural reform effort has from national policy-making. It remains,
The first formal step foreseen under as argued in a Lisbon Council e-brief last
the European Semester has already been become even more critical year, essentially a “Brussels-talking-to-
taken: in early January 2011, the in the wake of the crisis Brussels” exercise, divorced from civil
Commission presented its first Annual society and unheeded at the national
Growth Survey, a new flagship and its legacy of high level.4 As such, there is little ground to
publication intended to chart the unemployment and expect it to fare better than its ill-fated
direction for Europe over the coming predecessor, the so-called Broad
year. The Survey identified “10 priority depressed potential output.’ Economic Policy Guidelines, widely
actions… anchored in the Europe 2020 judged a failure. The process falls well
strategy,” which was itself launched just short of that advised in the Europe 2020
one year ago and intended as a break Rompuy and endorsed by the October Integrated Guidelines where, in order to
from the lacklustre performance of its 2010 European Council.3 enhance the impact on national policy-
predecessor, the Lisbon Strategy.2 Going The reader will hopefully forgive this making, it is recommended that the
forward, the Spring 2011 European bureaucratic opening. Its intention is strategy “be implemented in partnership
Council is due to provide guidance to twofold: first, to highlight that the EU with all national, regional and local
Member States as they finalise their already has – to use terminology currently authorities, closely associating
National Reform Programmes (NRPs), in vogue – a “competiveness pact” or parliaments, as well as social partners and
which are focused on structural reform as “grand bargain” agreed by all 27 Member representatives of civil society, who shall
well as on convergence and stability States: it is the Europe 2020 Strategy, contribute to the elaboration of national
programmes in the fiscal area. In April, complemented by the new reform programmes, to their
Member States are to present their macroeconomic surveillance procedures implementation and to the overall
finalised programmes, which will then currently being finalised. For the coming communication on the strategy.”5 In the
form the basis for specific policy guidance year, this broad strategy has been absence of such broad ownership, NRPs
in the summer, ahead of formal budget narrowed down in the Commission’s will remain, in essence, documents
adoption in Member States. By then, it is Annual Growth Survey into 10 priority prepared at the behest of Brussels,
also planned that legislation will have actions, endorsed by the Economic and destined to a restricted readership,
been agreed with the European Financial Affairs Council a month ago. unknown in national capitals, and
Parliament to implement the The primary concern now must be to give inconsequential for domestic legislating.
strengthened surveillance over these actions teeth and see to their full Six lessons follow from this:
macroeconomic imbalances and implementation. While euro area • First, European leaders should
divergences in competitiveness foreseen in members may wish to be more specific concentrate on securing the success of
the report of the Task Force, headed by and ambitious, given the requirements of the programmes and procedures in
European Council President Herman Van monetary union, it is neither helpful nor place and avoid, so early into the

15
process, cutting across these with new, margins under the Services Directive, Member States, would be as follows:
and largely improvised, initiatives; running counter to, if not its letter, • Sixth, all Member States should be
• Second, leaders should enhance national certainly its spirit; and expected to formally commit to at least
ownership by ensuring a genuine • Fifth, to the extent that new initiatives 3-4 actionable reforms chosen à-la-carte
domestic debate on NRPs and are undertaken – on which main – according to their importance in
involvement of civil society and countries such as Germany and France unblocking domestic growth and to
parliaments in setting the structural are willing to spend their political their national feasibility – from the
reform priorities for the coming year; capital by providing the impetus 7– specific examples provided under the
and energies should be directed at vesting main structural headings of the Annual
• Third, leaders should focus reform more reform authority at the central Growth Survey’s priorities, including (a)
priorities on at most 3-4 main level (at the very least, at the euro area making work more attractive; (b)
actionable steps per year, remaining level). Building on the relative success of reforming pensions systems; (c) getting
within a scope that is realistic and the “Single Market” initiative, this the unemployed back to work; (d)
whose delivery is easily checked. effort could usefully focus on a “Single balancing security and flexibility; (e)
The last point of course begs the Jobs Market” initiative, aimed at tapping the potential of the Single
questions: what are the most advisable achieving a truly integrated labour Market; (f) attracting private capital to
actionable steps to enhance growth market, by jointly emulating best finance growth; and (g) creating
prospects on a lasting basis? What, practices in key areas and eliminating cost-effective access to energy.
indeed, are the structural reform priorities obstacles to labour mobility within A growth-enhancing structural reform
at the current juncture? In responding to Europe (via, for example, full mutual has become even more critical in the
this question, one must of course pay recognition of professional qualifications wake of the financial crisis and its legacy
heed to the first recommendation above, and diplomas, the portability of pension of high unemployment and depressed
and ensure that the identified priorities rights and the dismantling of national potential output. To sum up, this effort
are well-anchored in the already agreed barriers to labour-market entry).8 should focus on implementing current
initiatives, avoiding untested proposals The five recommendations above still initiatives, notably the Europe 2020
and confusing super-impositions. And leave open the specific steps that each Strategy and the new macroeconomic
one should be guided by experience: this individual Member State should take at surveillance procedures; enhance
has clearly demonstrated that common the current juncture, and the best national ownership of reform efforts;
action under Community-level initiatives guidance that the European Council fully tap the growth powerhouse
vested with clear powers (e.g., the Single could provide for the finalisation of the provided by already centralised
Market Programme) have been much NRPs. Starting positions obviously differ programmes (in particular advancing
more successful than soft coordination appreciably across countries, and each the Single Market by transposing the
methods based essentially on peer thus exhibits different roadblocks to Monti Report and speeding
pressure (e.g., the Lisbon Strategy). growth; these have been well documented implementation of the Services
Which leads to three more in innumerable studies, perhaps most Directive); vest greater reform authority
recommendations: fully by the Commission in a at the central level (aiming ideally at a
• Fourth, fully mobilise the only readily comprehensive July 2010 survey.9 Such “Single Jobs Market”); and require
available Community-level growth studies show that, while the specifics of Member States to identify 3-4 annual
engines provided by existing centralized remedial measures thus inevitably vary priorities chosen from a common menu.
policies – by, first and foremost, across countries, with the details going Taken together, such steps would serve
expanding the European Single Market beyond the scope of this essay, all to give the EU’s structural reform effort
(putting into effect the Monti Report) countries exhibit similar broad categories much-needed renewed impetus as part
and speeding implementation of the of growth bottlenecks. The Commission’s of a post-crisis Action Plan, whose main
Services Directive. The EU’s Single Annual Growth Survey’s priority actions planks are laid out in the other essays of
Market remains the most powerful identify these categories, and the final this publication. It is along these lines
motor of economic growth and recommendation, directed to individual that scarce political capital is best spent.
integration. Sizeable benefits could be
reaped by rapidly transposing the
1. European Commission, “Enhancing Economic Policy Coordination for Stability, Growth and Jobs: Tools for Stronger EU Economic
recommendations in Prof. Monti’s Governance,” Communication from the Commission (Brussels, 30/06/2010, COM(2010) 367 final).
2. European Commission, “Annual Growth Survey: Advancing the EU’s Comprehensive Response to the Crisis,” Communication from the
report on the subject – a seminal study Commission (Brussels, 12/01/2011, COM(2011) 11 final).
unfortunately overshadowed by the 3. Th is would include regular assessments and alert mechanisms. Once an alert was triggered, the Commission would make country-specific
recommendations (focused largely on structural reforms), possibly issue an early warning, and – in particularly serious cases – recommend
exigencies of crisis response.6 In placing the Member State in an “excessive imbalances position,” triggering stricter (more intrusive) surveillance. See European
Commission, Proposal for a Regulation of the European Parliament and of the Council on the Prevention and Correction of Macroeconomic
particular, with services constituting Imbalances (Brussels, September 2010, COM(2010) 527 final).
two-thirds of the EU economy, but 4. A lessandro Leipold, Good Governance for the Euro Area: Proposals for Economic Stability (Brussels: Lisbon Council e-brief 08/2010).
5. European Commission, Brochure on Europe 2020 – Integrated Guidelines for the Economic and Employment Policies of the Member States
remaining plagued by corporatist (Brussels: European Commission, 2010).
6. Mario Monti, A New Strategy for the Single Market: Report to the President of the European Commission (Brussels: European Commission, 2010).
protections (notably in the professions, 7. Here one must recognize that, despite other countries’ sensitivities, Franco-German understandings have often been key to providing the
impetus to broader political agreements and to laying the blocks of EU construction.
retail distribution, transport, and 8. For an elaboration of this proposal, as well as a comprehensive set of recommendations, both at the euro area and country level, see Céline
network industries), the effects of Allard and Luc Everaert, Lifting Euro Area Growth: Priorities for Structural Reforms and Governance, IMF Staff Position Note SPN/10/19
(Washington DC: IMF, 2010).
liberalisation could be far-reaching. But 9. European Commission, Macro Structural Bottlenecks to Growth in EU Member States, Occasional Papers 6 (Brussels: European
Commission, 2010).
excessive use is being made of available

