How to build a knowledge economy in Greece

An edited version of this article was published in Odyssey magazine Winter 2011 issue

There is something deeply pathetic about the current state of Greece. Perhaps it has to do with the spirit of defeatism that imbues our modern political discourse since the routing of our army in the 1920s. We pretend to be the victims of history, bemoan instead of actively claim, blame others for our mistakes, lie to ourselves and to the rest of the world. This endemic culture of intellectual hypocrisy has led to Greece becoming today little more than a negotiable holiday destination for middle-income tourists. But sun, sand and surf alone will not pay for the mounting debt, or for our pensions, or for our future if we ever hope to have one. We need to re-invent Greece and turn it to a dynamic, high tech, export-oriented economy. Anything short of wholesale economic revolution will perpetuate the looming crisis into the following decades, exclude our young from the abounding opportunities of a globalized economy, further cultivate our tendency for introversion, and render our country and our people historically irrelevant.

Much needs to change. Our state schools serve not the interests of our children but of the heavily-unionized teachers. They produce hordes of ignoramuses destined for a life of unemployment or underemployment. As a result, if you are a bright young mind from a low-income family you have very little chance of climbing up the social ladder, a right that was not refused to our fathers and grandfathers.

Our Universities are a disaster, with a few shining exceptions in various departments here and there. Our research centers struggle to pay salaries and bills. Many of their stymied young scientists have left careers abroad to come to Greece, only to discover that the cleaners get paid more than they. Our brain power is frustrated, underemployed or unemployed, watching from the sidelines. If any of them dare to venture into commercially exploiting their ideas they will come up against the hydra of Greek bureaucracy, the labyrinth of our tax system and the medusa of our labor laws. Only heroes in the mythical sense could grapple with these monsters and defeat them.

So the question is: given the current situation is there a chance in hell that Greece can ever become a high tech export country? A country that will not only learn to exploit its knowledge capital, but will compete for markets with players such as the Americans, the northern Europeans, the Israelis, the Indians, the Koreans, the Chinese and a host of others who shape the future of our world?

I believe there is. The first step will be to raise the importance of the issue in government. We need a minister for science, technology and innovation to carry out the reforms. He (or she) must have a clear and sustained mandate from the Prime Minister. S/he will have the responsibility of drafting legislation that will cover all the other four areas to be discussed. The current ministry of education will have to be absorbed in the new ministry, and focus on executing the reforms in schools and universities. The general-secretariat for research and technology will have to be integrated also in the new ministry and focus on linking research to industry.

School reform will be one of the four areas that the new ministry should lead. State schools need to be redesigned and teachers made to teach. Parents should be given the right to choose the school for their children, based on school evaluation by an independent agency. Schools should have independent governance and the freedom to become competitive by selecting personnel, expand their curriculum, etc. Their state income will be tagged to their evaluation reports, but they may also attract additional income from charities, local government or industry. Science and technology should be given prominence in the curriculum. Teachers should work with students around science projects and not only courseware. They should go out of the classroom more often and observe nature. Connect science and engineering to reality, to real problems, and enthuse young minds with the exhilaration that comes from discovery. The best performing students must be given a chance for quicker progress. Special schools of excellence for the brightest kids should return to existence. These kids should be taken through a more rigorous curriculum that would satisfy their curiosity and abilities. Gifted kids from the countryside should be helped to study in these schools, their boarding paid by special grants.

Secondly, we must devise a new framework to exploit our knowledge capital, starting from the universities. I’m afraid that the decadence and corruption that prevails in Greek Universities are too deeply ingrained to simply go away with half measures. Universities must be evaluated and some of them must close or change ownership (privitaized or taken over by local governments). One should identify centers of excellence in research, save those only, fund them generously, and build  state universities anew, with new rules of governance. Central government cannot afford to fund too many universities of high quality, so I suggest that state universities are kept in five main cities only; Athens, Thessaloniki, Patras, Ioannina and Herakleion. If the various towns and smaller cities want to keep theirs they should find the money to finance them. It may take a generation to get to the level of really having good state universities again, but it’s the only way to go. Have private universities immediately, in order to absorb the unemployed professors, but also to create a competitive environment for higher education.

Education can be both a citizen right and a market commodity; and we can have the best of both worlds. Students who pass university exams should be given a state grant for four years depending on their family’s income – and the right to spend it to the university of their choice, private or public. Rich kids will get no grant, but will be able to get a student loan.  Private and State Universities of high quality will attract students and their grants or loans, and thus survive and flourish. The rest can happily perish. Evaluation of Universities, state and private, will be carried out by an independent agency in order to inform students and their families.

