How to get out of this mess

Nuala Moran, Senior Editor.

Let science be the source of the green shoots of recovery. It may be how we got into this mess, but no matter how big the bailouts or thorough the reforms, nursing the global financial system back to health will not be the solution to our present predicament.

Yes, we do need functioning banks, lending to us, to businesses and to each other, and oiling the wheels of industry and commerce. But what we don’t want is another credit-driven binge masquerading as growth.

Instead, science, technology and innovation must be brought to bear to catalyse a new wave of growth. The portents for this are mixed, as we variously report this week.

No one is saying the R&D engine is broken in the US, but public spending cuts have had an enervating effect, and for the first time in ten years the country’s total R&D budget will drop in 2009.

And as the European Union Innovation Scoreboard published today shows, there is a slowdown in Europe too. To take two figures from the mine of statistics: from 1995 to 2005, the EU’s share of the world’s R&D expenditure fell by 12.6 per cent, at the same time its share of world patents fell from 39.4 per cent to 30.9 per cent. This may be a smaller share of a bigger pie, but the report says this drop in patenting is evidence that the “relative ability of Europe to apply research results has fallen sharply,” compared to the rampant Asian economies.

Things look bad, too, at the other end of the technology commercialisation timeline. As the latest initial public offerings (IPO) data from PricewaterhouseCoopers indicate, there is no sign of Europe’s stock markets reviving their interest in new company listings any time soon. Technology companies that spent all last year eking out resources and waiting for the IPO window to open will be keeping watch a while longer.

But on the bright side, new money is being raised for technology investments despite the financial crisis. Since the beginning of the year Karolinska Development, BioMedPartners, HS Life Sciences and Balderton Capital have closed fundraising rounds. In December Celtic Pharma and Abingworth Ventures also announced that they have new money to invest in technology companies.

Then there were several references to the role science and technology will have in restoring the economy in President Obama’s inaugural speech. The US President pledged to “restore science to its rightful place”; “wield technology’s wonders” to boost the quality and reduce the cost of healthcare; and on the subject of climate change and energy sources said America will, “harness the sun and the winds and the soil.”  

UK industry minister Baroness Vadera was severely admonished last week for saying she was “seeing a few green shoots” of recovery, so I hesitate to offer this collection of anecdotes as proof of a boost for innovation-driven growth.

But I note bulbs planted many-a-long-year ago are sprouting now, in the midst of the coldest winter for a decade. The fact is, it takes more time and effort to achieve growth through the engine of R&D than by lending consumers money they will not be able to repay.

But it is more sustainable.