reclaiming europe’s digital leadership · strategy centre (epsc), the european commission’s...

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EPSC Strategic Notes are analytical papers on topics chosen by the President of the European Commission. They are produced by the European Political Strategy Centre (EPSC), the European Commission’s in-house think tank.

DisclaimerThe views expressed in the EPSC Strategic Notes series are those of the authors and do not necessarily correspond to those of the European Commission.

Building ‘Brand Europe’: unity, speed and scale matterEurope can still make a name for itself in the next wave of the digital revolution by playing on its strong reputation for quality and safety. But the slow pace of digital adoption and diff usion in European companies poses a serious threat to the continent’s current and future competitiveness that can only be overcome by creating a genuine and seamlessly-operating digital single market.

Major gains in sight for public servicesThe limits of traditional ‘one-size-fi ts-all’ public welfare models are becoming increasingly clear given the rapid changes taking place in the economy, labour markets and society-at-large. Against this backdrop, digital technologies off er promising venues for higher-quality, more effi cient and tailor-made public services that better respond to businesses and citizens’ needs.

Security and democracy at stakeRecent cyberattacks have uncovered the vulnerability of public and private institutions, while emerging misuses of the Internet pose a serious threat to democratic systems. The EU must show itself capable of protecting its own and upholding the fundamental freedoms and rights of citizens and businesses alike.

Building a digital society fi t for the futureMuch like electricity or the steam engine once upon a time, the Internet will generate profound change throughout society, not only in companies or start-ups. Societies need to be prepared for – and accompanied during – this ongoing transition. And digitalisation itself needs to be harnessed and fi ne-tuned to adjust to European laws and traditions, without losing sight of the many benefi ts of the digital age.

Europe established itself as a world leader in the information and communication technology revolution back in the 1980s, when Member States enabled a rapid take-off of GSM technology thanks to a united and forward-looking approach. But its leadership has since faded away.

Perhaps overwhelmed by the eff ort of reconciling many diff erent views and regulatory regimes, Europe has, on balance, proven too slow in adopting and diff using technological innovations, even as much of the rest of the world is accelerating.

The EU’s diversity, its strongest resource, is also its nemesis. Other economies such as the United States and China have been far better at coming to terms with – and seizing the opportunities of – the Internet and digital technologies, leveraging their access to more sizeable and seamless domestic markets to foster growth.

As the spread of the Internet of Things and Artifi cial Intelligence progresses, how can Europe regain a leading position in the next wave of the digital revolution? This is not an idle question. It will largely determine whether the European way of life will be sustainable over time. The stakes are high – but so is Europe’s potential.

Back in the GameReclaiming Europe’s Digital Leadership

Issue 2728 September 2017

EPSC Strategic Notes

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EPSC Strategic Notes - Back in the Game

The EU’s ‘connected business’ deficitEU losing ground despite early leadership in ICT revolutionAlthough it got off to a good start, leading the information and communication technologies (ICT) revolution of the 1980s, by the turn of the millennium, Europe was already lagging behind key competitors such as the US and Japan in the digital race that ensued.

Despite being a leader in research and development, Europe has found itself struggling to transform inventions into genuine innovations and commercial products. Even when individual companies succeeded in bringing ideas to market, lack of access to finance or less attractive business environments meant companies often preferred to relocate to the Silicon Valleys of this world. And, in many cases, European leaders fell short of achieving a similar momentum to the one achieved on GSM telecommunications, leaving behind a patchwork of regulatory frameworks, fragmented markets, and failing to create sufficient critical mass for new technologies to take off.

At the same time, European companies – and SMEs in particular – have remained far too slow at taking up even basic digital technologies aimed at boosting productivity and improving internal processes.

They are all too often discouraged by initial investment costs, cross-border barriers that limit market potential, and, increasingly, concerns about cybersecurity. To date, only one in five European companies trades over the internet or uses cloud computing services (Figure 1), while fewer than 2% of European companies use advanced digital technologies to innovate in products or processes.

In addition, a good deal of European firms and managers still seem not to have grasped that digital technologies are not just a tool for propping up or enhancing existing business models to keep up with the competition. They are instead the key drivers of transformative new business models that are rapidly replacing those of the past (Figure 2).

Source: Eurostat, 2016

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Figure 1: Only 1 out of 5 EU companies make use of e-commerce or cloud computingPercentage of all enterprises, without financial sector

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Source: Bloomberg and the Economist, 2017

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Figure 2: Digital companies replacing traditional powerhousesWorld’s largest listed companies by market capitalisation (billion US dollars)

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A new phase of the digital revolution is startingToday, as the digital revolution enters a new phase, with the daily emergence of new applications of Artificial Intelligence and automation, Europe risks falling even further behind.

