Competitiveness & Creativity In the light of the Lisbon strategy Dr. Risto E. J. Penttilä Director, Finnish Business and Policy Forum EVA

We all know the Lisbon Goal: To make Europe “the most competitive and dynamic knowledge-based economy in the world” by 2010 Agreed by the European Council in March 2000

But do you know the Lisbon joke?

The Lisbon Joke: The European Council decided to extend the deadline by SIX MONTHS

This, of course, did not happen but… It is supposed to be funny since nobody believes that six months is going to do the trick

So what will do the trick? Is there a new way of making cities, countries and regions competitive?

Some people think so...

Richard Florida: The competitiveness of nations will be determined by their ability to attract and retain talented people He speaks about a new ”CREATIVE CLASS” [ link][ link]

USA has the largest ”creative class” USA: 30% of workforce The Netherlands, Belgium and Finland: almost 30% The UK, Ireland, Denmark: around 25% Other EU: around 20% Laggards: Italy and Portugal: around 15% (Portugal rising)

How to attract them? Three T’s: Tolerance Technology Talent

”Creative Class” sounds suspicously Marxist… Otherwise he seems to have a point At least there is a lot of anecdotal evidence that creativity and competitiveness go hand in hand…

For example: The Bilbao Effect The Nokia Effect

My purpose is to answer two questions: First: Can creativity be a cure for Europe’s lack of competitiveness?

My purpose is to answer two questions: First: Can creativity be a cure for Europe’s lack of competitiveness? Second: Is creativity an alternative to the Lisbon strategy?

But first: Let’s take a look at what experts say about Europe’s competitiveness…

The European Round Table of Industarialists* has been very critical… *The ERT is a forum of c. 45 leaders of large, internationally operating companies of European parentage

The list of problems is long: The Single Market has not been completed Resistance to change and unwillingness to take risks over-regulation, taxation and administrative disincentives, lack of entrepreneurship, rigid labour market rules People work too little (per year and during life time)

But even the ERT sees progress: Productivity in some areas has caught up with the USA The new Commission seems to have the right prioritities (and the right composition)

How about the OECD? Long-term prognosis: EU growth will average 1,2 % per year until 2025 This is not enough to maintain current levels of employment

Goldmann Sachs: Asia will have overtaken Europe by 2050 BRIC countries (Brazil, Russia, India and China) and the USA will dominate The best EU member state will be the UK (number 7)

The World Economic Forum* The Lisbon Review 2004: ”Much has yet to be done within a number of EU countries, across all dimensions, in order to bring them to the level of competitiveness intended by the Lisbon Declaration.” * Members are 1000 leading companies in the world

Wim Kok’s High Level Group*: “There are sufficient grounds for Europe to be seriously worried about its medium to long run growth path and this concern should provoke a significant policy response.” * High Level Group on the Lisbon Strategy, 26 May 2004

Bottom line: Much needs to be done

Can Creativity be a cure?

Perhaps… According to some estimates creative industries are more important to the City of London than financial services creative industries

But let us not jump to conclusions Two questions: 1.What do we talk about when we talk about creativity and economic growth? 2.Is creativity an alternative to the Lissbon strategy?

We talk about three common- sense things: 1. Art as business:  i.e. less state subsidies, more entrepreneurship 2. Business as art  how to manage business, how to undestand markets 3. Creative cities  how to attract creative people and (with them) investments

It is reasonable to argue that These three dimensions taken together promote growth in a given city or an industry  Should be encouraged

What is the relationship between Lisbon strategy and creativity? Are they alternatives? Can we forget the Lisbon goals and concentrate on ”creativity”?

They are not alternatives.

Lisbon stategy includes measures to promote creativity It calls for: Developing a European area for innovation, research and development More Liberalization Building network industries Improving the enterprise environment

Indeed… The same countries that rank high in achieving Lisbon goals are on top of Europe’s creativity list

The top countries are: Lisbon: Finland Denmark Sweden UK Netherlands Germany Creativity: Sweden Finland Netherlands Denmark Belgium Ireland

THUS: CREATIVITY IS AN IMPORTANT PART OF THE LISBON STRATEGY, NOT AN ALTENATIVE TO IT.

PS1. Florida claims that ”the epicentre of Competitiveness” in Europe is changing. Old: France, Germany, UK New: Northern Europe (plus Ireland and UK) Is this view correct? Looking at the two rankings, the answer seems to be ’yes”.

PS2. Florida argues in Harvard Business Review* that America is faced with a ”looming creativity crisis” The reason is new visa requirements that discourage the inflow of talents  Will Europe benefit? * HBR, October 2004