16
Towards a ‘Circular’ Society:
Building an Eco-Majority for Change Harry Verhaar is senior director for
energy and climate change at Philips and
co-chair of the Eco-Innovation Network
By Harry Verhaar at the Lisbon Council.
A few years ago, people still knew very benefits of sustainability programmes and
little about climate change or sustainable activities. We all know the economic
development. Energy was cheap, raw arguments about energy-efficient
materials were abundant, and economic products and processes. Lighting, for
growth seemed destined to spiral ever example, represents 14% of Europe’s
upwards. Since then, we have made a electricity consumption. Significant
hard landing and are confronted in savings are possible – on average 40%
virtually every aspect of life with a – by switching to energy-efficient lighting
complex, inter-related, three-legged crisis: solutions. In fact, if this ‘switch’ is
an economic downturn, a drastic rise in completed before 2020, these savings on a
the cost of energy and global climate European level can amount to €28 billion
change. in reduced electricity cost, 98 million
Today, as we tackle the triple challenge tonnes of CO2, or the equivalent of 141
of dwindling global resources (energy, power plants (in itself representing a
raw materials, water and food), €300 billion savings in reduced need for
sustainability and climate change, the power infrastructure). Yet these
direction we need to go is crystal clear, ‘As we tackle the arguments alone have not propelled
but the momentum is just too weak. We challenges of sustained action. We must now focus on
are simply not getting to the solutions the social benefits of sustainability
quickly enough. sustainability and climate drivers, rather than the drivers
When it comes to the mind-set needed change, the direction we themselves, to ensure emotional
to build a low-carbon economy, society resonance and so secure commitment.
can be divided into three broad need is crystal clear, Our third challenge is to develop and
categories. First there are the “eco- but the momentum is just apply a new, more emotionally appealing
innovators” who actively seek action, but lexicon that highlights the benefits of
are in a minority. At the other end of the too weak.’ making positive resource-efficiency
spectrum are what we call the “eco- choices. How many ordinary people
laggards,” who do not recognise, or even would be inclined to send their children
refute, the need for action; this group is This “lowest initial cost” mentality to a “low-carbon school?” It sounds quite
also in a minority. And third, in the means we are consistently pushing the off-putting. Or a “green” school – it
middle, we have the vast majority of operational economic and ecological bill sounds better, but could carry a political
society: people who are to some extent into the future. But we already know that connotation for many parents. At
“eco-conscious” and agree that action is the next generation will not be able to pay Philips, we call schools with energy-
needed, but who may need a helping this bill, let alone ourselves today. In fact, efficient systems “bright schools,” a
hand to commit their support. Our task, we are the only species in nature that still much more appealing designation, with
then, is to win the hearts and minds of lives in a fundamentally linear society its allusion to better light, better learning
this “eco-majority” and power-up the (with GDP as the key indicator) that and so brighter children. The narrative
momentum for change. extracts, consumes and emits resources and language we use is going to be a key
In creating momentum for change, it (energy, water, materials, food), and in changing behaviour and having
is imperative to understand the core of actually still in some places considers the people join in on the journey. And there
the issue at hand. Over the past decades, amount of waste we produce as a sign of are other benefits as well. Our dedicated
we have created a society that is prosperity. So we need to move from a classroom lighting – which allows
optimised towards lowest initial cost. linear to a circular society (with quality of teachers to adjust both the brightness
Our behaviour has become price-tag life as the key indicator) where an and warmth of the light to suit the
focused; most of our decision-making effective use and re-use of resources activity at hand – has been proven to
processes (e.g. public tendering) as well as – starting with energy – creates a promote learning by boosting children’s
the way we (e.g. consumers, media, competitive economy centered on the concentration, motivation and behaviour
politicians, businesses) make our health and well-being of our citizens. and supporting their general feeling of
judgments are based primarily on Our second challenge in winning the well-being.
obtaining the lowest initial cost and hearts and minds of the eco-conscious When we answer these challenges –
receiving the fastest instant gratification. majority is to shift emphasis to the social and win the emotional buy-in of the

17
public at large – it will translate to
changed voting and buying behaviour of
individuals. It will also provide much
needed impetus for cooperation between
the business community and key public
stakeholders, who in new public-private
partnerships can tackle the enormous
task of building the low-carbon economy
and transforming our linear society into a
circular and sustainable one.
In concrete terms, we need three types
of measures to drive this process forward:
• First, adopt dynamic energy
performance standards, raising the
bar as technologies progress to phase
out old inefficient products, and
combine this with innovative ways to
make energy consumption visible
and transparent (e.g. through
increased use of smart grids, web
applications and social media);
• Second, legislate to encourage the
renovation of all existing building
stock and other city infrastructure
with energy and resource-efficient
solutions and approaches. An
ambitious commitment to 3%
annual energy-efficiency
improvement (compared to the
current commitment of 1%) would
reduce Europe’s need to invest in
zero-carbon energy infrastructure
(renewable energy; nuclear; carbon
capture and storage) up to 2050 by a
factor of three, thus dramatically
relieving future European budget
constraints.
• Third, embrace a novel approach to
financing solutions, encouraging
investors to look more closely at the
upfront life-cycle impact of decisions.
An example would be a “green
budgeting” mechanism that would
integrate capital and operational
expenditure, requiring operational
expenses (dominated by rising energy
costs) to be considered
up front.
All of the above measures are not
“just” about saving the planet, but much
more about creating a prosperous future
for Europe, where people have good jobs
and enjoy the best possible quality of life.