Around the globe, traditionally strong industries are losing out to start-ups: car companies find themselves competing with software companies, while retail companies are being taken over by data analytics enterprises. Although this phenomenon is common around in the world, the emerging champions of this competition tend not to be Europeans.

The biggest and most powerful Internet companies are American and Chinese (Figure 3). And this is also the case in emerging sectors, such as fintech, where China looks set to dominate (Figure 4).

This is not to say that Europe has not given birth to its own success stories. The emergence of a flourishing European start-up community reflects major efforts on the EU’s behalf to clean up its regulatory environment and facilitate access to early-stage finance. Investments in Europe’s tech sector are also growing rapidly, reaching 12 billion euro in 2016 – marking a fivefold increase since 2011.1 And the EU is already home to companies such as Spotify, TransferWise or Zalando, which rank among the exclusive global list of billion-dollar fast-growth technology companies.

However, digital performance varies significantly across Europe and, on balance, European firms continue to lag well behind their American and Chinese counterparts.

Building ‘Brand Europe’: Upgrade, upscale and secure‘Brand Europe’ has long been synonymous with technical excellence, superior quality and the highest safety standards. Europe’s solid reputation, combined with its commitment to purposeful innovation, its tradition for design and elegance, and a relentless focus on the common good, has enabled it to become a global leader in many traditional manufacturing industries, from automotive and mechanical engineering, to chemicals and pharmaceuticals.

At the same time, the world’s best basic research originates in the European Union, as do one third of global patent applications. Europe is the region with the highest number of doctoral graduates in the world (Figure 5). And the EU has invested more than 3 billion euro in digital research and innovation under its Horizon 2020 work programme for 2016-2017, to develop key digital technologies including nanoelectronics, photonics, robotics, 5G, high-performance computing, big data, cloud computing, and Artificial Intelligence.

As a global leader in research and in traditional manufacturing, Europe has the potential to achieve economic leadership in the digital era by placing the fusion between traditional industry and digital at the core of its future growth and jobs.

This is where the biggest scope for productivity gains lies.2 According to estimates, the European manufacturing industry alone could grow by 15-20% by 2030 if fully digitalised.3

In addition, the demand for digital technologies will continue to grow, as the Internet of Things is forecast to expand from a mere 4.6 billion devices in 2015 to more than 16 billion units in 2021.4 So the market potential is huge.

Source: Statista, 2017

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Figure 4: China set to dominate the fintech marketTotal fintech transactions on value by region (billion US dollars)

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Swim or sink: European companies must go digitalTo capture a share of this growing market, Europe’s traditional industries must urgently ‘upgrade’ to take full advantage of the digital transition. All sectors of the economy – and SMEs in particular – must be incentivised to adopt digital technologies in a much more ambitious manner so that they can increase productivity, access wider business opportunities and better integrate into value chains, reaching out to potential new customers and suppliers.

Investment patterns show it clearly: most productive and innovative firms have moved from a bricks-and-mortar economy towards a hyper-connected one. Today’s most successful businesses are those that use digital technology as a means of reinventing themselves, their operational models, their value chains and their customer relationships.

They are the ones that are able to add value to the user experience by responding to people’s habits and needs, wherever they are in the world. In a nutshell, if the industrial age was marked by standardisation, the digital era is about customisation.5

The EU and its Member States must therefore proactively support the transition to Industry 4.0 among traditional businesses. They need to help companies large and small to embrace digital technologies. This means engaging with businesses to explain the benefits of digital technologies, while promoting affordable interoperable digital solutions that can be easily taken up by smaller companies. It also requires investing in digital skills and ensuring that Europe’s managers and entrepreneurs are better trained to anticipate change rather than be driven by it. These efforts can be supported by the development and deployment of new measuring and monitoring tools that

better capture digital transformations. Such tools can help test the effectiveness of enabling policy measures and allow companies to benchmark their progress vis-à-vis their competitors.

Support for Europe’s nascent tech scene should also be stepped up. On the one hand, the EU should take measures to stimulate the creation of new platform-based services in Europe. On the other, it must help successful start-ups to grow and create jobs in Europe, instead of all too often relocating or being acquired by non-EU competitors, along with their know-how, copyrights and patents. Today, 1 in 7 EU scale-ups move their headquarters and part of their value chain out of the EU in search of additional funding.6 The EU must fill the gap by forging ahead with its Capital Markets Union. It must also do better in providing truly seamless financial support at a much larger scale to innovative European companies throughout all stages of their lifecycle, including the scale-up phase.