But University reform, however radical and revolutionary, will not deliver any substantial results if not linked to the real economy. There are many who think that there is no real industry in Greece. This is not true. There is and our efforts should focus on what we have, chemicals, pharmaceuticals, materials and software. For the next ten years research centers in our Universities and in our research institutions should act solely as R&D departments for our core industries. Researchers will be paid by the government but work in their labs to increase the international competitiveness of the private enterprises. Contracts will guarantee that profits from patents developed in the labs will be shared with the researchers. If the government, or private entrepreneurs, can bring in investment from abroad in other industries, then surely this framework will prove to be a major incentive for foreign investors. Greece cannot fund every research area there is, so we must focus on supporting our industries and create new jobs. Blue-sky research and basic research should be funded by European grants or by exploiting Greece’s membership to international scientific organizations such as ESA, CERN and EMBL.

Thirdly, a legal and administrative system must be designed and applied in order to finance new high tech industries. This system should give incentives to banks, corporations and angel investors, to invest on high-risk ideas. Labor and tax laws must be simplified. High tech start ups must be given tax breaks for the first three years of their operation, and be able to tap in the R&D resources available at the research centers and the Universities. An important catalyst for technological innovation is defence procurment budgets. Greece spends a considerable precentage of it GDP in defence. A part of this could be allocated to innovative research which could find its way, after a few years, into civil application. This is a common practice for many countries and although Greece tried to do likewise in the 80s and 90s, it failed. It is time to assess the reasons for failure and reestablish a strong link between research and national defence.

Fourthly, there must be support for the high tech industries. The government must build partnerships with our industries which will actively promote our products and services abroad, attract investment and scientific talent, and reinforce our presence to strategic markets. Greece must be rebranded. We must reintroduce ourselves to the world as a reinvented country where bright minds and novel ideas are valued and supported.

Lastly, and perhaps the most difficult task of all, we must foster a new scientific culture in our country. Promote scientists and engineers, and encourage kids to choose science, engineering and maths as their favorite subjects. Professional organizations in science and technology must come out of the shells and reach out to society. The outreach program of the Hellenic Society of Physicists is an example which has to emulated and advanced by chemists, mathematicians and engineers. Big Society must support the work of a truly reformist government, and that includes the major charity foundations of Greece which in the past decades seem to be obsessed with funding opera houses, art museums and music halls that appeal to the few and the mostly old. It is of course fantastic to have these buildings but what we need most urgently now is to catch up with the rest of the world and not left behind. We need to invest in new ideas, in people, in innovative start-ups, in high technology.

Will any of this ever happen? My ruminations are based on a fundamental - or fatal, depending on your view - assumption: that the political leadership of Greece will adopt the vision of reinvention and execute it. Let me hope for a moment, against all odds, that they will.

Whatever happened to Dedalus? (and, by the way, Icarus too)

The failure and opportunity of technological innovation in Greece

Many myths are born in Greece, one of which claims that Greeks rank amongst the cleverest people in the world. And yet, by examining Greece’s ranking in the Global Innovation Index[1] you would be hard-pressed not to disagree. The country was at place 42 last year, at the bottom of every other western European country, a fact reflected on the sobering absence of Greek high technology products and services from the world market. More disparagingly, when the crisis hit, the debate about recovery was focused on investing, and improving, the tourism and agricultural sectors; which makes one wonder if our politicians and mainstream journalists live on another planet, or another era.

A favorite explanation for Greece’ lack of marketable hi-tech ideas is that public investment in research and development is very low. Indeed Greece’s public expenditure on RTD, at 0.57% of GDP[2], is one of the lowest in Europe. The key for improvement, politicians will hasten to claim, is more tax money funneled to science and technology. This may be true in the case of large scientific infrastructures or in fascilitating the mobility of scientists, or even for building a European Research Area free of cross-country obstacles - but the notion of public subsidies or grants is at least debatable when it comes to out-of-the-lab technological innovation. Given the current situation in Greece, not only it is mathematically impossible for the Public Purse to subsidize such type of innovation but, as I will argue, the surest way to stifle bright ideas that can immediately create market value is through government subsidies.

But what about the Universities and the research centres? Surely, they ought to be contributing ideas, people, and means - or don't they? Since Greece joined the EU in the early 1980s billions of Euros have been invested in research infrastructure and payrolls, in universities and research institutes. And more billions have poured in through a superfluity of EU-funded research programs. And yet, there is very little to show for it. With the exeption of certain, isolated, departments here and there Greek universities in general have failed both scientifically and socially. They have become playgrounds for organized groups of brain-washed, leftist students who terrorize staff and their fellow students, and vandalize what is public property in the name of academic freedom. Meanwhile, all kinds of byzantine machinations percolate in the background, for teaching positions that rarely target talent and more often than not are cheap rewards for blind loyalty. Greek universities have thus become a waste of taxpayers’ money which undermine the social cohesion of the country. Why? Because kids from poorer families cannot get the standard of higher education that their more well-off peers –whose parents can afford to send them abroad – do. Bright professors and research students who can, have started to flee. Research institutes do not fare any better. Like every other public institution in Greece they are heavily politicized at the expense of good research work.