18 Geoff Mulgan is chief executive of the
Young Foundation. From 1997 to 2004,
Mobilising Europe’s Collective he served in several UK government
roles, including director of the prime
Intelligence for Social Innovation minister’s strategy unit and director of
policy at 10 Downing Street under Prime
Minister Tony Blair. He is a member of
By Geoff Mulgan the Lisbon Council’s Board of Advisers.
The challenges Europe faces are well of the ones most likely to grow, are ones
known. Today, we have both the virtues with a strongly social content. Health
and vices of maturity. The virtues include accounts for between 7 and 13% of GDP,
relative stability, strong institutions and a and 17% in the US where it’s forecast to
great deal of accumulated knowledge and grow to as much as 48% by the later
wisdom. The vices include rising decades of the century.1 Education is
dependency ratios, inflexible institutions typically around 6% of GDP. Eldercare
and a longstanding challenge of and childcare are growing fast, as are the
generating new knowledge, new many industries associated with the
industries and new jobs. environment. All are bigger than cars,
To turn our vices into virtues, Europe computers, ships or agriculture. Not
has no option but to evolve. That sounds surprisingly these sectors are increasingly
easy. But evolution never is, and it’s coming to be seen not just as cost burdens
particularly difficult for settled societies to be funded, but also as sources of
and incumbent institutions. Evolution in comparative advantage, trading income
nature involves mutation, selection and and growth.
replication. But deliberate mutation, the ‘Systematic innovation Every survey of the future shape of the
task of creatively multiplying options and matters as much in economy reinforces the point.
possibilities, is particularly hard for Manufacturing and business services will
bureaucracies. Selection can be even society as it does in the continue to be hugely important, and
harder, especially for politically economy.’ Europe is right to be concerned about its
accountable institutions, since it involves weaknesses. But they are only part of the
admitting that some things have failed. picture. A recent survey on new sources of
Harder still is the task of growing and growth from Accenture identified the
replicating the mutations and new ideas institutions have been slow to see the “silver economy,” the new markets
that work, since that means shutting connections between disciplines which associated with ageing, as the most
down and decommissioning the are where some of the most important important growth area; next came the
institutions and programmes that don’t innovation is happening. many innovations around energy, from
work well enough. The challenge is even greater in electric cars to smart grids, all of which
Much of this is reasonably well relation to social and public innovation, depend on changing policies and
understood in business, where thanks to where there is a vast gap between the changing patterns of behaviour as well as
the influence of Joseph Schumpeter and creative fertility of much of society and new technologies.2
others, it’s recognised that Europe needs the relative stagnation of many This shift in thinking about the
more entrepreneurship, more investment institutions. Part of the reason is that in economy is being matched by a change in
in new ideas, more open markets and earlier decades social and economic how we think about the balance between
more sophisticated strategies for growth. policies were thought of as separate. The sectors. The twentieth century political
But Europe’s ability to mobilise its economic challenge was to generate more debate was dominated by a to and fro
collective intelligence to create wealth products and firms – the higher the between the private sector and the public
remains uneven at best. In recent years, technology, the better. The social sector. But for several decades, the third
Europe has given the world everything challenge was to use the proceeds of sector of civil society has been recognised
from Skype to monoclonal antibodies, growth to finance an evolving social as a vital complement to business and the
the worldwide web to zero-carbon towns. model with welfare, healthcare and state, and its size and confidence has been
But it’s often been negligent in making education. Entrepreneurship mattered for growing. Now almost every part of
the most of its knowledge and its the first task, but not the second. This Europe has a thriving ecology of social
capabilities. Two out of three of Europe’s was, roughly, the story of the Lisbon enterprises, coops, mutuals, charities and
best young researchers choose to leave, Agenda. Now, however, we know that the community organisations, some
often to the US. Too many of our economic and social are much more reanimated by the myriad ways in which
research institutions are rigid, hierarchical interwoven than this implied, and that the Internet can be used for citizen
and poor at making creative use of young systematic innovation matters as much in organisation. Once they were seen as
talent. And too many of our 4000 or so society as it does in the economy. The marginal backwaters, yet they’re playing
universities and higher education largest sectors of the economy, and some leading roles in key growth sectors like

19
eldercare or neighbourhood energy and like Gulbenkian in Portugal and alternatives that are better placed to
are set to play an important part in Bertelsmann in Germany. But our deliver value for money. In the private
shaping Europe’s future. institutions for social and public sector, market forces provide an
Governments, too, are having to adjust innovation remain far weaker than their unambiguous measure of whether
their thinking. Once government was equivalents in traditional research and innovations succeed or fail: we need
mainly thought of as an administrative development, with few mature sources of comparable measures for public and social
hierarchy, taking in political instructions finance and skill. innovation.
at the top, and pushing out laws, So what is to be done? And what could Third, Europe needs to incentivize
directives and programmes at the bottom. be achieved? By 2020, we need our effective innovation. Part of the answer is
Now we realise that the public sector just continent to be full of creative new to mobilise new sources of capital to
as much as the private sector needs approaches to issues like disability, drugs, finance social investment banks, and
institutionalized innovation if it’s not to crime and transport. We need Europe to social venture funds providing a mix of
stagnate, with better ways to create new become good at recognising successful grants, loans and equities for high impact
ideas, better ways to test them and better innovations and even better at adopting new ventures. But just as important will
ways to spread them. Current GDP them, and we want the rest of the world be new funding models that reward
statistics obscure this point, in that the to see Europe as a continent where the successful innovation and contribute to
public sector’s contribution to growth is future is being created – from low-carbon growth. Structural funds could be
measured by how much they spend, communities to networks for self- reshaped so that they incentivize results,
rather than the value of what they managed healthcare. To achieve this goal drawing on the idea of “social impact
achieve. But increasingly governments we need much more systematic and bonds.”3 Instead of funding programmes
want to focus more sharply on how to energetic action to accelerate evolution: or activities, funds would be tied to deals
boost public sector productivity, doing First, every government should between the European Commission,
more for less, automating processes where earmark at least 1% of every public governments and regions, with significant
possible, raising quality and doing better budget for innovation – a modest tranches of funding only released once
in preventing costly problems. investment in the future that would measurable outcomes, such as more jobs
Together these shifts are forcing a quickly pay for itself. New funds should for young people, have been achieved.
change in how we think about be invested in funding individuals as well Funding mechanisms of this kind would
innovation. In the last quarter of the as groups and organisations, and backing encourage greater innovation and more
twentieth century, every ambitious nation them to take their ideas from sparks into take-up of proven models from elsewhere.
tried to expand investment in R&D. investible projects and programmes. That Linking all of these points is the need
Silicon Valley was the model that inspired means a new generation of innovation for a change of perspective. Economic
Taiwan, Israel, Finland and Singapore to funds and challenge prizes to mobilise and industrial policy needs to become
pump money into universities, venture citizens’ brainpower to develop better more attuned to social needs, priorities
capital and spin outs, even if each ended answers to helping older people stay and opportunities. But conversely social
up with radically different models. Now active, to cut crime or shrink carbon policy needs to become more attuned to
any nation that aspires to the first rank footprints. It also means R&D questions of productivity and innovation.
has to invest 3-4% of GDP into future programmes that are opened up to civil The strong lead from José Manuel
science and technology. society, and that place as much emphasis Barroso, president of the European
But this is no longer enough. Instead on new service, business or organisational Commission, and Maire Geoghegan-
the changing shape of the economy, the models as they do on new hardware. And Quinn, commissioner for research and
rising importance of civil society, and the it requires investment in innovation skills innovation, is already galvanising action.
changing views of the public sector – so that Europe’s innovators are familiar The challenge now is to embed this new
require a revolution in how innovation is with the best methods in design, thinking into Europe’s institutions and
understood and supported. As the incubation and finance. into the strategies of national
Innovation Union strategy recognised, for Second, Europe needs to do better at governments, regions and cities. If we get
Europe to thrive innovation has to be selecting what really works. That means a this right, and learn how to mobilise
cultivated in every field; it’s no longer just clear commitment to evidence, with Europe’s collective intelligence, we may
the prerogative of big laboratories, transparent processes to judge what works even turn some of our problems into
universities or venture capital funds, but and what is cost effective, drawing on opportunities.
matters as much for public services, models like the Cochrane Collaboration
community groups and citizens and the National Institute for Clinical
themselves. Evolution matters as much for Excellence (which publicly rules on what
schools, hospitals and prisons as it does works and what’s cost effective in health)
for factories and IT systems. as well as the work of bodies like the
We start with many strengths. Europe OECD. In every area of public service
is rich in institutions concerned with civil and public policy, we need accessible,
1. C ongressional Budget Office (CB0), The Long-Term Outlook for
society and has developed new banks like useable guides to what works and what’s Health Care Spending (Washington D.C.: US Congress, 2007).
2. Accenture, New Waves of Growth: Unlocking Opportunity in the
Banca Prossima and Banca Etica in Italy, cost effective, so as to put pressure on Multi-Polar World (London: Accenture, 2011).
investment funds like Sitra and Tekes in public sectors to decommission obsolete 3. Geoff Mulgan, Neil Reeder, Mhairi Aylott and Luke Bo’sher,
Social Impact Investment: The Opportunity and Challenge of Social
Finland, as well as impressive foundations projects and programmes, and scale up Impact Bonds (London: The Young Foundation, November 2010).

