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The EUs post coronavirus Marshall Plan must focus on improving its digital economy

Confronted with an economy in ruins in the aftermath of the Second World War, European leaders implemented a massive recovery program to rebuild European industries with support from the United States. As COVID-19 wreaks havoc today, the European Commission is calling for a new, self-funded Marshall Plan to address the consequences of the pandemic once it is under control. This should be more than just a large injection of capital into the economy. Just as the original Marshall Plan accelerated European integration, invested in industrialisation, and led to a strategic alliance against Soviet aggression, a Marshall Plan for today’s economy should invest in technology, promote digital free trade, and align its industrial strategy with allies such as the US and Japan to resist the growing economic and security threats posed by China.

The first priority should be investing in digitalisation of European businesses and governments. This transformation is especially essential to EU competitiveness as companies that embrace digital transformation are the most productive, spur growth, and provide higher paying jobs. Unfortunately, adoption of digital technologies among EU companies remains low. Less than a fifth of EU companies are highly digitised and only 12% of them use big data analytics. Industries such as healthcare—where only half of general practitioners have used electronic networks to transfer prescriptions to pharmacists and only 40% exchange medical data with other healthcare professionals—are ripe for digital transformation. One reason Europe lags in digital adoption is that larger firms tend to adopt technology faster, but Europes long legacy of giving preference to smaller enterprises means that Europe has a larger share of these businesses.

One reason Europe lags in digital adoption is that larger firms tend to adopt technology faster, but Europes long legacy of giving preference to smaller enterprises means that Europe has a larger share of these businesses.

Eline Chivot

Center for Data Innovation

The EU should direct investments to support digital innovation in the industries and technologies where it can build on core competencies, such as robotics, autonomous systems, high-performance computing, the Internet of Things and in key application areas, for instance health IT, smart grids, smart cities and e-government. In addition, to ensure companies can compete in the global digital economy, EU policymakers should avoid adopting more regulations that make it difficult for firms to gain scale, and that raise the costs and legal difficulty of developing and using technologies like AI.

The EU should not only invest in digital technologies, but also digital skills. The EU should address the digital skill gap by encouraging member states to integrate digital skills into their education curricula. Only 56% of the EU population is equipped with basic digital skills, which will be far from enough to boost EU competitiveness and productivity. But improving digital skills will likely require improving online education. Unfortunately, in several EU countries, the capacity of schools for digital teaching and learning remains limited. Through its newly-adopted Digital Education Action Plan, the EU should invest in the use of digital technologies in education, including remote teaching.

The EU should also prioritise digital free trade and the free flow of data across its borders, as well as globally with its allies. Although the EU has made substantial progress in creating a Digital Single Market, European firms still face challenges in scaling up and developing emerging technologies, and full cross-border access to online content and services for all users is not yet a reality. For example, European citizens cannot securely access and exchange their electronic health records when seeking treatments in multiple EU countries. But an integrated digital single market will not be enough. EU firms will need global reach and scale, which will be difficult if the bloc limits cross-border data flows to its allied trade partners.

Rather than fighting a rear-guard action to erect roadblocks for US technology firms while attempting to protect and subsidise European firms, the EU should recognise who the real adversary is – China.

Eline Chivot

Center for Data Innovation

Finally, the EU should focus on aligning its industrial strategy with key allies to provide a unified front to the economic and national security challenges posed by China, such as intellectual property theft, forced technology transfers, and closed markets. Unfortunately, Europes current industrial strategy focuses on EU sovereignty rather than “allied nation sovereignty,” which contradicts Europes commitment to free trade and global innovation. Rather than fighting a rear-guard action to erect roadblocks for US technology firms while attempting to protect and subsidise European firms, the EU should recognise who the real adversary is – China. As such, EU officials should seek to establish a joint technology alliance with like-minded allied partners and pool resources in the many areas where that is mutually beneficial. To be competitive against China, the EU should coordinate with the United States, Japan, Australia, South Korea and others as it seeks to leverage technologies like AI and the Internet of Things, develop shared datasets and data standards, and improve cybersecurity in autonomous systems.
The Marshall Plan was a major factor in Europes post-war economic success, and this type of ambitious and strategic leadership will be necessary to recalibrate the European economy for the post-pandemic era.

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