The Confederation of Swedish Enterprise welcomes Mario Draghi’s report on the future of European competitiveness. The report paints a grim economic picture, and we share Draghi’s analysis that Europe must address the need for boosting productivity growth. However, Europe is in many ways still a leading economy, and there are reasons to be optimistic about Europe’s economic prospects, provided the right policies are pursued.
Draghi’s proposal for an EU competitiveness strategy for the future contains both new and old proposals and takes as its starting point the need to address three major transformations: to accelerate innovation, to bring down high energy costs while continuing to decarbonise and shift to a circular economy, as well as to also react to a world of less stable geopolitics. The call for significantly raising investment levels is a central and cross-cutting theme.
While Draghi identifies Europe’s competitiveness challenge as being about improving productivity, the report lacks an extensive analysis of key drivers of productivity to underpin his policy recommendations, except for calling out EU’s relative weakness in digital technology. This is unfortunate, as developing measures to raise productivity growth requires insights, based on evidence, of what factors have a positive impact on productivity.
A main driver of productivity growth is that resources in the economy continuously are being reallocated to more productive companies that deploy new and better ideas and innovations. Several factors are considered to be important for this process. Examples of important external factors are institutions and regulatory frameworks, for example competition legislation, framework conditions for entrepreneurship and risk-taking, and access to capital and labour. Openness to the outside world in terms of trade and investment is also considered an important factor. To be impactful, any programme aimed at raising productivity levels will have to take these factors into account.
Swedish Enterprise believes that open and competitive markets offer the best path to a more prosperous future and that this must be a guiding principle in policy development. Investments should be mainly driven by the private sector and the primary task of policy makers in this respect is to ensure the right framework for private sector investments. Some proposals are therefore particularly welcome as helpful means to achieve higher productivity growth, such as ensuring a properly functioning Single Market, creating the conditions for increased R&D&I spend and easing the regulatory burden. Others translate into quite heavy-handed interventionism and provide a more protectionist direction.
Draghi has chosen a multi-layered approach, and addresses several areas, which oftentimes overlap. Our commentary focuses on some of the central themes: innovation, decarbonisation, security and dependencies, financing and better regulation. This paper serves to set out our views on some of the key points and proposals contained in the report.