20 Žiga Turk is professor and chair in
construction informatics at the
University of Ljubljana in Slovenia. From
Unleashing Europe’s Digital Economy: 2008 to 2010, he was secretary general of
the European Union’s Reflection Group
Platform for 21st Century Success on the Future of Europe, headed by
former Spanish Prime Minister Felipe
González. He is a member of the Lisbon
By Žiga Turk Council’s Board of Advisers.
A transition to a different kind of http://www.download.com. Today,

economy is underway. You can call it the Europe does not have a single company
“information,” “knowledge” or even the among the top 20 in BusinessWeek’s
“meaning” economy. The transition goes Tech 100 list.1
well beyond the boundaries of normal Europe’s failure to be competitive in
economic activity, reaching out into the the ICT sector is just a symptom. The
fabric of society itself. Increasingly people causes are deeper: a generally
are spending money on information- uncompetitive business environment,
based goods. And they are working more systemic rigidities, unresponsiveness,
in information-based jobs, where they fragmented markets, lack of
create and handle information as concentration, many non-tariff barriers
opposed to the old “material jobs” where and underdeveloped financial services.
they handled mostly material things. Europe is failing to translate world-class
Moreover, the material products and science and technology into growth and
services people make today are jobs. The ICT sector is moving too fast
themselves increasingly knowledge and ‘The issue is not “digital for the way we do business in Europe, for
information intensive. A substantial the way our societies are organised, for
proportion of the product’s value is not economy” versus the way we combine creativity and
related any more to labour, energy or the “industrial economy.” It is entrepreneurship. In the new and fast
material used to produce them. growing ICT sector, our excellent
Ideas – information, knowledge and about figuring out how traditions and better starting positions in
meaning – are being created with the the digital economy will some industries are unable to obscure the
assistance of information and increasingly evident shortcomings of our
communication technologies (ICT) that transform industries and socio-economic models.
have been digitised. The digital economy societies, improve It would be unfortunate if Europe’s
is not just about digital products emerging digital strategy would only
(software, content, media) or digital productivity and increase treat the symptoms. IT and the Internet
services (communication, data transfer, added value.’ have been on the political banners of the
storage). Rather, digital technology has EU at least since 1994.2 ICT and the
become a key tool to create, manage and “knowledge-based economy” were
communicate “ideas” related to all prominently represented in the Lisbon
products and services to every part of this essay invented a search engine for Strategy. The Digital Agenda for Europe
society. The issue is not “digital freeware and shareware in 1990s. is one of seven flagship projects in the
economy” versus “industrial economy.” It But Europe too often failed to Europe 2020 strategy.3 The wise man’s
is about figuring out how the digital translate this technical leadership into group Project Europe 2030 called for the
economy will transform industries and businesses and jobs. The first decent completion of the single market “to
societies, improve productivity and commercial Web browser was created by include services, the digital society and
increase added value. Netscape in the US, which went on to other sectors.”4 There is no shortage of
Europe has had its share of leading dominate Internet services and content, visions, such as Future Internet 20205 or
ICT innovations. The World Wide Web starting with Yahoo!, followed by Google The Digital World in 2025.6
was invented in Europe’s CERN. A Finn and Facebook. Linux powered the servers The ICT industry likes being in the
developed Linux, disrupting the of Silicon Valley start-ups that evolved limelight like this, and is happy to
operating system market and bringing into market leaders. Skype was sold to support various plans and agendas that
the open source paradigm to a whole new eBay. The smartphone market is now would give it a priority status in R&D
level. A Swede and a Dane invented dominated by North Americans – Apple, funding or call for investment into the
Skype, shaking up telephony. Nokia, RIM and Google. The only company products it sells. But many of these same
Ericsson and Siemens dominated the making real money from selling music in “national champions” would not, with a
early days of the mobile telephony the originally “European” MP3 format is similar vigour, support measures that
business. Fraunhofer Institute invented Apple with iTunes. And it was an would make competition on the
the MP3 codec that changed the music American company that commercialised European markets tougher. In Europe,
industry. Last and least, the author of my search engine and grew it into the providers of connectivity have an

