Alex Singleton | Journalist and political commentator

European Commission President Barroso has a lot of good things to say on the importance of making the European Union more competitive. He leans towards the free market (he’s hated by France’s Jaques Chirac who regards Barroso as an “ultra-liberal”). He recognises the importance of climbing the economic ladder rather than sticking to the less well paid jobs of the past. But is his proposed European Institute of Technology a good idea?

Well, for a start the project has been watered down. Under pressure from nation states, it’s going to be virtual instead of a single institution - which a European Parliament report earlier this month criticised. The UK’s House of Lords European Union Committee says it “would cost a great deal of money and would be largely ineffective”.

But it’s not just the structure that’s wrong - it’s the whole idea of government subsidisation of research that’s flawed. Joe on the TechDirt news site discusses how the United States is suffering from similar thinking:

Concerned about the ability of the US to compete in the global economy, Senators on both sides of the aisle gave support to a bill that offers more funding for research, and more investments into science and technology education. On the face of it, a law supporting research and science education sounds like a good thing. But it should be noted at the outset that the alleged gap between the output of technical schools in China and India and the US has been overstated. Also, while much of this money will flow towards universities, it should also be seen as a business subsidy, since a lot of technical research that’s done at universities goes into actual products. This might explain why a number of technology trade associations quickly praised the bill. What’s funny is that there are plenty of political and intellectual leaders that would disparage things like agriculture subsidies (for distorting the market), but then have no problem supporting subsidies for R&D. The problem in both cases is that simply throwing money at a problem rarely solves it. If the US really thinks it has a problem in terms of competitiveness, which is debatable, then it needs to be serious about fostering competition. Unfortunately, some measures, like lifting trade barriers, are a lot less politically palatable than funding more R&D, which makes for a great soundbite.

TechDirt hits the nail on the head when it suggests that competition is what drives innovation. Trying to impose innovation from on high through government subsidies does not deliver the goods; in fact, it tends to crowd out the private sector. To increase innovation, getting rid of Europe’s Common External Tariff (replacing it with a uniform tariff rate of zero on all imports) would be a great way to start.