As OECD Forum 2007 showed, everyone agrees that innovation is important, but not everyone agrees on the reasons why.

This is an article of mine published by the OECD Observer magazine at:

http://www.oecdobserver.org/news/fullstory.php/aid/2284/Innovation:_Not_all_peaches_and_cream.html  

Innovation is the key for endless economic well-being! Innovation is the only effective response to today’s globalization! We all want more innovation!

These were some of the cries of government and business speakers at this year’s OECD Forum as they stressed the crucial role innovation plays in competitiveness, productivity and national progress. After all, innovation has driven much of the rise in living standards since the Industrial Revolution. And to remain competitive in the face of China and India, OECD countries realize they must move up the value chain and engage in a continuous process of adjustment and innovation.

More equitable global development is also possible thanks to innovation, according to a number of speakers. For example, in the Philippines, the average waiting time for a fixed-line telephone was 14 years in the 1980s. Now everyone can buy a mobile phone, and Manila has become the world’s texting capital.

According to one estimate, Filipinos send SMS messages at a rate of 500 billion messages per year.

Innovations in information technology have enabled countries like India to thrive, while internet and mobile phone banking have allowed wider access to credit.

Many OECD countries complain about the difficulties of spurring more innovation. Ultimately a cocktail of policies is needed to ignite the “magic powder” in areas like high quality education, investment in science and technology, and an innovation-friendly business environment, based on strong intellectual property rights, open and competitive markets, and financial markets which back risk-taking. The OECD is now launching an innovation strategy to help governments the world over win the innovation game, the Forum learned.

But is innovation all peaches and cream? Many civil society and trade union participants at the Forum were not convinced. For instance, innovation is a major source of economic change and social disruption today, with rapid technological progress, rather than globalization per se, being the main driver of structural change. Workers are ill-equipped to adapt to this change, they said, and governments could do more to enhance their mobility, upgrade their skills and provide income support.

Another concern they voiced focused on financial market innovation, particularly the rise of hedge funds and private equity firms that, whatever the less visible benefits, are seen as swallowing up companies and laying off workers in a quest for short-term profits. And financial innovation has also led to unlimited movements of capital worldwide and a rise of international criminality like money laundering, bribery, corruption and tax evasion. Even intellectual property rights are viewed with skepticism, because they favor corporate profits and restrict access to new products, including important medicines. Nor are IPR regimes effective in combating counterfeiting and piracy, though many poor people suffer the health and safety consequences of counterfeited products. China and Russia may be identified as leading counterfeiters, but the open availability of bogus products on western markets from Canal Street in New York to the flea markets in Paris shows that it takes two to tango.

At their annual meeting following the Forum, OECD ministers were very sensitive to these concerns. They stressed that it is urgent to provide information to the public as to the true nature of the issues at stake, based on sound data and analysis, and the OECD is well placed to assist in this task.

But ministers also acknowledged that there is more than a “communications deficit”. We must create an environment where the benefits of globalization are shared more widely, including through adjustment assistance, they said, and underlined the importance of the OECD’s contribution in identifying policies which can help ensure just that. However, the organization must also “display greater understanding for the many different paths that lead to growth and development.”

So, with more effort from us all, innovation could be all peaches and cream, and an effective ingredient in dealing with globalization. After all, the peach is itself a product of globalization, having been introduced to the west thousands of years ago from its native home in China where it remains today a Taoist symbol of immortality.