21
upper hand when compared to the particular, the EU should ensure that information services; it does NOT mean
providers of intelligent services and the concept of roaming has nothing to more public money, financial assistance,
software that sits on top of that do with national borders. Regulating subsidies, dirigisme, or protectionism.”
connectivity. With local loop the price of SMS and mobile voice That was clear in 1994, and it
unbundling, we created perfect telephony was popular, but addressed demonstrates perhaps the biggest
conditions for local and dumb yesterday’s issues. By contrast, the problem of the European digital
infrastructure providers, not for global policy of adopting flat-rate mobile-data economy: Much as Europe is unable to
and smart service providers. access across Europe would create a translate science and technology results
Europe knew better in the distant market for mobile services, which could into commercial products, European
past. During the “dark” Middle Ages, have perhaps prevented the sunsets of politics is unable to translate the
the foundations of European capitalism the Nokias and Ericssons. recommendations of high-level, expert
were laid. Free city states between Rome • Intellectual property rights systems and reflection groups into political
and the Alps competed (rather than should have one single goal: to action. The problems holding back the
agreed on common economic policy) to encourage intellectual property European digital economy have little to
see who could create the best business creation. Energy should be shifted from do with the digital economy itself.
environment. In Sienna, Lucca and later legislation that is focusing on how to
Florence, the first truly European banks replicate the IPR regimes for the
such as Gran Tavola dei Bonsignori, material and paper paradigm in the
Ricciardi and Medici appeared and digital world towards legislation that
financed kings and popes, trade and would maximize the impact that open
wars. The first universities were founded. innovation and creativity can bring.
Also in the 13th century, the Magna But we already know this. As Martin
Carta set out to protect the rights of Bangemann wrote 17 years ago in his
property owners. Hand-copied books of seminal report: “Actions must be taken at 1. J ennifer L . Schenker, “Meet the Tech Pioneers 2011,”
the time included a curse against stealing the European level and by member states BusinessWeek.com 02 September 2010.
2. European Union, Bangemann Report, Europe and the Global
content. to strike down entrenched positions Information Society (Brussels: 1994).
3. European Commission, Communication from the Commission to
In other words, in the Middle Ages, which put Europe at a competitive the European Parliament, the Council, the European Economic and
Europe was busy laying the foundation disadvantage: it means fostering an Social Committee and the Committee of the Regions: A Digital
Agenda for Europe (Brussels: European Commission, 2010).
of future success. It created the financial entrepreneurial mentality to enable the 4. Felipe González et al., Project Europe 2030: Challenges and
Opportunities. A Report to the European Council by the Reflection
services market, knowledge institutions, emergence of new dynamic sectors of the Group on the Future of Europe (Brussels: May 2010).
IPR policy, along with an ethical and economy; it means developing a common 5. European Commission, Future Internet 2020: Visions of an
Expert Group (Brussels: European Commission, 2009).
legal infrastructure into which the regulatory approach to bring forth a 6. European Internet Foundation, The Digital World in 2025:
Indicators for European Action (Brussels: European Internet
originally Chinese invention of paper and competitive, Europe-wide market for Foundation: 2009).
printing was planted. European
civilization was the clear winner in the
paper communication revolution. But it
seems to be a laggard in the Internet
communication revolution.
To reverse this trend, we must
urgently do the following:
• The European financial sector should
be motivated to look for high-risk,
high-return opportunities in high-tech.
Today, too much capital is interested
only in secure, low-risk support of
national pension plans or servicing the
debt of Industrial Age industry. The
whole culture of venture capital in its
essential meaning – to venture – is
missing.
• The Single Market needs to be
deepened and completed, particularly
in services. ICT is related to all areas of
economy and governance, but is even
more related to services than to
products. This includes public services
such as healthcare and education. In
general, a single market for services
would create a single market for the
digital support of those services. In

22
New Waves of Growth:
Releasing the Potential Mark Spelman is global head of strategy
at Accenture and a member of the Lisbon
By Mark Spelman Council’s Board of Advisers.
The time has come for European leaders billion by 2015.

to shift their focus from sovereign-debt Technology is central to economic
management to unleashing new waves of progress, including productivity
growth. Sorting out the eurozone debt improvements and the improvements of
trap with credible structural reforms is living standards. The volume of data and
necessary. But it is not sufficient. The the surge in computing processing speeds
European Union needs to embrace the will continue this decade. Breakthroughs
Europe 2020 strategy and develop more centered on innovations in information
precise roadmaps for delivering growth and communication such as superfast
this decade. Aspirational targets have broadband and cloud computing,
their place, but they need to be materials and nanotechnology, mobility
underpinned by commitments and and robotics, mobile and remote sensors
milestones from both European and as well as genomics and biotechnology all
national leaders. represent a range of growth possibilities.
There is significant, new, and largely Ageing, resource constraint and new
untapped growth opportunities technologies are three examples of
contained in some of the important ‘Conventional wisdom underexploited potential growth sectors.
economic and social trends we see: the views ageing as a These trends are pervasive – people will
ageing population, pressure on natural live longer, energy and natural resources
resources and the convergence of new problem. The “greying” of are already becoming scarcer and
technologies. Conventional wisdom views the population represents technology is marching onwards with
ageing as a problem. But the “greying” of more applications and more users. With
the population also represents an a significant untapped the right responses from governments and
opportunity. The number of people over growth opportunity.’ business, these trends can represent
60 will grow by 17% in the UK and 14% strong bets for future growth and job
in Germany this decade. By 2020, creation. Modeling of the UK and
Germany will have 24.5 million people German economies shows that with the
over 60, of which six million will be over right policies, annual GDP growth rates
80. Many industries will benefit from the minerals – can also present fertile terrain could be on average 0.5-0.7% per annum
surge in age-related demand – for growth and new jobs. There is already higher, creating an additional 2.5-3.0
particularly healthcare, financial services a strong European focus on green capital million jobs in each country by 2020.
and consumer products. There will be goods and infrastructure from The growth prize is significant not just
more health diagnostics, self-help photovoltaic systems, wind turbines, for Germany and UK, but for the whole
programmes and home-based healthcare carbon capture and storage, smart of the EU-27.
services. Financial services will adapt to buildings, remote sensors and meters. The opportunity for accelerated
the needs of an ageing population with However, the opportunity is broader; growth and job creation could be easily
tailored equity release products and new increased regulation and pricing of lost because the trends are largely
health insurance plans, while consumer carbon will create demand for carbon inevitable but the benefits are not. The
goods will be adapted to the changing finance, green investment funds and reason is many European economies lack
physiological condition of older people. energy mapping. Growing populations the supply-side factors that stimulate
Learning and leisure are two other areas coupled with changing diets and lifestyles growth – the right quantity and types of
with large potential. The provision of will drive demand for food and high skills, underlying infrastructure,
tailored education will enable growing value agri-businesses in areas such as technology standards and innovation
numbers of older people to refresh skills processing, handling, packaging, systems. There needs to be a stronger
and seek new mental stimulation over a transporting, marketing and distribution linkage between EU and member state
longer working life, while the delivery of of food products. Land degradation, growth initiatives. Given that one size
leisure services such as entertainment, climate change and water scarcity will clearly does not fit all, countries will have
travel and tourism will find growing put a premium on efficient land and different points of leverage, but the
demand in the “silver economy.” water use. The global market for combined effect should be a strong push
The response to the squeeze in global desalination technologies alone is for higher growth and better execution, at
resources – land, water, energy, food and expected to reach approximately €40 both the European and country level.

