Mr Barroso’s illogical €2.4bn European technology idea

THE EUROPEAN JOURNAL, SEPTEMBER 2008:

Technology analyst, Armand Van Dormael, writes that Commission President José Manuel Barroso’s idea to create a €2.4bn European Institute of Technology (EIT) is out of touch with the industry’s cutting-edge issues and in the end, will not yield any noteworthy results. The best we can hope for, he argues, is that the European Commission gets out of the way and lets the scientific community and the industry attempt to re-normalize the strategies and procedures of scientific research.

In February 2005, Commission President José Manuel Barroso put forward a project intended to smooth the interaction between public research organisations and industry. He proposed to create a new institution, The European Institute of Technology (EIT). The EIT would be a flagship for excellence in innovation, enabling Europe to compete with the most prestigious institutes of technology. It would give access to world-class research facilities and host top scientists. “Such a body” Barroso stated, “would act as a pole of attraction for the very best minds, ideas and wcompanies from around the world.” He envisioned that it might eventually match MIT as a platform for research partnerships between academe, industry and government. The operation would be funded from public and private sources. The project was to be launched within a year and would cost €2.4bn. The Commission pledged €308 million from its own budget, hoping to persuade the private sector to put up the remainder.

A consultation on the EIT’s mission, objectives, added value and possible structure took place in autumn 2005. Industry was kept informed, but not consulted. The proposal immediately ran into trouble and gave rise to endless debate. The League of European Research Universities took the position that the EIT was useless, unimaginative and of doubtful sustainability. The European Research Advisory Board gave notice that plans to create a US-style high-tech institute were too ambitious and warned the Commission that a “world-class research institute cannot be created top down.” Even those who were in favour had very different views on how the eventual EIT should look. In the face of such criticism, Barroso decided to change tack. Instead of one large campus, he proposed a virtual model of six Knowledge and Innovation Communities (KICs) to be established across Europe. These innovation hubs would be joint ventures organised around strategic objectives.

The EIT gave rise to endless debate. For months, EU education ministers and MEPs kept struggling behind the scenes to settle fundamentals about funding, powers, governance and legal status. The European Parliament saw EIT as a source of overlap with the activities of the newly created European Research Council and decided to withhold its backing until the Commission announced where its money would come from. Despite the lack of support, Barroso kept pushing his plan forward. In October 2006, the Heads of State and Government, meeting in Lahti, Finland, adopted the proposal on establishing the European Institute of Technology.

The EIT will consist of two levels: an administrative council responsible for the strategic priorities and several “knowledge and innovation communities” (KICs). The communities will be overseen by a permanent governing board made up of high-profile business and scientific personnel, plus a limited support staff. Each KIC will have at least three partner organisations, based in two or more Member States. At least one of these partners must be a university and at least one a private company.

When it came to decide which country would host the headquaters, a fierce argument erupted between several governments. In June 2008, EU ministers agreed that the seat of the EIT would be located in Budapest because the city did not yet have a European institution.

The governing board has until the end of 2009 to identify, select and launch the first innovation hubs. The project faces unresolved financing problems. The projected budget for 2008-2013 is 2.36 billion, but there is no provision for this in the budget of the Commission. The EU will contribute 308 million. Business has shown no incentive to participate and has not pledged any of the private sector investment on which the project depends. Europe has no tradition of private donations to public research institutions. If all goes well, operations are expected to start within two years. Once the EIT is established, the first projects will cover climate change, renewable energy and next-generation information and communication technologies. The first KICs could see the light of day by 2010. By then, Europe should be “the most competitive and dynamic knowledge-based economic area in the world.”

European Technology PolicyThe EIT is the latest in a series of mega-projects intended to give Europe a prominent place in the global IT industry. In the early 1950s, American mainframe computers made their appearance in Europe and immediately took control of the market. Within two decades, about 20,000 machines were installed. This raised the spectre of a technology gap and economic backwardness not only in Europe’s nascent computer industry; it would also affect the telecommunications, automotive and service industries. Each government protected its computer industry with preferential contracts, tariff walls and substantial subsidies. When the “buy national” policy proved ineffective, a consensus developed that European countries should pool their scientific capabilities.

This presented the Commission with the opportunity to propose a “European” technology policy in the new prestige field of electronics. It would serve as an antidote to the image of fraud associated with the common agricultural policy, and provide Europe’s IT industry with the basic technologies needed to resist and beat American and Japanese competition. Technology policy became the Commission’s big project. Big projects, of course, meant big money. Company lobbyists, universities, research institutes, consultants and experts of all kinds quickly learned how to play the game. Most of the funds went to the largest computer companies. The Commission’s technology planners were unaware of the fact that Silicon Valley’s startups had invented the microcomputer which had revolutionized and reshaped the industry, and created an entirely new business model of open standards, forcing IBM to join the PC market, using software provided by a startup called Microsoft.

