There is plenty of discussion as to whether the US or China will end up dominating the economy of the future. To become a part of the conversation, Europe will need to make up for its long-standing neglect of research and development.
Apple, Samsung, Alphabet, Alibaba, Amazon, Baidu and Tencent. The world’s biggest technology companies all have one thing in common: they originated outside of Europe. Although the EU is the second-largest economy in the world – behind the US in nominal terms and China with regards to purchasing power parity – nobody really considers the bloc to be a potential leader of the digital economy of the future. In other words, the continent that brought the world the printing press, the internal combustion engine and the world wide web is falling behind.
If Europe is to regain its place at the top table, it will need to put its money where its mouth is. For too long, the continent has allowed investment in research and development (R&D) – the foundation that underpins technological progress – to flounder. In 2000, the EU allocated 1.67 percent of its GDP to R&D, almost double that of China (0.89 percent). Since then, though, China’s commitment to researching new technologies has been relentless, overtaking the bloc in terms of R&D spending in 2012 (see Fig 1).
The EU also trails behind Japan, South Korea and the US in terms of R&D expenditure, but simply throwing money at the problem will not be enough to get it back in the race for technological dominance. Instead, cultural attitudes towards risk need to be challenged and regulatory frameworks must be reformed if they are shown to stifle innovation. Unfortunately, this may still not be enough, as the problem with neglecting R&D is that once you fall behind, it’s very difficult to catch up.
Read more below