Innovation, innovation, innovation

September 13, 2006

Free Market Foundation

When recently asked what his top priorities were for his country’s European Union presidency, Finnish Prime Minister Matti Vanhanen had just three words to say: “Innovation, innovation, innovation.”

Finland’s willingness to embrace change, shift priorities and make tough choices has created one of the world’s most competitive economies, says Ann Mettler, executive director of the Lisbon Council, a Brussels-based think tank.

Taking Finland as an example, the following key lessons can be drawn:

Education, skills and lifelong learning must be at the centre of an innovative economy; far from being a consistent top performer in the mid-1980s, secondary school students in Finland performed only slightly above the Organisation for Economic Co-operation and Development (OECD) average in science tests the country pursued comprehensive reforms in spite of a deep recession in the 1990s.

Finland’s policy makers were determined to rid their schools of the bureaucratic inertia and myriad of responsibilities that hobble other European school systems to this day.

Through decentralisation and holding teachers and schools accountable for their students’ performance unthinkable in much of the rest of Europe the reforms instilled in educators a sense of professional pride and unprecedented empowerment.

Today, Finland is the top performer in the OECD’s high-school study.

A second area where Finland is leading by example is in shifting its resources toward future-oriented projects:

In 2004, Finland spent 3.41 per cent of its Gross Domestic Product (GDP) on research and development (R&D).

Even more important, industry contributed the lion’s share, 2.41 per cent.

Much of Europe, on the other hand, is trying (unsuccessfully) to reach the 3 per cent target through more public spending.

Finland realised that attracting private-sector investment is not only more productive but also more likely to yield commercially viable innovative products.

Source: Ann Mettler, Innovation, Innovation, Innovation, Wall Street Journal, August 28, 2006.

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FMF Policy Bulletin/ 05 September 2006