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Mega-investments as encouragement and symbol for growth and innovation

Europe needs the courage to invest in new, innovative mega-projects – be it new infrastructure or in other domains. Such investments drive innovation and economic activity, have a positive impact on employment and, above all, they can become long-standing symbols for development and progress.

by Reima Suomi
Professor at Turku School of Economics, University of Turku, Finland

January 4th, 2012

Two concepts of innovation: social and systematic

Innovation is by far not always –probably even quite rarely– about new technical artefacts. Rather, an “innovation” often consists in applying existing technical solutions in new and unconventional ways, by matching existing problems and solutions in a creative, “innovative” way. In particular, two types of innovations still need some clarifications. The first is social innovation, which makes some things trendy and others not. Using solutions is about their acceptance, from a social and economic perspective. The second type is systemic innovation, which reorganises systems into new configurations, allowing them to solve new problems.

Social innovations start from users, not from developers, even though developers can of course assist in the birth of the innovation. A good example of social innovation is that of low-carbohydrate diet. What was against all trends only ten years ago has now become widely socially accepted. This change has purely to do with feelings and socially constructed truth, not with “objective” facts.

Systemic innovation is about reorganising systems, mainly human and social systems. Turning activities away from face-to-face encounters to the internet is a good example of a systemic innovation. The technology used to accomplish this is not anymore new or in any way rocket science. The current economic and financial crisis in Europe can also be seen from a systemic behaviour view: a case of human beings creating and accepting new social and economic systems. From this perspective, the economic crisis can be seen as an unmanaged systemic innovation process. Actually, systemic innovation is in most cases an unmanaged process, just as social innovation.

Economic activity is by far not always –probably even quite rarely– about facts and figures. It is very often about feelings and courage to start and continue doing things, which at first appear as economically impossible. Or about continuing doing things that are not really and permanently economically viable.

Both the economy and innovations are also deeply about feelings, courage and social contracts. We also need mental stimulation to encourage economic activity and innovations.

One issue currently dumped into death is that of national and international mega-investments, usually directed towards infrastructure. Over decades, mega-investments have been issues like building water-supply, electricity, sewers, roads and railways networks. Note that these innovations are just partly technical ones – the critical issue has been that of systemic innovations. But where are the mega-investments of today? The Internet is the last big carrying wave in the list of mega-investments, but its carrying power is already based on technology that is 20-30 years old.

There is also a difference on how the innovation might enter into our life. You and me, neighbours and friends who are buying new iPads or other gadgets is of course a symbol of innovation, but this activity happens rather incrementally, not radically. It is also deeply intertwined with our daily life, and the radical change with symbolic value might be difficult to identify for many. Take another extreme of an innovation: when a new railway line was built, and people could see the train and take a ride for the very first time, it was a radical innovation collectively shared. Or consider the moment electricity was for the first time connected to a village or city.

Europe needs new mega-investments

What we also need are mega-investments, as said usually to infrastructure, that would encourage innovation and economic activity. As such, they would bring huge long-term benefits, but their first help would be employment, and above all, encouragement and symbolic value of development.

At the European level, the last big mega-investments have been those of the Channel Tunnel between France and UK and the Öresund Bridge between Sweden and Denmark. They are both known as success stories, fuelling innovation and economic activity in their environment. We need more of such real, but also deeply symbolic, building projects, also in Europe.

Not believing a word? Take a look at the growth of China at the moment. Huge growth, not always based on real economic fundaments but on the courage and enthusiasm by the Chinese people, is taking place. Reasons for Chinese economic activity growth and innovation are of course many, but one cannot rule out that the big infrastructure projects of the country would not massively support in the process: bullet train networks, the three Gorges Dam, the whole venue for the Peking Olympics, etc.

Still not believing? Then, take a look at the history of some monuments, including European ones. Yes, mega-investments do not always have to be into infrastructure, but they need to be something extraordinary. The French seem to be masters in this: the Eiffel tower, as such a rather secondary technical establishment, has been serving as a symbol of economic growth, development and prosperity for France and for the whole of Europe for 122 years.

Europe needs such mega-investments. They bring real economic benefits on the long run, but most importantly they serve as symbols and encouragement for economic activity and innovation for both private citizen as well as for business from the first moment of publishing the real building project. But vary, publishing projects and then abandoning them based on, say bad economic conditions, is having an effect directly to the opposite direction: de-motivation for innovation and symbol for non-accomplishment.

Too expensive to do? Well, try to see the analogue situation in mega-investments with risk management. You think risk management and mega-investment is too expensive? Might be, but try a risk (accident)/stagnation realized.