Size matters: no leadership without a functioning digital single marketThe European digital economy will never be able to thrive if it continues to consist of 27 different consumer markets, with businesses having to leapfrog over 27 different regulatory regimes. This is why the rapid implementation of the Digital Single Market strategy and a single regulatory framework are crucial.

Mirroring the GSM success story of the late eighties, a concerted effort by Member States to support important initiatives that would boost EU connectivity and create the necessary scale for Europe’s digital economy to thrive is urgently needed.

EU Member States must come together to support the spread of the next generation of telecommunications systems and computing and data infrastructures across the European continent. The deployment of 5G wireless technologies – an indispensable ingredient to support an ever more digital and mobile business environment – would in particular gain from more coordination at EU level for the assignment of wireless spectrum as announced by the European Commission in its telecoms package. This is equally true as regards the deployment of a European high-performance supercomputing infrastructure – which is necessary to support the inevitable shift towards a European Industry 4.0 underpinned by big data. Currently, only seven EU Member States have signed the Rome declaration in support of the European Commission’s plans on high-performance computing, but the support of all Member States will be crucial.Barriers to digital flows between Member States need to be addressed, in line with the European Commission’s

Notes: EU includes Spain, Italy, Germany, France, the Netherlands, Portugal, Sweden, Poland, Belgium, Czech Republic, Denmark, Slovak Republic, Austria, Finland, Ireland, Greece, Hungary, Slovenia, Lithuania, Latvia, Estonia, Luxembourg

Source: OECD, 2014

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Figure 5: Europe is home to the highest number of doctoral graduates in the worldNumber of doctoral graduates (all fields)

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Source: McKinsey Global Institute, 2016

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Figure 6: World trade is increasingly about data

proposal of 13 September 2017, aimed at facilitating the flow and access of data across the single market7, which seeks to ban non-personal data localisation requirements within the single market, creating a genuine ‘fifth freedom’ for the movement of data within the Union (see EPSC Strategic Note: ‘Enter the Data Economy’8).

Measures are needed to ensure a level playing field on corporate taxation, where rules designed for the analogue age have given rise to concerns. The European Commission has made proposal towards a fairer and more efficient tax system in this regard.

Regulatory tools must also be updated to address new challenges. For instance, making EU competition laws faster and more effective to stand the pace of technological disruption. However, when reviewing these frameworks, it will be important to maintain a balance between innovation and market integrity.

Finally, in a world where trade is increasingly about data flows (Figure 6), Europe must seek to shape the global standards relating to digital flows in its economic and trade relations with third countries, all the while focusing on pulling down barriers that limit cross-border competition in the digital domain and fostering a smooth and secure flow of data. This would not only facilitate access to foreign markets by EU companies, it would also reduce upstream costs for EU companies that rely on data as key input for their production processes. This would in turn generate a virtuous circle incentivising companies to compete, innovate and perform to succeed in globalised markets.

Making it safe: cyber risks threaten organisational resilience and discourage digital investmentsDigital transformation can only be supported in a world where businesses and people feel safe to go online. Nowadays, companies still face a dilemma between the return on digital investments versus costs and risks. The rapid acceleration of new threats such as cyber-criminality, economic espionage, extortion, or data theft mean many firms – and, again, SMEs in particular – are reluctant to digitise. And even when they do so, they still face issues linked to the lack of sufficiently skilled staff able to understand and craft cybersecurity systems, as well as the scarcity of competitive security solutions tailored to their needs.9

The recent WannaCry and Petya viruses are but two examples of the type of threats that could escalate in the coming years. And they have certainly revealed just how unprepared many Europeans are. The figures are clear: today 4 in 10 Europeans do not have basic digital skills even though 90% of jobs will require some level of digital literacy in the near future. Only one European company out of five has an updated cybersecurity strategy (Figure 7).10 And Europe is facing a projected skills gap of 350,000 cybersecurity workers by 2022.11 In addition, the high level of fragmentation at European level leads to important geographic, institutional and sectoral silos, leaving major gaps in Europe’s cyber protection (see EPSC Strategic Note: ‘Building an Effective European Cyber Shield’12).

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Yet, operating on the Internet is inherently a cross-national business, and challenges emerging in the digital space cannot be properly addressed without inter-jurisdictional coordination.

