todays wp - for IP - role of innovation in making economy competitive,finland; contrast us trends

["David Farber" <dave () farber net>]

Time to learn Finish

-----Original Message-----
From: "paul foldes"<pfoldes () interhelp com>
Sent: 14/07/05 8:14:53 AM
To: "dave () farber net"<dave () farber net>
Subject: todays wp - for IP - role of innovation in making economy competitive,finland; contrast us trends

Dave, for IP if desired, today's wp article on finland's choice to back r&d 
as a 'competitive advantage' ; and push to overcome obstacles to pure 
meritocracy

<http://www.washingtonpost.com/>washingtonpost.com
Innovation Gives Finland A Firm Grasp on Its Future
Economy Offers a New Model for Old Europe

By Robert G. Kaiser
Washington Post Staff Writer
Thursday, July 14, 2005; A21

HELSINKI -- The political and economic malaise that afflicts so much of 
Europe this summer has not infected this northernmost outpost of the 
European Union. The contrast between Finland's optimism about the future 
and Old Europe's gloom is striking.

While France, the Netherlands, Italy, Germany and others are stumbling, 
Finland prospers, both economically and psychologically. The recent "no" 
votes in France and the Netherlands that undermined, perhaps fatally, the 
E.U.'s proposed constitution have produced a pervasive despair in much of 
Europe that did not turn up in recent interviews with scores of Finns.

"The Finnish model could offer some elements of a way out of the European 
crisis," said Pekka Himanen, a 31-year-old philosopher and co-author of a 
much-discussed book about Finland's successes.

Not that Finns have all the answers. Like all Europeans, they are producing 
too few babies to pay the promised welfare-state benefits to an 
ever-growing contingent of senior citizens. The new jobs created by their 
high-tech successes have been matched by losses from low-tech plant 
closures, so unemployment remains high -- about 10 percent.

Nevertheless, the Finns know they are much better placed now than many of 
their Old Europe neighbors to the south. Exploiting their small size (5.2 
million people) and ethnic homogeneity, the Finns have proven themselves 
successful experimenters and innovators.

Fifteen years ago, Finland faced a full-scale depression, brought on by the 
loss of the country's most important markets as the Soviet Union 
disintegrated. Unemployment soared to 20 percent. But the Finns took 
control of their future, made painful adjustments and came out of the 
crisis with an economy that the World Economic Forum in Davos, Switzerland, 
ranks as the most competitive in the world.

The major economies of the E.U. are growing too slowly -- and their elderly 
populations are growing too quickly -- to preserve the traditional welfare 
state and provide adequate jobs today, or to offer the prospect of genuine 
competitiveness in the global economy tomorrow, many Europeans agree. In 
this view, the countries invest too little in education, research and 
development and do too little innovating. But there is no consensus on a 
course of action to fix these problems. Many people worry about preserving 
a social system that is rich in benefits for all.

"Right now," said Himanen, the young Finnish intellectual, "Europe is like 
a once-fit top athlete who has fallen out of shape. Instead of taking 
action, the athlete keeps writing new strategic plans on how to get back 
into shape: 'I could go running, I could go swimming,' and so on. Sometimes 
it feels that the European logic is: 'When I'm in better shape, I will 
start exercising.' "

But "it was actions and not words that created the Finnish model," Himanen 
added.

Those actions reflected a pragmatic spirit typical of Finland in its brief 
history as an independent country (Russian control ended in 1917). A 
relatively backward agricultural country became a high-tech powerhouse with 
labor productivity as good or better than that in the United States, but 
also a welfare state as generous as any in Europe.

Perhaps the most revealing statistic behind this transformation is 
Finland's commitment to research and development. The Finns put 3.5 percent 
of their domestic product into R&D last year, second in the world to Sweden 
(about 4.3 percent) and far ahead of the United States (about 2.6 percent) 
or the E.U. as a whole (less than 2 percent).

R&D expenditures symbolize the Finnish resolve to preserve a comfortable 
place in a globalized world for an underpopulated nation with thousands of 
lakes and billions of trees. Typically, the decision to spend so much on 
scientific research and the adaptation of its results to commercial 
purposes was the result of a broad political consensus. Finland steadily 
increased government spending on R&D throughout the 1990s, when all other 
spending was either cut or frozen.

Three Finnish institutions channel this money. One is a unique body called 
Tekes, the national technology agency. It supports both basic and applied 
research, granting about 40 percent of its funds to universities and other 
research institutions and 60 percent to businesses.

This year, according to Veli-Pekka Saarnivaara, the president of Tekes, the 
organization will give out nearly $540 million, or more than $10,000 for 
each Finnish citizen. A U.S. agency investing a comparable amount per 
capita would put $300 billion a year into American R&D.

Tekes is an entirely autonomous agency funded by the Finnish government. 
This "quite special" arrangement, as Saarnivaara put it, reflects one 
factor that sets Finland apart from many other industrial democracies -- 
Finns trust their government. Visitors from other countries who express 
admiration for Tekes tell Saarnivaara that such an operation would be 
impossible in their countries "because of the corruption," he said in an 
interview here.

The second source of the agency's independence is its reputation as a wise 
and discreet investor. For 20 years, Saarnivaara said, the agency has 
worked closely with private firms, helping them decide where to place their 
R&D bets, working collaboratively to identify markets and products, 
persuading Finnish universities and research organizations to collaborate 
with business.

"We are helping to plan R&D projects that we will then fund," he said. 
About a third of the projects Tekes funds fail completely, Saarnivaara 
said. He would like that percentage to be higher -- in other words, he 
would like to take more risks.

A second Finnish institution that supports the research and development 
efforts is Sitra, the Finnish National Fund for Research and Development, 
founded in 1967. Its budget is just a tenth that of Tekes, but its impact 
on Finnish business has been enormous. It acts as a venture capitalist, 
investing money earned by its own $750 million endowment in the start-ups 
and new ventures of established companies.

Sitra is run by Esko Aho, who was Finland's prime minister during the 
crisis years of the early 1990s and was nearly elected president in 2000.

Sitra's endowment came largely from a block of shares in Nokia that the 
government acquired in return for its support of the company's cell phone 
enterprise when it was in its infancy. Nokia was "a miracle," as Aho put it 
in an interview.

Since making a major commitment to telecommunications in the early 1990s, 
Nokia (a Sitra client itself) has grown into the world's leading cell phone 
maker. Its $35 billion in annual sales drives the Finnish economy.

Sitra, too, is politically autonomous. Revealingly, more than 90 percent of 
the companies in which Sitra has invested were previously supported by 
Tekes, an example of how Finland has become what Himanen and his co-author, 
Manuel Castells, a Spanish-born sociologist, call "a network society."

A third important source of R&D funding is the Finnish Academy of Science 
and Letters. Until Reijo Vihko became its president in 1996, it was a 
clubby organization that channeled research funds to established scientists 
and labs without much regard for how good they were. Vihko, a former 
medical professor, turned the academy upside down, according to several 
Finnish scientists.

"The main point was to concentrate on centers of excellence," Vihko said in an



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