Tal inför Arenas ekonomiska råd - Socialdemokraterna

Tal inför Arenas ekonomiska råd

From abstraction to action - developing Sweden's future innovation policy. Speech by Stefan Löfven, the 25th of October 2012

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I would like to start by thanking the Friedrich Ebert Foundation and the Arena Group for inviting us here today.

I agree with the statement of this seminar. Competitiveness is too often discussed with an asymmetric focus on the level of taxation and the nature of labour legislation. There is a genuine need for a more sophisticated debate. So I'm glad to have the opportunity to take part in these talks.

* * *

The headline for this panel discussion is "Progressive policies required", and if we look at Sweden's role in global competition as an example, the requirement of policy is urgent.

The current European crisis has not hit Sweden as hard as many other European countries, but the developments of the last few years have shown significant flaws in Swedish competiveness.

You don't need to be the leader of the opposition to notice that unemployment is at record high levels and rising. Sweden has been worse at job creation than comparable countries such as Germany, Holland and Austria.

The last few months have been dominated by reports of research based companies such as AstraZeneca and Sony Mobile leaving for other countries. October was full of news of dismissals, and there is great uncertainty about the coming months.

Meanwhile, the current right wing government's attacks on health and unemployment insurance have succeeded in increasing inequality, but not lowering unemployment. On the contrary, there are strong signs that attacking these basic benefits damage Sweden's potential to adapt in a changing world economy.

There has been much focus on the supply of labour, but not on the creation of demand, even though common sense tells us that companies hire based on incoming orders – not based on the poverty rates of unemployed.

* * *

I truly believe that the key to competiveness and industrial growth is innovation.

Innovation leads to new orders and creates access to new markets, increasing the demand for labor and bolstering the entire economy. Without innovation, industry faces stagnation, and will instead have to compete by way of lower costs and lower wages.

I had the opportunity to take part in the work of the Royal Swedish Academy of Engineering Sciences, IVA, and their project "Innovation for Growth" which presented its final report a year ago.

The Academy's report presented some major challenges for Swedish competiveness:

The key problem is the lack of structures for taking an idea and developing it into a commodity or service to be sold on a market. Because an idea cannot be called an innovation until it is put to use. These failings in the current structure for innovations could be put into four major categories:

Firstly, there's a lack of diversity in research. Swedish research is focused on a few key companies, making it very vulnerable for companies downsizing or moving abroad.

Secondly, many companies, especially small and medium-sized enterprises, lack capital to grow. Private venture capital focuses on secure investments, and public venture capital is fragmented and hard to acquire.

Thirdly, downsizing in education has created a growing gap between the general education level of the unemployed, and the demands of growing companies, creating a lack of specially skilled workforce.

Fourthly, and maybe most importantly, there is a lack of coordination between different government departments on the issue of innovation policy. This is in addition to a lack in cooperation between society, academia, companies and trade unions. It slows down the policy process and makes the economy more vulnerable to change and crisis.

Facing these problems, and the growing unemployment, the Swedish right wing government presented a long-awaited Innovation Strategy two weeks ago. We in the opposition had great expectations for it too.

Sadly, the sixty page strategy document could be compared to an IKEA catalogue, but without the furniture or the prices. The pictures are great, the words are marvelous – but there is a complete lack of concrete goals or tangible tools to reach them.

The stated goals are incredibly vague. Let me show you an example by quoting one of the goals, called "Innovative people":

"Goal: People will have the ability, will and possibilities to contribute to innovation. Interim target: People will have the knowledge, competence and skills to contribute to innovation."

And these goals are set for 2020. Their vagueness will neither help nor develop the Swedish innovation climate, and that is also reflected in the latest budget, where the only major reform is a reduction of corporate taxation.

It is obvious that the old right-wing motto of "Business is best left alone" still reigns supreme.

* * *

This could be seen as an ideological difference between progressives and conservatives, where we progressives have both research and industry on our side.

Very few serious companies today, especially in Sweden, ask for less interest or support from the government and fewer forums for cooperation and coordination.

Because politics can make a difference, especially in uncertain times. And politics can be a seedbed for innovation and industrial growth – if, and only if, it moves from abstraction to action.

We need concrete tools to do this.

If we see the innovation process as a chain, from an idea at one end to a industry growth at the other–we need to strengthen every link along that chain.

* * *

We need to address the lack of diversified research in the beginning of the chain by investing in public research. But we also want to make research and development deductible for small and medium-sized firms with smaller profits in order to achieve greater diversification.

Many small companies don't have the knowledge or resources to protect themselves against patent theft, so there's also a need to strengthen patent rights for start-up companies.

We adress the lack of capital further along in the chain by creating a single point of access to public venture capital. We want to strengthen regional incubators, while also making venture capital available in the early phases. The government could also help to secure loans to entrepreneurs with little collateral.

Many new companies today have such specialized products that they need to be introduced directly to a global market. We therefore need to increase government support for exports, and deepen our dialogue with developing nations, not only the BRIC-countries but new tigers such as Indonesia and Angola.

There are also great opportunities in government procurement. The Swedish national and regional government buys goods and services for more than 55 billion euros every year.

If these procurements could be shifted more from ordering already existing products towards solving shared problems, government could use its vast resources to spur innovativeness.

This would be very beneficial in the quest to meet our generation's greatest challenge, the creation of a sustainable society. This is why we in our current shadow budget, along with smarter regulation and heavy investment in climate innovation, also propose a national policy on government innovation procurement.

* * *

So let's say that we have knowledge through research, and the capital. Then the next step to enable expansion is to solve the shortage of educated or trained people in the workforce.

That's why we want to invest heavily in getting unemployed young people back to school, and securing education throughout the working life.

A globalised economy demands not only financial security during unemployment, but direct access to education that will provide you with a competence that is required in the labour market. This shortens the time in unemployment to a minimum and reduces the risk of powerlessness and poverty.

That is the reason education is at the very core of Social Democratic policy – it reinfroces both equality and the economy simultaneously.

* * *

By increasing access to research, capital and a skilled workforce we strengthen all the key parts along the innovation chain. But the only way to create a true dynamic innovation system is to address the lack of coordination and cooperation.

As the pace of the global economy increases, other export-dependent countries such as Finland, Holland and South Korea have created systems to coordinate innovation policy. They use them for cooperation with industry and academia and to create rapid responses to common threats and opportunities.

In Sweden, innovation issues are spread across a multitude of departments, with no coordinating body. The vagueness of the current innovation strategy could be seen as evidence of this.

Therefore, we have presented the idea of a national innovation council, led by the prime minister, with the ability to meet the demand for coordination and rapid response.

We also want to invest in concrete forums for strategic cooperation between policy makers, academia, companies and trade unions. Many sectors are in dire need of these forums, and we see for example Life Science as one of those key areas where both industry and academia could benefit from closer cooperation.

This creates a necessary shift in policy making, from a one-way monologue to a constant dialogue, and will shorten times for reaction and creation of new policy.

It strengthens the entire innovation chain, because just as innovation is a key to growth, cooperation is a key to innovation. Such a method, with set forums for cooperation, is also central if we want to build mutual understanding and act to achieve a sustainability.

* * *

So in conclusion, industrial growth is dependent on an active state which follows an innovations strategy with both reachable and measurable goals. A society that strengthens the weak links in the innovation chain through policies developed in cooperation.

And if we move from vague abstraction to concrete action, we will also find that those tools that are used to strengthen innovation – such as management of capital and research and forums for cooperation – are also the tools that will build a sustainable society.

This shows us that building a modern, innovative and sustainable economy is not three challenges, but one opportunity – an opportunity that we need to take today.

Thank you!

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