Digitization has slipped through the EU's fingers - what should we do? 

The former head of the European Central Bank, Mario Draghi, has presented his report on EU competitiveness, commissioned by the European Commission a year ago. Draghi describes how the EU has fallen behind and how this threatens Europe's prosperity.

Digitization plays an important role in the petition. The report is clear that the EU is not taking full advantage of the opportunities offered by digitalization. Technology development is now fastest outside the EU's areas of strength - automotive, precision engineering, chemicals, materials and fashion. Draghi writes that 70% of the new value created in the global economy over the next decade will be digitally enabled. This increases the risk that the EU will continue to lose ground. Since the breakthrough of the internet around 2000, the US and China have been better at transforming their economies, a trend that has accelerated since 2019, according to Draghi. 

Draghi is therefore blunt in saying that the main driver of the widening productivity gap between the EU and the US has been digital technology ("tech"): 

"The main reason why EU productivity diverged from the US in the mid-1990s was Europe's failure to take advantage of the first digital revolution with the internet - both in terms of generating new tech companies and spreading digital technologies in the economy. In fact, if we exclude the tech sector, EU productivity growth over the last twenty years would have been broadly in line with the US."  

Europe currently seems to be falling further behind in several areas according to Draghi: AI, the cloud market and now quantum computing. "Sweden and Swedish industry are probably not the biggest problem here, but the public sector has fallen behind in Sweden. The interest in digitalization and the handling of EU issues over the years in Sweden also leaves something to be desired. So there is reason to study Draghi's report.  

Many people have already commented on the report, which shows a high level of productivity at least in terms of reading. The main report is over 300 pages long and covers a wide range of areas and makes many suggestions. There will probably be reason to return to the report and the proposals in it. Many of them concern TechSverige's mission and members. There is probably a lot to be gained, as well as some objections. Today we will take a look at the AI issue addressed in the report. 

Draghi sees opportunities for businesses to take advantage of AI developments to boost their competitiveness - but the pace must be fast. The risk is that competitiveness will decline in key sectors such as automotive, financial services, telecoms, healthcare and retail. This was also one of the themes of TechSweden's report Using AI as a tool: 

"AI can mean that traditional industrial advantages, such as advanced manufacturing and highly skilled labor, can be undermined by automation and innovative AI solutions. However, if Swedish companies can successfully integrate AI, it can lead to renewed competitiveness and new opportunities in the international arena." 

One of the suggestions in TechSweden's report was that the government should announce ten innovation prizes of SEK 11 million (the same amount as the Nobel Prize) to leverage investments in data that have already been made in the public sector while solving societal problems. An innovation prize rewards those who succeed in solving a predetermined problem. A large prize money attracts those who believe they can solve the problem and creates new collaborations. This can often be more effective than simply increasing investment in research. Draghi is taking the same approach with 'inducement prizes' to develop practical solutions to specific technological, industrial or commercial problems - 'EU Grand Challenges'. In the EU, the European Innovation Council (EIC) and the European Space Agency (ESA) already operate innovation prizes, but according to the report, their use is more widespread in the US. 

Like TechSverige, Draghi points to the need to reduce the costs of complying with all regulations such as the GDPR, often in combination with other regulations. The hope expressed by TechSverige in the report A tech agenda for the EU of breathing space for the tech industry after over 100 legislative proposals last term. This seems even less likely with Draghi's report. Soon, the new European Commission will probably have read through the 328 pages and get down to business. So we'll have to roll up our sleeves and see where this goes.