23
For the Member States
Each member state country should
complete a growth plan for 2011-2020
focused on growth opportunities, supply
side initiatives and exports in a way that
goes beyond many of the fiscal measures
set out in the European Commission’s
recent Growth Survey.1
• Adopt a strategic view to new
growth waves.
Each country should identify growth
waves such as ageing, resource scarcity
and technology and define their
potential impact on GDP growth and
job creation. Governments need to
adopt a more strategic view of growth
by understanding the investment
frameworks, organisations and action
steps required over a one-, five- and
ten-year horizon. This is not about
picking winners, but learning from
countries like Indonesia and Columbia
to create the engagement, commitment
and plans to deliver an acceleration in
growth and jobs.
• Improve the supply side.
To underpin growth, each country
needs to develop plans to strengthen
skills and innovation in line with the
new growth waves. former Soviet Union countries. single market will have a significant
a) Skills – widening the net to retain The plans should include agreed targets impact on the prospects for EU growth
older people in the workforce, by a cross section of public, private and this decade. Moves to improve
encouraging younger people to civil society organisations to accelerate standards and interoperability will be
develop STEM skills and growth by setting interim milestones for beneficial. However, the critical issue is
strengthening digital skills; one, three, five years with a clear roadmap speed of implementation and finding
b) Innovation – strengthening the links for how the growth will be delivered. the right carrots and sticks to ensure
between scientific research and For the European Union the core features of the single market
entrepreneurs by deepening the The European Union should focus on are implemented.
interchanges between academia, three growth priorities in 2011: Doha, • Growth Summit.
research universities, start-up the Single Market and a Growth Summit. Plan for a EU growth summit at the
businesses and larger companies • Doha. end of 2011 to assess progress on the
both within country and across Freeing up trade and investment Europe 2020 strategy, national growth
borders; through global agreements is one of the plans and the prospects for Doha. This
c) Enabling infrastructure – building best routes to fuel growth. There is less will provide the context for setting
the technological arteries of the than one year left to agree the drawn growth priorities and milestones for
economy for new energy solutions, out Doha round: the search to close the 2012 and 2013.
mobile, connectivity, super fast fibre gaps in the next six months is critical. The recovery is not complete in Europe
optics and improved transport links. Pushing for more ministerial face time and will require more work, but
• Exports. within the EU and with trade partners insufficient attention is being paid to
Identifying growth export markets by is an important step to avoid a internal and external sources of growth.
understanding where countries and bottleneck in negotiations at the end of There is significant untapped potential.
regions have comparative advantage. the calendar year. Now is the time to seize hold of the
This will involve looking at consumer • Single Market. growth opportunities. Building and
and infrastructure requirements in: Deepening and broadening the expanding on the Europe 2020 strategy
a) Established markets within the EU European single market is vital given must be a critical priority for 2011, if
and US the size and scale of intra-EU trade in Europe is to break the shackles of relative
b) New export markets, revitalising old goods and services. The momentum to underperformance.
trading links where appropriate and improve cross-border procurement,
leveraging the near markets of create a single energy market and 1. European Commission, Annual Growth Survey: Advancing the
EU’s Comprehensive Response to the Crisis (Brussels: European
Eastern Europe, Turkey and the accelerate the development of a digital Commission, 2010).

24 Sören Stamer is CEO and founder of
Yokudo, a start-up company aimed at
connecting artists more closely to their fan
Entrepreneurship, Here and There: base. His previous start-up, CoreMedia,
which he sold in 2009, was one of
Being the Best We Can Be Germany’s fastest growing Web services
companies. Born in Hamburg, he lives today
in Silicon Valley. He is a member of the
By Sören Stamer Board of Directors of the Lisbon Council.
There are moments when you feel European Union has created the largest
invincible, moments of pure elation and integrated market and the highest
tomorrows filled with possibility. Then standards of living globally, it stands for
there are moments when you stumble on diversity, peace, stability, fairness and
hard realities, when unexpected troubles justice, culture and tolerance, with many
drain your energy and turn your countries hoping to join the European
stomach. Despite the numerous hurdles Union at some point in the future.
to creating something from nothing, Europe should build on these strengths
entrepreneurs continue to emerge, willing and aim to become a beacon of
to tackle the unknown. Their victories entrepreneurship and innovation in the
and challenges are our own, since the world.
technology they develop through So how can the Europe 2020 Agenda
entrepreneurship and innovation will help?
determine our future. As the techno-sage According to Anders N. Hoffmann,
Marshall McLuhan once said, “We shape the real policy challenge for the
our tools and thereafter our tools shape European Union in the field of
us.”1 ‘Europe must increase its entrepreneurship is not a lack of start-
As in the past, change will happen in appetite for change and ups, but a lack of fast growth in start-
unforeseeable ways, and—given the ups.3 I agree with this view. European
accelerating rate of innovation in a embrace innovation to entrepreneurs must deal with Europe-
global, networked society where ideas attract risk-taking specific barriers if they want to grow fast.
careen around the world in seconds—the Drawing on my own personal experience
transformation will be even more entrepreneurs and enable as a European entrepreneur who recently
fundamental than anything we have more high-growth moved to Silicon Valley to start a new
experienced before. To address this new company, I propose three action items to
reality, Europe must change its policies start-ups.’ overcome these barriers:
regarding entrepreneurship and
innovation. 1. Embrace change
In the last 20 years, the World Wide When I stumbled upon Joseph
Web—one of the greatest European social change as we have seen with the Schumpeter’s work on entrepreneurship
inventions of all time—has given birth to wave of popular revolutions in the and innovation several years ago,
an avalanche of innovations. People Middle East and North Africa. I realised more fully why I had been
around the world share ideas and Entrepreneurship and innovation are drawn to being an entrepreneur.
participate actively in the emerging key forces for economic growth and new Schumpeter noted that the creative
global information society, with the employment. In this increasingly destruction resulting from innovation
majority having daily access to mobile networked world, rising complexity and and entrepreneurship is the force that
communications and the Internet. For the rapid rate of change will continuously creates sustainable long-term economic
the first time in history, they are able to shift the competitive advantage from big, growth.4 His conclusion that radical
actively participate in a truly global established companies to innovative, innovation will lead to a better society
market, a paradigm that is changing the agile newcomers. captures the essence of what has
competitive landscape for many Given these dynamics, Europe will motivated me to build new companies.
industries. face intensifying global competition. As However, Schumpeter’s work seems to
Global social networking and the global network effects widen the gap be interpreted differently in the United
ubiquity of mobile phones—over 5.3 between the winners and the rest, the States (and especially in Silicon Valley)
billion subscribers at last count—are also stakes are higher than ever before: than in Europe. My impression as an
disrupting the balance of power between Europe’s policies for innovation and entrepreneur is that Europe tends to
central authorities and the people.2 As a entrepreneurship will have a profound optimise existing structures, while
result, start-ups like Facebook and impact on Europe’s future Silicon Valley has a greater appetite for
Twitter have become platforms for people competitiveness. radical change. This difference in attitude
not only to poke and follow their friends, Europe is well-positioned to capitalize has consequences for the availability of
but also to build powerful movements for on this rapid innovation cycle. The venture capital, the focus of