The private, high-tech sector does not innovate either. Since the 1980s Greece has been de-industrialized whilst failing to claim a position in the global, digital economy. The result is that the majority of so-called “innovative” companies are proposal-making manufacturers that go after EU-subsidies. It is precisely this policy of subsidization that has rendered Greece a follower and not a leader; and here is the reason why.

The key to marketable innovation is risk. New ideas are risky because you never know if they have any value unless you invest in them first and then roll them out into the real word. So the question arises who takes the risk for all this? By introducing a grant or subsidy system, the risk is borne mainly by the state (or the EU). But this is wrong for at least two reasons, one moral another economical. Why should the taxpayer be burdened with the risk for something that, if successful, will profit only certain individuals? Secondly, the only real motivation for doing things right is when by doing things wrong you have something to lose; grant and subsidy takers do not have a strong enough motivation because they simply do not risk their own money and time; on the contrary, their main economical goal becomes the taking of the subsidy; therefore, their success is measured not by the efficacy of the end product but by the approval of their grant application by a bureaucrat who, in turn, risks not his own but the taxpayers’ money in the name of some vague “social good”. Hence, the proliferation of the proposal-making industry and the strangulation of the really good ideas; the latter constantly have to compete against government subsidies and grants, taxation and levies.

And yet there are many people in Greece with very bright ideas. They are the untapped human capital, the best of the best this country has. They are struggling against a well-entrenched system that is indifferent to merit and hostile to business. Potentially, they could be an agent for change and economic growth, if only they were given a chance. The wonderful thing about the digital economy is that you need very little infrastructure. A computer, a modem and access to the Internet is all you need; that, and a good idea. Greece may never become the innovation hub of big multinationals but can become a place for innovation start-ups in the creative industries, the media, web applications, industrial and architectural design, smart green technologies, as well as social innovation.

There is a movement of people, young or somewhat less young entrepreneurs, who are willing to take risks. Today, if they want to start a business they must go through a bureaucratic labyrinth and begin to pay taxes and contributions before they make their first euro. This is a serious impediment for someone who aspires to something speculative and risky. Greece cannot afford to lose her brightest entrepreneurs. At the same time, no one expects the Greek socio-political system to change overnight to suit them. And yet this crisis can become, paradoxically, a golden opportunity for those innovators, if only the government would be willing to allow them to mitigate risk outside the system. No subsidies, no grants, no nanny state. In fact, the best recipe would be to have as little state intervention as possible.

This can be achieved, for example, by allowing technological start-ups a two-year tax and social contributions’ break. If you think you have a great idea register your tech company with the tax office on-line and get a VAT Number. This procedure should only take one minute and be done wholly on the web. Then, all you have to do is concentrate on being inventive and profitable. For two years you don’t have to pay tax. If you want to employ someone, you do not have to pay IKA. You can pay him/her cash in hand at a level agreed between the two of you. You don’t have to pay TEVE, the various levies, whatever. If after two years you have managed to prove that your idea can succeed in the real world then start paying your dues to the society that permitted you to realize your dream. If not, stop - or maybe try again another idea.

Let the government do that and all else will follow. Given this tax-free framework for innovative start-ups the private sector will be more willing to invest in risky projects. There is a superb example called “Open Fund” right now, a wholly-private, grassroots initiative, which offers seed money and precious business advice to technological start-ups. One must not lose hope that in the near future a major reformation of Greek state universities will also take place under pressure by Greece’s lenders, as well as the establishment of the first private universities, which may be able to transform the current, ruinous situation of higher education in Greece. World-class education standards, a business-friendly environment and less government, and this country may manage to bootstrap itself out of its perennial debts, and become a place we can all be proud of.

I am not a believer of myths, but I do believe in people and individuals with a vision and the will to take risks. What we need is for the Dedalus spirit of inventiveness to be given a chance. Remember that there came a time that Dedalus had enough of his state sponsor and decided to move on; whereupon he had his greatest idea: to fly. Like Dedalus we have to leave behind the shores of false security and take to the skies. Which is a risky business, because for innovation to take flight you need to test the limits and aim to go beyond. To invent like a Dedalus but to think, and dream, like an Icarus.

An edited version of the article was published in Odyssey magazine (Summer 2010 issue)

[1] he Global Innovation Index is a global index measuring the level of innovation of a country, produced jointly by The Boston Consulting Group (BCG), the National Association of Manufacturers (NAM), and The Manufacturing Institute (MI), the NAM's nonpartisan research affiliate.

[2] Eurostat Newsrelease 8/9/09