The European Commission’s new cybersecurity package proposed on 13 September 2017 looks to close these cybersecurity loopholes by transforming ENISA, the EU’s Agency for Network and Information Security, into a fully-fledged European Cybersecurity Agency. This reinforced agency would act as a reference point to ensure coordination and cooperation with all other relevant bodies, enabling significant advances in the fields of prevention, detection, cooperation and protection.

By investing jointly in digitalisation and cybersecurity, and combining this with its prominent and trusted positioning in favour of rigorous personal data protection, Europe has a potentially strong hand to play. It can become a thriving digital ecosystem – a pole of attraction for companies wishing to enjoy the benefits of digital while trusting that no harm will come to them or their clients.

Taking advantage of its position, the EU must rapidly develop an EU-wide certification system for the Internet of Things, as proposed in the European Commission’s new cybersecurity package. This should be developed together with the whole range of different Internet of Things stakeholders and be based on minimum thresholds and mutual recognition of national certificates and labelling systems.

By attesting that certified ICT products and services comply with specified cybersecurity requirements, such as their protective capability against data-breaches for example, such a certification system would allow public and private actors alike to make

a conscious choice in favour of increased data protection and digital security – whether purchasing a connected car, an intelligent fridge, a smart meter or a router, and regardless of where these products are made. This would provide a strong competitive advantage to European products, leveraging European citizens’ preference for security and protection of personal information.

Finally, Europe must seek to shape the global standards relating to digital safety and security. Today, there is too big a gap between the level of maturity of cyber threats and that of global norms in the cyber context. If Europe does not take the lead in setting the standards that shape digital multilateralism, then others will, and Europe will need to adapt.

It’s not just about businessPublic services must enter the data revolutionDigitising public services is also critical to Europe’s competitiveness and long-term prosperity. The quality and efficiency of the public sector and the services it provides are inextricably linked to the social and economic performance of a country. Indeed, public services provide the backdrop for the business environment, playing a defining role in companies’ decisions to set up and to stay put or to relocate.

They also play a crucial role in the development of citizens’ human capital and thus, their future prospects. And yet, social protection systems today are not in sync with the fast-paced digital developments taking place in society, in the economy and

Source: Eurostat, 2015

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Figure 7: Only one in five EU companies has updated cyber-security strategyPercentage of enterprises with a formally-defined ICT security policy

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in labour markets, such as the growth of online platforms. They remain primarily designed to support and protect traditional industrial workers, and are not always appropriate to new risk groups, such as those working in the gig economy, often with more flexible or volatile employment. More and more, the ‘one-size-fits-all’ approach of the past is proving inefficient in populations that are becoming more diverse and societies which see more transitions than before, but also longer working lives that demand up-skilling along the way. On the flipside, in instances where the public sector has been slow or unable to reform, there is a trend among households with higher levels of disposable income to literally ‘check out’ of public services and revert to private providers which are seen as guaranteeing better education, health and child care or security. Such a development leads to further divergences within society and reinforces inequality – a potentially vicious circle that feeds into populism and estrangement from politics.

The promise of a digitally-powered government is thus the delivery of more targeted, more efficient public services, both for businesses or citizens. Estimates suggest that the Digital Single Market could cut the administrative burden in the public sector by 15-20%,13 while another study suggests that the use of open data could reduce public administration costs across the EU by 1.7 billion euro by 2020 (Figure 8).14

The exponential rise in available data, along with the development of new computational tools, open new opportunities to improve policy design and delivery. Thanks to data analytics, it is now possible to identify those issues that need to be

addressed, estimate their relevance and simulate the impact of proposed policies with an unprecedented level of accuracy. Further, data profiling can allow for more granular and better targeted policy interventions adapted to different user groups or – when coupled with geospatial data – territories. Valuable policy insights can stem from combining datasets that have not previously been brought together, underlining the crucial importance of linking data across policy areas, sectors, territories and applications.15

Bringing information closer to citizens and businesses also favours active societal engagement on their behalf. In a context of significant decline in citizens’ trust towards public institutions, boosting the use of data analytics could be instrumental in regaining citizens’ confidence, by helping to streamline institutional processes, increase transparency, save tax-payers’ money and achieve better results through evidence-based policies.