25
entrepreneurs, and the social acceptance specific? Some might be more of a and more elaborate idea exchange, the
of failure. “Fail often, fail fast” is the cumbersome legacy than an asset. Europe 2020 Agenda should make
mantra of Silicon Valley. Having tried At the same time, Europe’s diversity low-cost, trans-national broadband access
something and failed is generally can be an advantage for start-ups that to the mobile Internet a top priority.
perceived as a badge of honor and as want to address a global audience in a
good preparation for the next venture, localised way. Tailoring offerings to local The Europe 2020 Agenda offers a
whereas, in Europe, there is still a stigma cultures and business practices is a great opportunity to shape Europe’s role
associated with failure. potential strength of European start-ups. in a global, networked society. Promising
This fast-learning culture has become However, legal and structural hurdles developments like the recent rise of
a defining quality of the Silicon Valley can stand in the way and must be Berlin as a hotbed for start-ups in the
ecosystem. It is evident not only in small addressed in order to increase the creative space show Europe’s potential.
start-ups, but also in established, chances for fast-growth start-ups to Entrepreneurship and innovation will be
market-leading companies. As a result, emerge. key drivers of progress and change in the
the collective learning curve of The EU should aim high in order to next decade. By taking the three steps
companies in Silicon Valley tends to be create the best legal framework possible outlined above, Europe can and should
significantly higher than of those in for a global networked society. The position itself as a vibrant ecosystem for
Europe. A case in point: Apple’s entry Internet brings new challenges for legal innovation.
into the smart phone market with the systems around the world. Not all
iconic iPhone was rewarded with global existing laws make sense given the reality
1. Marshall McLuhan, Understanding Media: The Extensions of Man
market dominance (today, after only of the Internet as a global medium, and (New York: McGraw Hill, 1964).
2. “Global Mobile Statistics 2011,” MobiThinking.com February
three years, the iPhone accounts for more new aspects need to be regulated for the 2011.
than 50% of all profits in the global first time. How are privacy, free press, 3. A nders N. Hoffmann, Promoting Entrepreneurship – What are the
Real Policy Challenges for the European Union (EU)? (Copenhagen:
cell-phone market).5 Google quickly and freedom of speech to be handled best Danish Ministry of Economic and Business Affairs, 2006).
4. Joseph Alois Schumpeter, Capitalism, Socialism and Democracy
followed their lead and launched the in a global networked society? The (New York: 1942).
5. “ iPhone Market Share: 17.25% of Smartphones, 4.2% of All
Android mobile operating system. Again, Europe 2020 Agenda should make these Phones,” OsXDaily.com 01 February 2011.
after just three years, Android became questions into top priorities. 6. Tarmo Virki and Sinead Carew, “Google Topples Nokia from
Smartphones Top Spot,” Reuters 31 January 2011.
the global market-leader for smartphone 7. Stephen Elop, “Full Text: Nokia CEO Stephen Elop’s ‘Burning
Platform’ Memo,” The Wall Street Journal 09 February 2011.
software.6 Nokia, on the other hand, one 3. Establish dense and diverse networks 8. Brian Knudsen, Richard Florida, Gary Gates, and Kevin
of Europe’s long-standing stars and the It has been observed that the rate of Stolarick, Urban Density, Creativity, and Innovation (May 2007).
9. “Skilled, Educated Immigrants Contribute Significantly to U.S.
dominating mobile phone market leader innovation is increased when specific Economy,” ContactoMagazine.com
of the last decade, has not been able to geographic areas have a higher density
innovate with nearly the same pace and and diversity of people organised around
has been heavily punished with declining a common industry.8 Europe should
market share and lost momentum.7 adopt this approach to foster innovation.
Europe must increase its appetite for San Francisco and the Silicon Valley
change and embrace innovation to attract are full of ambitious people who want to
risk-taking entrepreneurs and enable make the oft-mentioned “dent in the
more high-growth start-ups. The Europe universe,” and all of them believe they
2020 Agenda should promote more angel can. In this region, the density of highly
investment in early stage start-ups and networked, like-minded people creates an
bankruptcy laws that prioritize successful ecosystem that enables the fastest
re-starts. dissemination of ideas I have experienced
thus far. The chance to be a part of this
2. Create a single, large and ecosystem attracts entrepreneurs from
unified market around the world, further increasing the
The sheer size of the unified US market density and diversity. Over half of all
versus Europe is another major start-ups in Silicon Valley has one or
difference. While the European market more immigrants as a key founder.9
as a whole is larger, it remains Europe would also benefit from
fragmented by languages, national opening up more and attracting global
structures and local cultures. US talent through proven lures: high-quality
start-ups have a significant competitive universities (that are more affordable
advantage before they are even out of the than those in the US), an attractive visa
gates. While local cultures and languages program for entrepreneurs and their
are rightly here to stay, national families and a fair chance to become a
regulatory and legal structures should be European citizen.
re-evaluated. Do the disparate copyright Europe can further increase the
regimes, telecoms regulations and privacy effective density and diversity of Europe’s
standards, for instance, create value for citizenry through greater Internet access.
European citizens by being country- To enable an even denser social network

26
Europe and the World: Parag Khanna is senior research fellow at
New America Foundation and author of
The External Dimension The Second World: Empires and Influence
in the New Global Order and How to Run
the World: Charting a Course to the Next
By Parag Khanna Renaissance.
Europe has been a systemic anchor of leave off Europe entirely while focusing
world order since ancient times. It has on China and India. This is their
shaped every major era of history mistake—and Europe’s for not acting as
including the Middle Ages, modern one and investing in future growth. An
inter-state system, colonization and the EU that deepens ties with and eventually
Cold War. To retain its worldwide comes to include Ukraine and Turkey
significance in the coming decades to will add close to 150 million largely
2020 and 2030, Europe will need to young, educated and industrious citizens
ensure that its external strategy is a to its labour force, while simultaneously
global one. deepening its access to the markets and
The US National Intelligence Council resources of the Near East and Russia.
has already conceded Europe’s success. Deeper economic engagement with
Its Global Trends 2020 report states that North Africa will also bring a
“Europe’s strength could be in providing Mediterranean Union to fruition faster
a model of global and regional than political overtures, while also
governance to the rising powers….The expanding the European sphere of
European Union, rather than NATO, ‘Calculations of global influence. The dictum that must always
will increasingly become the primary power frequently hinge lead European thinking is that “There is
institution for Europe, and the role no Europe, only Europeanization.”
which Europeans shape for themselves on on demographic size and To act as one Europe will mean
the world stage is most likely to be economic growth.’ consolidating European seats in major
projected through it.” international organisations such as the
If stability and prosperity go hand in United Nations Security Council and
hand, then Europe must not lose sight of International Monetary Fund. This
the long-term drivers of both: widening skilled jobs on the continent as well as recommendation, which has been talked
and deepening. A consistent and sizeable profits. Aggressive commercial about a lot in recent years, has been met
collective commitment to both drivers expansion is therefore fundamental to a with resistance from some EU member
has been and continues to be essential for strong Europe. states in the name of maintaining
Europe’s long-term success. There are Europe’s investments close to home influence in these organisations. But this
numerous internal scenarios which have been crucial to Europe’s successful counter-argument is deeply flawed. First,
portray a European stability and expansion politically and economically, the lack of reform renders such bodies
prosperity threatened by uneven fiscal and must continue even as the common illegitimate, meaning Western powers
fundamentals between the core and European house grows. As new European may eventually stand alone in them,
periphery, varying ability to integrate members secured market access, ultimately influencing no one. Second,
immigrants and manage social unrest, participation in the Schengen zone, precisely because the EU lacks the
and difficulties coping with the challenge official cohesion funds and subsidies, and combined strategic capabilities of
of ageing populations. But European improved credibility among creditors and coercion outside of its immediate theatre,
leaders cannot let internal economic investors, they quickly became the fastest it very much relies on diplomatic
obstacles overwhelm the imperative of growing nations in Europe until the manoeuvring in representative
building a long-term basis for growth onset of the financial crisis in 2008-9. multilateral organisations. Creating space
and influence on the world stage. But the lessons from that crisis are that in such bodies for new members thereby
Even in a period of slow economic EU member-states—new and old—have also creates more—not less—
growth and delayed structural reforms, become interdependent and must support opportunities for Europe to influence
externally oriented policies are key to each other for collective gain. their behaviour.
maintaining momentum for the EU as a It may seem the height of folly to Despite the setbacks the eurozone
whole. For example, European encourage Europe to take on ever more faces with the crises in Greece and
companies are currently successfully burdens through continued expansion of Ireland, the “European Model” is still a
signing large long-term engineering and the EU, but bear in mind that global standard bearer on many levels.
infrastructure contracts in the fast- calculations of global power frequently Europe continues to represent both the
growing economies of the Persian Gulf hinge on demographic size and economic aspiration and reality of nearly universal
region and Asia. This generates high- growth—hence some such lists tend to healthcare provision, low-income

