FYI: Industrial Policy?

[Dave Farber <farber () central cis upenn edu>]

from Scientific American June 1993

Mr Clinton Put Down That Watering Can

President Bill Clinton would not be flattered. When he
announced his $17-billion technology initiative this
past March, many Europeans dismissed it adjust another
example of the "watering can" approach to nurturing new
technology and fostering industrial competitiveness. Why
the lukewarm response to the idea of showering money on
critical technologies? The European Community's plunge
into similar industrial policy under the rubrics of Esprit,
Eureka and Race has not produced a tangible return.

So now the EC is nurturing a hot, new idea bearing the
buzz name "megaproject." Whereas past EC research proj-
ects brought together researchers and manufacturers,
megaprojects would tie research more tightly to market
needs by not only enlisting potential users as collabora-
tors but actually putting them in a leadership position. ln
the case of designing computer networks for health care,
for example, hospitals and health authorities would de-
fine goals and direct a cluster of research projects charged
with developing standards and technology. And rather
than stop at the demonstration of feasibility, megaproj-
ects would even go so far as to build factories'

Up to this point the Commission of the European Com-
munity in Brussels has talked only informally about set-
ting up megaprojects, citing such applications as comput-
er networks. The idea, however has received widespread
support from industry and research policy officials and is
expected to form the centerpiece of the fourth phase of
the commissions research programs, called Fourth Frame-
work, beginning next year

With Europe's flagship high-tech companies-most no-
tably Groupe Bull, Siemens, N.V Philips and Olivetti-losing
money a shift in thinking was a political necessity for the
commission. The lingering recession has made it difficult to
argue that past programs have had an effect on compet-
itiveness. According to Nigel Homs, a special adviser at
KPMG Peat Marwick and an adviser to the commission, "the
time has come when we should expect more from re-
search than progress on a broad technological front."

.Much of the impetus behind these policy proposals has
came from dissatisfaction with the results of previous re-
search efforts. The Esprit program's original goal in 1985
was merely to foster research collaboration. Since then,
critics of the program have succeeded in convincing the
commission to sharpen project definitions and to require
tangible "deliverables" every few years. Despite these ef-
forts, however Esprit has never proved its effectiveness in
improving the crucial linkage among the research and de-
velopment and marketing departments of large corpora-
tions. Similarly, the Race program, created in 1988 to de-
velop transnational broadband communications networks,
fell short of its goal of implementing the networks. "Race
has done a good job in certain technology areas," says John
Forrest, chief executive of National Transcommunications in
Winchester England, "but the vision has gotten nowhere."

Industry seized on these shortcomings as evidence that
programs should be selected that have greater "market
pull." A review of EC projects showed that some of the
more peripheral ones targeted at specific industries such
as health care and air-traffic control had the best record.
The notion of combining the pragmatism of these efforts
with the technological depth of Race and Esprit took hold.

The current state of policy limbo in Brussels is temper-
ing optimism for the megaproject concept. The commis-
sion is only just finding its feet after a massive, 18-month
reorganization. Uncertainty over the fate of the Maastricht
Treaty, which will not be ratified before the summer if at
all, has put a hold on any formal proposals. As a result,
details about how to structure and pay for the megaproj-
ects are now the subject of vigorous behind-the-scenes
lobbying. Nevertheless, the idea has enough impetus that
megaprojects may soon become the new paradigm for
European competitiveness.

-Fred Guterl, London

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