Inno ation is e eryone agrees the source o growth

Europe as objecti e, a ew years ago, to become the most power ul knowledge o the world economy. The results hardly were at the height o what was expected. Should we penalise the political inability to implement the recommendations o the experts or must recognize an error at least partially o diagnosis This question was at the heart o the theme o the 11th Con erence o the International Schumpeter Society, which is held in Sophia Antipolis rom 21 to 24 June 2006, namely the relationship between inno ation, competition and growth.

irst recall the broad lines o the European consensus on the oundations o growth. They hold in two propositions: the macroeconomic stabilization (price stability, balanced public budgets) is a condition necessary and screening o growth; the growth rate will then be high that markets will be more competiti e. In other words, the application o monetary and iscal rules would ensure the existence o steady growth, the increased lexibility o markets and deregulation would ensure the increase in the potential growth rate. There ore, the ailure o growth and unemployment are attributed to the lack o macroeconomic rigour coupled with the inability to implement these structural re orms likely to acilitate including labor markets and the markets.

This scenario aces, indeed the European realities o the time compared to those o the United States, but also to the analysis o the true springs o e olution. Inno ation is, e eryone agrees, the source o growth. Expanding the knowledge by the in estment public and pri ate research and de elopment (R & D) is what allows to de elop new products and new processes o production, ensure both the producti ity gains o ariety. But stop the certainties. It is not enough, indeed, to create the institutional conditions or strong incenti es to R & d. Must be the economy, subject to a continuous process o creati e destruction, able to contain the imbalances that ine itably occur at the microeconomic as macroeconomic le el.

This requirement o coordination between di erent and imper ectly in ormed actors is a permanent challenge. It would be illusory, in e ect, to belie e, that it can be de initely satis ied and that the economy can achie e the nir ana o competition between players de oid o power and neutrality o the State. Structural re orms, when they are necessary, require a stable growth, which implies a counter-cyclical acti e inter ention to deal with the global imbalances inherent in the recurrence o technology shocks. The competition is the determining element o the desired coordination, because it produces in ormation that stakeholders need. But this competition is based on somewhat inertial beha iour and practices characterized as monopolistic necessary to enable the consistency o the actions o players immersed in a world o radical uncertainty and irre ersibilities. It is, according to ancient teachings sometimes orgotten authors as important as Al red Marshall and Joseph Schumpeter, markets are organized and the organization helps the knowledge and inno ation. ollowing this perspecti e, unemployment and income inequality are more the result o technological bias. Credit constraints ha e more in luence on industrial per ormance than institutional properties o labor markets. Deregulation, rather than lead to a world disintegrated, lead to the stabilization o new oligopolies. The liberalization o trade strengthens the need to correct internal distortions to the countries concerned through discretionary policies rather than rigid rules.

In short, the world is much more complex that doesn't want the consensus under which it is su icient to rely on the skills o the omniscient economist and to apply the optimal alleged rules that he would ha e disco ered. Accept and deal with this complexity has resonances in the political and social system itsel . It must be recognized that arbitrations are necessary at all le els and that they necessarily express implementation o social standards that are ne er subject to the orms taken by the technology.