27
equality, social democratic governance,
and ecological sustainability. At the
World Economic Forum Annual
Meeting in 2010, both European and
Chinese ministers conceded that their
models must be oriented towards such
goals in order to provide for their anxious
populations.
In short, Europe has done quite a lot
right ever since the formation and
evolution of the European Union. And it
has done so not by calling itself a “soft
power” or “civilian power,” but by
matching means to ends shrewdly and
skilfully. That is the true test of strategy.

28
References and
Additional Reading
• Accenture. New Waves of Growth: • —. Preventing Greek Tragedy from

Unlocking Opportunity in the Multi- Becoming a Eurozone Disaster (Brussels:
Polar World (London: Accenture, 2011) The Lisbon Council, 2010)
• Barroso, José Manuel. Political • Mettler, Ann. From Why to How:

Guidelines for the Next European Reflections on the Lisbon Agenda
Commission (Brussels: European Post-2010 (Brussels: The Lisbon
Commission, 2009) Council, 2008)
• European Commission. Europe 2020: • —. A New Dawn: Ten Recommendations

A European Strategy for Smart, for the New European Commission
Sustainable and Inclusive Growth (Brussels: The Lisbon Council, 2009)
(Luxembourg: European Commission,
2010) • —. Innovating Indicators: Choosing the
Right Targets for Europe 2020 (Brussels:
• —. Europe 2020 Flagship Initiative: The Lisbon Council, 2009)
Innovation Union (Brussels: European
Commission, 2010) • —. If Not Now, Then When? Using
Europe 2020 to Move from Crisis
• González, Felipe et. al.. Project Europe Management to Restoring Confidence and
2030: Challenges and Opportunities. A Growth (Brussels: The Lisbon Council,
Report to the European Council by the 2010)
Reflection Group on the Future of Europe
(Brussels: May, 2010) • Monti, Mario. A New Strategy for the
Single Market: Report to the President of
• Hofheinz, Paul. Europe 2020: Why the European Commission (Brussels:
Skills are Key for Europe’s Future European Commission, 2010).
(Brussels: The Lisbon Council, 2009)
• Mulgan, Geoff. The Art of Public
• K hanna, Parag. How to Run the World: Strategy: Mobilising Power and
Charting a Course to the Next Knowledge for the Common Good
Renaissance (New York: Random (Oxford: Oxford University Press,
House, 2011) 2008)
• —. The Second World: Empires and • Mulgan, Geoff, Neil Reeder, Mhairi
Influence in the New Global Order Aylott and Luke Bo’sher. Social Impact
(New York: Random House, 2008) Investment: The Opportunity and
Challenge of Social Impact Bonds
• Kok, Wim et. al.. Facing the Challenge: (London: Young Foundation, 2010)
The Lisbon Strategy for Growth and
Employment (Brussels: European • OECD. PISA 2009 Results: What
Commission, 2004) Students Know and Can Do
(Paris: OECD, 2010)
• Legrain, Philippe. Beyond CAP: Why
the EU Budget Needs Reform (Brussels: • Williams, Anthony D.. Wikinomics and
The Lisbon Council, 2010) the Era of Openness: European
Innovation at a Crossroads
• Leipold, Alessandro. Good Governance (Brussels: The Lisbon Council, 2010)
for the Euro Area: Proposals for Economic
Stability (Brussels: The Lisbon Council,
2010)

31
Acknowledgements
The Lisbon Council would like to thank the European Commission’s Education, Audiovisual and Culture Executive Agency for an
operating grant which makes possible so much work on the European project. The authors would also like to thank the participants
of The Europe 2020 Summit where the conclusions of this policy brief were first presented and discussed, including José Manuel
Barroso, president of the European Commission. Special thanks as well to Chris Barton, Bernard Foubert, Raymond Frenken, Britta
Jacquet, Nadine Legrand, Stéphanie Lepczynski, Alice M. Schutte-Nahon, Sylwia Stępień, and Caroline De Winter.
Lisbon Council Policy Brief, Vol. V, No. 2 (2011)

ISSN 2031 0943
Published under the editorial responsibility of the Lisbon Council asbl. The responsible editor is Paul Hofheinz, president, the Lisbon Council asbl.
The Lisbon Council for Economic Competitiveness and Social Renewal
asbl is a Brussels-based think tank and policy network. Established in
2003 in Belgium as a non-profit, non-partisan association, the group
is dedicated to making a positive contribution through cutting-edge
research and by engaging politicians and the public at large in
a constructive exchange about Europe’s economic and social future.
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The case for a better skills policies is consequence of a lack of responsiveness

Figure 1: How Lack of Foundation Skills Translates into Economic Disadvantage

3,5  id not receive investment

1,5  eceived social assistance

Source: Adult Literacy and Lifeskills (ALL) Survey, 2003-2007

Action Plan for Europe 2020: Lisbon Council Policy Brief

6,0 S econdary schooling

 ottom half of users on ICT

2,5  as not participated in adult

Source: Adult Literacy and Lifeskills (ALL) Survey, 2003-2007

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

European leaders meet this Spring at a constructive to super-impose new

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

A transition to a different kind of http://www.download.com. Today,

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

The time has come for European leaders billion by 2015.

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

Action Plan for Europe 2020: Lisbon Council Policy Brief

• Accenture. New Waves of Growth: • —. Preventing Greek Tragedy from

• Barroso, José Manuel. Political • Mettler, Ann. From Why to How:

• European Commission. Europe 2020: • —. A New Dawn: Ten Recommendations

Action Plan for Europe 2020: Lisbon Council Policy Brief

Lisbon Council Policy Brief, Vol. V, No. 2 (2011)

155 rue de la Loi

Copyright © The Lisbon Council 2011. All rights reserved.

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3,5 id not receive investment

1,5 eceived social assistance

Source: Adult Literacy and Lifeskills (ALL) Survey, 2003-2007

6,0 S econdary schooling

ottom half of users on ICT

2,5 as not participated in adult

Source: Adult Literacy and Lifeskills (ALL) Survey, 2003-2007

• Accenture. New Waves of Growth: • —. Preventing Greek Tragedy from

• Barroso, José Manuel. Political • Mettler, Ann. From Why to How:

• European Commission. Europe 2020: • —. A New Dawn: Ten Recommendations