Lack of knowledge leaves Europe playing catch-up

Oct 12 2006 by Nic Paton Print This Article

Europe's economies lag behind the U.S because they have consistently failed to invest in their knowledge base and as a result are always playing catch-up when it comes to technological progress.

New research by a UK think-tank, the Work Foundation, has argued that between them, European countries can boast a "knowledge economy" that is as big if not bigger than that of the U.S, with more than 40 per cent of European workers employed in knowledge-based industries.

But Europe has never matched the U.S in terms of economic growth and productivity largely because it has not invested as much in its knowledge base. In fact, it may now be suffering a slowdown in technological progress.

Those nations that have invested most in "knowledge" – research and development, information and communications technology, higher education and so on – have tended to enjoy relatively better economic dynamism.

But, argues the research, investment on its own is not enough.

The ability of companies to implement technological innovations efficiently is also an important factor in explaining differences in economic performance.

Between 1994 and 2004, R&D spending as a share of GDP across the 15 members of the EU increased by less than 0.1 per cent – and actually fell in France, the UK, the Netherlands and Ireland.

In comparison, in 2004 the U.S invested 2.7 per cent of GDP in R&D, against 1.9 per cent in the EU15.

Ian Brinkley, director of the knowledge economy programme at The Work Foundation, said: "The indications are that the countries prepared to invest in knowledge and have the ability to make the most of that knowledge on the whole perform better."

He added: "Knowledge is critical to the economic destiny of the EU, and the continent is now well on the path to being a knowledge economy both in terms of GDP from its knowledge industries and in terms of employment in knowledge work.

"Where it falls down is that it has simply failed to invest enough. The priority must now be for policy makers to encourage organisations – especially private sector organisations – to invest much more in knowledge in the future.

"The continent's technological progress is slowing down: that is precisely the wrong direction to be headed as knowledge rises in importance," he concluded.