ESPRIT was established in 1984 to promote cooperation between companies and to involve Europe in drawing up worldwide technical standards. National R&D programs would be coordinated to develop basic, non-proprietary technologies. Following EC antitrust laws, research had to be pre-competitive. Individual contractors were free to use the results and develop their own projects. The programme allowed companies and researchers to tackle R&D projects that they would not otherwise have attempted. For several years, about 3,000 engineers and scientists from 420 independent organisations worked on about 200 projects. In its first two rounds, ESPRIT ploughed 4.7 billion ecus into pre-competitive research.

The Framework Programmes (FP) are by far the most important schemes for the implementation of the joint policy on research and technology. Under Jacques Delors, technology policy became the major project of the Commission. Delors was no friend of big business, but he expected the industrial leaders to “think European” by providing them with ample subsidies. Grandiose mega-projects were drawn up in consultation with abundantly staffed working groups and panels of researchers and evaluators. But a permanent power struggle between the European Parliament, the Commission and the governments obstructed the decision-making process. Despite their obvious ineffectiveness, the scope of the Framework Programmes increased exponentially. The budget of the First FP (1984-87) was 3.7 billion ecus. The Seventh FP (2007-13) has a budget of €53 billion.

EUREKA was the third joint European development programme. Research focused on six broad scientific areas: optronics, high-speed microelectronics, large computers, artificial intelligence, high-power laser and particle beams. Financing was shared between governments and industry. EUREKA brought together about 13,400 partners. Most of them were small and medium-sized enterprises. More than 1,840 individual projects and 180 cluster projects were completed, with a budget of €9.9 billion and €10.9 billion. Currently, there are around 700 ongoing individual projects and 120 cluster projects with a budget of €1.7 billion and €2.3 billion respectively. Launched in early 2007, the European Research Council (ERC) is a funding agency for frontier research. The ERC has a budget of €7.5bn. It focuses on fundamental research in all physical, engineering, social, biological and environmental science. Investigators will be able to compete for grants. Research is run on a peer-reviewed basis. A Scientific Council directs the operations. There is no specification of research areas or themes. To assess the level of validity of each project, the Council will count the number of scientific papers published by the researchers and the number of citations they receive.

On the wrong track and against the tideThe European Union is handicapped by the unique system and the unique economic philosophies it has created. A political construct, it lacks businesslike common sense and economic logic. The amalgam of socialist statism and the invisible hand of the market has led to a dichotomy called the third way. Politicians and bureaucrats mastermind scientific research and economic development policy-making, but lack the sophisticated understanding of the ways in which science and technology interact. From the beginning, the Commission considered research as a collaborative endeavour, whereas it is inherently competitive and top secret. R&D is one of the most important and least understood elements of the Commission’s budget. The focus of the political class is on spending a percentage of GDP equal to that of the United States and Japan, with slight concern for follow-through and juste retour, and without any idea of what makes R&D’s success in these countries.

The acid test of any industrial policy is the measure of progress in creating new or better products and new sources of wealth. The outcome of three decades of European high-tech policy makes a mockery of the promise. The mind-boggling subsidies intended to make the European electronics industry globally competitive were wasted on backward research laboratories and badly managed companies. In 1984, when the Commission opened the throttle of public money, 12 European companies – large and small – were producing computers. They became accustomed to public-cash infusions and developed a dependency culture. Ten years later, they had disappeared or closed their computer division.

In a globalised economy, to be of any value, research must be world-class. The prestigious American universities are private institutions having close links with industry. China’s universities graduate 500,000 students a year with degrees in science and engineering. Japan’s universities turn out more engineering graduates than the American colleges. Compared to the US and Asia, very few European students take science subjects and maths. As a result, industry has severe difficulties to hire trained personnel, which hampers the ability grow and innovate. Near-gratuity yields a democratic access to education, but reduces it to mediocrity. European universities are packed with students who hope to settle down into a comfortable job, which is not the best incentive to develop new ideas and new products. Bright and ambitious scientists and engineers who don’t see opportunities for reward take their talent to the United States. Any new idea requires a visionary appreciation of its potential applications, followed by arduous work to achieve commercial success. In Europe, the entrepreneur who embraces new ideas is a rare breed. Technically trained people prefer a comfortable job in a solid company, rather than the risk and bother of starting a new company.

Competitiveness in industry depends on the spirit of enterprise and educational provision. The prerequisites are creative minds, capital for start-ups and for expansion, world-class research and business-friendly fiscal policies. The high-tech industry is brutally competitive. Its products tend to become obsolete within a few years. Burdened by overregulation, an anti-entrepreneurial climate and exorbitant wage and tax levels, Europe is an inhospitable place for entrepreneurs.

Scientific research, as concocted by Europe’s politicians and bureaucrats, perverts the image of science. The Commission throws money around far and wide. The real issue in scientific research is not quantity, but quality. Switzerland hosts the top university on the European continent. The University of Singapore, a country of 3.3 million inhabitants, ranks among the world’s best. The cardinal mission of the universities resides in providing scientific education and training, and - secondarily - carrying out research activities. Academic research as it is performed in Europe is out of touch with the industry’s cutting-edge issues and will not yield any noteworthy results. The best we can hope for is that the Commission gets out of the way and lets the scientific community and the industry attempt to re-normalize the strategies and procedures of scientific research. We shall then have to wait for research in Europe to become about as tractable and productive as it is in other parts of the world.