Econ_Sep_22

The Economist

September 22nd 2018

Leaders 11

without wastingmoney or lapsing into protectionism? The

has a dismal record in high-tech industrial policy. Witness

Quaero, a failed attempt to build a European alternative to

Google, or the Human Brain Project, which has spent over

€1bn ($1.17bn) with little to show for it. Experts warn against

the rise of “

nationalism”, whereby countries increasingly

try to keep their data and their algorithms to themselves.

Two aims should guide

policy. Instead of focusing its fi-

nancing on high-profile individual projects, Europe should

create the environment for its

industry to thrive. And in-

stead of keeping foreign providers out, it should use its clout to

improve their behaviour.

Creating the right environment means, above all, working

to overcome the fragmentation that bedevils Europe. Big and

homogeneous home markets give America and China the

huge advantage of scale. According to one estimate, Chinawill

hold 30% of theworld’s data by 2030; America is likely to have

just as much. Europe has data, too, but needs to pool its re-

sources. To its credit, the EuropeanCommission is arguing for a

common market for data. But much more needs to be done,

such as laying down rules about howdata held by companies

and governments can be shared.

National faultlines also cut deep in research and develop-

ment. Germany has downgraded plans to co-operate with

France in

research, for example. In addition, Europe’s exist-

ing research bureaucracy is adept at sucking up funds, to the

detriment of startups and outsiders. Better to encourage grass-

roots initiatives such as

CLAIRE

and

ELLIS

, which seek to create

Europe-wide networks of research labs. France has launched

JEDI

, short for Joint European Disruptive Initiative, an attempt

to mimic America’s Defence Advanced Research Projects

Agency (

DARPA

), which allocates money using open competi-

tions and does not hesitate to cull programmes that fail to

showpromise. More opportunities of this sort, plus an accom-

modating immigration regime, would attract and retain

re-

searchers, who often decamp to America (and sometimes

even to China).

European policymakers can alsomake better use of the one

area where they are world-class—setting standards. Europe’s

market of 500m relatively wealthy consumers is still enticing

enough that firms will generally comply with

rules rather

than pull out. An example is a strict newprivacy law, the Gen-

eral Data Protection Regulation; the principles of the

GDPR

are

nowbeing used as a benchmark for good data practice inmar-

kets well beyond Europe. By imposing common rules, such

standards can help the

’s indigenous

industry flourish.

But they could also have a more subtle effect—of making

fromoutside the

more benign.

By the rule book

America and China both represent flawed models of data col-

lection and governance. China sees

as a powerful tool to

monitor, manage and control its citizens. America’s tech titans

scoop up users’ data with insufficient regard for their privacy.

The

GDPR

is just the start. Robust standards are needed to en-

sure that

services are transparent and fair and that they do

not discriminate against particular groups. Europe has a

chance to shape the development of

so that this vital tech-

nology takesmore goals into account than simplymaximising

advertising income and minimising dissent. Even if it comes

up with policies that help its native

industry thrive, Europe

may never match America and China. But it can nonetheless

help guide

onto a path that benefits its own citizens, and

those in the rest of theworld.

APANESE prime ministers

used to come and go in the

blinkofan eye, but ShinzoAbe

has been inoffice for longer than

the previous five combined.

This week he easily won a third

consecutive term as head of the

ruling Liberal Democratic Party

(see Asia section). Given the

LDP

’s landslide victory in last

year’s parliamentary election, Mr Abe is now secure in office

until 2021.

Ifhe completes his newterm, hewould be the longest-serv-

ing prime minister since the job was created, in 1885. Under

him, the

LDP

has convincinglywon three elections for the low-

er house and two for the upper house. With his coalition part-

ners, he commands more than two-thirds of the Diet. Perhaps

most impressively, he has quelled the factionalismthat used to

plague his party. Despite various scandals, he is firmly in

charge, as he showed by engineering a change in party rules to

allow himself to have a third term. Now that he has been re-

elected, Mr Abe should use this unrivalled power to complete

his economic programme. The danger is that he will get

boggeddown in changing Japan’s pacifist constitution instead.

Mr Abe’s longevity has been a blessing for Japan. It has al-

lowed a consistency in policymaking. After a decades-long

swoon,

GDP

is growing, albeit modestly. Inflation, although

low, is at least positive and has been for most of Mr Abe’s ten-

ure. Aswan as this performance sounds, it is the best Japanhas

managed since the 1980s. For that, thank lavish government

spending and bend-over-backwards monetary policy—inte-

gral parts ofMr Abe’s economic platform.

Loose that arrow

Under Mr Abe, Japan has also tried to play a more muscular

role in world affairs. He has beefed up Japan’s “self-defence

forces”, and sent troops to join

peacekeeping missions.

This week, for the first time, his government admitted sending

a submarine into the South China Sea, part of a broader effort

to rebuff Chinese expansionism. And he has passed laws al-

lowing Japan to come to the defence of allies if they are at-

tacked—something previously considered taboo.

Mr Abe wants to amend the constitutional clause that bars

Japan from keeping an army, since that is what the “self-de-

fence forces” patently are. This is a perfectly reasonable idea,

Reforming Japan

A long haul

ShinzoAbe needs to set records forproductivity, not just longevity