Industrial Revitalisation: New Drivers for Growth and Job Creation

by Allan Kristensen

Challenged by the loss of millions of jobs in old manufacturing sectors, both the EU and US desperately need to restore their economies and find new ways to growth and prosperity. Health, welfare, climate change and the environment have been noted as some of the most promising areas for new growth and job creation.

The idea is to combine the handling of major societal challenges already in need of reform with the deliberate creation of new industries in these sectors. The objective is to achieve first-mover advantages in what are expected to become global growth markets while solving important public problems simultaneously.

In the health sector, the global market for new innovative solutions is growing rapidly due to the ageing populations of Europe, the US and Japan. Over the next 20 years for instance, the number of Europeans aged over 65 is expected to rise by 45% from 85 million in 2008 to 123 million in 2030. Rising living standards in the new growth economies of Asia and South America are adding to the expanding market for new health products.

China is responding to the increasing demand for healthcare goods. Its pharmaceutical market is currently growing 20% annually due to improved living standards and better welfare provisions.

The growing demand for national health spending puts an enormous strain on economies and public finances. The US spends more than 16% of GDP on health whereas the EU spends 8,3% and China 4,6%. Healthcare is becoming an increasing economic burden for private households and the sustainability of public finances.

Innovative solutions that enable more healthcare services to be distributed to more people in more efficient ways are desperately needed. Whoever comes up with the technologies, services, processes or concepts to achieve this goal will be able to develop new healthcare industries and strengthen existing ones through business and expansion into new markets.

There are numerous good arguments for a proactive and targeted industrial policy designed to support the development of healthcare industries. There is a need for new solutions and a need for opportunities that create new businesses and jobs. It’s not about politicians picking “winner industries” and technologies and supporting them blindly but rather about politicians selecting the most important challenges where innovation and progress are needed along with the execution of smart policies.

Smart policies would, in this case, be further public investments in R&D and education in order to build up knowledge and competencies in certain areas. Second, they would include creating collaborative platforms where companies, citizens and key public personnel (doctors, nurses etc.) could exchange views and collaborate on innovative ideas. Third, it would be the fostering of innovation through public investment in new smart infrastructures like electronic health records, biobanks, laboratory facilities and networks of databases. Fourth, it would be the execution of intelligent public demand using public tenders and procurement to promote innovation rather than realise public savings. The health market is primarily a public market and public procurement is therefore an important driver of innovation. Finally, it would be the introduction of smart regulation that promotes or even enforces innovation. The introduction of new standards and provisions to replace current regulation that tends to spread existing technologies and solutions.

Of course such a policy would require a balanced approach. Public finances need to be respected and the government’s ability to control spending needs to be taken into serious consideration. The other side of the coin to intelligent public demand is hidden state support for inefficient industries and companies which are an absolute no go for the long term sustainability of job creation.

Furthermore, patients in the case of healthcare also need to be taken into account. Equal access to state of the art treatment ought to be an indispensable objective of the policy. This will lead to the best health status benefiting both the individual citizens and society.

Finally, the industry’s incentives to innovate also need to be considered and austerity policies balanced in this respect. If government’s only objective is savings, low prices and low quality should be the norm, not high quality and innovation. This is what is needed if Europe is going to create new jobs in new industries.

Allan Kristensen is the Chief Consultant to the Danish Association of the Pharmaceutical Industry.

This column is part of the Industrial Europe Online Debate jointly run by Social Europe Journal, the Friedrich-Ebert-Stiftung Rome and the Fondazione Brodolini.

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