Philippe Aghion: “The crisis has revealed that Europe is not as good as the US at innovating” | Economy

Philippe Aghion fears heights more than any financial cataclysm. When the photographer directs him to the door of the room, close to an interior balcony, he slows down to almost a stop, twists his face, and adduces vertigo so as not to approach less than a meter from the railing. The French economist, son of an Egyptian Jewish immigrant marriage – she is an important fashion designer, political activist and art gallery owner – walks unhesitatingly for very high heights professionally: he teaches at the Collège de France, the London School of Economics and Harvard; the Spanish edition of his latest book, The power of creative destruction (Ed. Deusto), was published in June; and this Tuesday he received in Bilbao the Frontiers of Knowledge Award granted by the BBVA Foundation. He is recognized for having made “fundamental contributions to the study of innovation, technological change and competition policy.”

More and more precedents indicate that the award means entering the select club of candidates to obtain the Nobel one day, but Aghion (Paris, 1952) evades the call of vanity with a Swedish prefix. “I do not think about that. For me, this award is magnificent and sufficient, “he says from the bank’s headquarters in the capital of Biscay. 400,000 euros will be shared with the other winner in the Economics category, his collaborator Peter Howitt.

His most recognized contributions revolve around the concept of creative destruction. “It is the idea that new innovations destroy previous technologies making them obsolete,” he sums up. Starting from that premise popularized by the Austrian economist Joseph Schumpeter, who injects new life into the economy and now seems so obvious – there are multiple examples, such as the transition from cameras to smartphones, or changes in formats in we listen to music—, Aghion has articulated a new theory of growth in which innovation is the central element.

One of the clearest obstacles it encounters to technological development is the overwhelming dominance of a small group of actors. “The US grew a lot between 1995 and 2005 thanks to the large platforms that emerged with the technological revolution, such as Google, Amazon, Facebook and Apple, but by becoming hegemonic, these companies are blocking the growth of others. They discourage them from competing because they know that if they enter the market they can dumping [vender un producto por debajo del precio de mercado]. The problem in the US is that Competition policy is not adapted to the digital age, the only criterion is market share, and not if they make it difficult for new firms to emerge ”.

Aghion, a friend for more than a decade of French President Emmanuel Macron — years before arriving at the Elysee, they held extensive talks on economics at the economist’s house, and even asked him for advice on his transfer to the Rotschild bank — with whom he exchanges mobile messages often and to whom he sends some of his research occasionally, he believes that France and Europe have visualized their shortcomings during the pandemic. “The covid has brought to the fore a big problem: deindustrialization. And the blame is on the lack of innovation. You have to invest in reindustrialization through innovation, but venture capital is not sufficiently developed, nor is there a strong ecosystem of institutional investors. We must create the European equivalents of US defense agencies (Darpa), energy (Arpa) and biotechnology (Barda) ”.

America is a recurring model for Aghion. Not only because for decades it has had technology firms much more powerful than European ones, but because of the fundamental role of North American pharmaceutical companies such as Pfizer and Moderna in the race to find an antidote to the virus. “The crisis has revealed that Europe is not as good as the US for innovation. It is a fact. Vaccines have emerged mainly in the US And that despite the fact that messenger RNA is a technology previously developed in Europe ”.

Regarding the third global giant, China, he believes that many underestimated it for years equating it with developing African countries. “They invest in research massively, they give enormous means that we don’t give in Europe. They are very good at imitating or improving technologies, but they have not made fundamental innovations, in part because lack of freedom has consequences. The political power is afraid that companies are too powerful and question their power, as has happened with Alibaba ”.

The potential of Einsteins lost

During the conversation, Aghion is very interested in refuting what he considers to be two false ideas. The first, that to stop climate change it is necessary to go back and move towards a degrowth policy, as some experts and environmental groups proclaim, given that GDP fell much more strongly than emissions during confinements. “The key is to promote green innovation. Companies that have innovated in polluting technologies in the past will want to innovate in those technologies in the future. Creative destruction is good for green innovation because startups don’t have that problem. ” He believes that the States, with initiatives such as subsidies for electric cars and restrictions and taxes on polluting cars, seek to break that inertia by redirecting technological changes with criteria other than the search for profits.

The second belief that Aghion believes to be wrongly spread is that Europe is less innovative than the US because it devotes more resources to its social protection system. “I do not agree with that. We can be both more innovative and more inclusive, ”he insists. As examples, he cites the case of Denmark, where firing is cheaper but the State pays 80% of the salary for two years to the worker who loses his job, trains him and helps him find a new destination, which makes it easier for him to of construction work passes from sectors in decline to those in boom, the basis of the idea of ​​creative destruction. Another example he uses to disprove the assumption that more social means less innovation is the importance of learning. “If for many generations you implement an accessible education for everyone, it will create the double effect of having more innovators and more inclusion. There are Einsteins lost from families without education, very intelligent people who could be potential innovators ”.