Administrations must lead by examplePolicies at all level of governments in the EU are needed to transform the relationship between public administrations and citizens from a vertical and hierarchical one to a more participatory and direct one. EU, national and regional public bodies must be in a position to harness the power of data analytics. Making this happen rests on three complementary dimensions:

• Firstly, the right data needs to be (made) available: Currently, there are major differences in terms of the availability and quality of public data in Europe.16 The city of Gdańsk in northern Poland, for instance, has made 28 datasets publicly available, while Florence published 1,392 datasets on its portal.17 Ghent was the first city in Belgium offering real-time datasets in the transport and mobility domain – 12 in total. In Denmark, third parties have been allowed to re-use some of the public service building blocks of the National Land Registry, saving Danish courts 10 million euro per year, and end-users 20 million euro.18 As the European Data Portal observes, ‘cities have not yet identified priority domains based on specific assessments, nor do they base the release of particular datasets on the needs of the user’ – suggesting that Europe needs a more strategic approach to opening up certain public datasets.

• Secondly, public authorities need the capability to analyse the data: Governments in Europe and beyond have already committed to promoting e-Government, using information and communication

Source: European Commission, 2016

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technologies to improve their activities and facilitate interaction with citizens. However, progress has been slow in many Member States, and only very few are actively reaping the full benefits offered by digitalisation and big data developments by strengthening their capability to perform fully-fledged data analytics, combining data management and data use. They must be equipped with skills and computing facilities matching those available to frontier firms in the hi-tech sector.

• Thirdly, public institutions need to be able to protect the data: Public institutions, as the source and guardians of an extensive range of personal and government data, and the operators of various types of critical infrastructure and services are increasingly drawing the attention of politically-driven cyberattackers because of the potential for destabilising or harming large parts of the population, or interfering in political affairs. This means that public bodies need to invest in cybersecurity much more intensively than private actors. Yet today, public institutions are possibly even more unprepared than private ones.

The EU must support the process of digitalising public services across the continent, both by providing guidance to Member States and regional authorities (e.g. on datasets to be made public, on open licence policies, on protection against the misuse of data), as well as by leading by example – both on cybersecurity and on digitalisation.

Today, while the European Commission has been strongly supportive of data4policy initiatives, it continues to lack a solid in-house capability that would serve as a one-stop-shop for data collection, processing and analysis. Although all Directorates-General collect and analyse data – for instance to support the drafting of impact assessments – there is little information exchange across the institution, resulting in missed opportunities and duplications. One solution could be to establish an in-house data analytics hub equipped with state-of-the-art computing facilities, centralising the collection of all quantitative information and responding to analytical queries by all Commission services.

EU Member States must also join the European Commission’s efforts to facilitate a seamless flow of interoperable information between European public bodies while respecting the highest standard of citizens’ data protection. A digitalised public administration must facilitate the cross-border mobility of citizens and businesses, simplifying the interaction with national systems through portability of information from tax registers, health and social systems.

Finally, further instruments are also needed to fully implement the eProcurement plan throughout Europe so as to facilitate cross-border access to public procurement markets, reduce public expenditure, increase efficiency and transparency and decrease the risk of bid-rigging.

Towards a digital society: the example of EstoniaSince declaring its independence in 1991, Estonia has embarked on an ambitious digital journey, placing technological investments at the centre of the its strategy to modernise and reshape public governance, simplify people’s life and support business growth. In just 25 years, Estonia has become one of the world’s most connected and technologically advanced countries. By 1997, 97% of Estonian schools were online. In 2000, Estonia declared access to Internet as a basic human right. E-voting has been in place since 2007 and, since 2015, people across the world are able to apply for Estonian e-residency, a transnational digital identity that gives them access to the Estonian business environment and the use of public e-services. The country uses blockchain to store all publicly available data, and it is also home to the only NATO-accredited cyber-defence centre. Home to a large and strong start-up community, Estonia has been leading the development and roll-out of innovative solutions for the economy and society such as intelligent transportation systems, online instant video-messaging, or high-tech delivery robots. In 2017, the small country ranked 12th in the World Bank’s ‘Doing Business’ Report.

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Societal transformation demands rethinking of investment strategiesDigital transformation is driving changes of such unprecedented pace and scale that society as we know it will develop in ways that may seem unimaginable today. Many of the changes driven by digital technologies will make everyday lives easier. But there will also be plenty of unintended or unforeseen consequences.

Autonomous electric cars are just one illustration of a future that is already within reach and that will have wide-ranging implications, well beyond changing mobility systems. While the spread of this novel technology will lead to less congestion and pollution, it will also result in improved transportation services – for instance by enabling a rise in car-hire and car-sharing services. It is clear that there will also be knock-on effects in many other areas. Energy systems will be affected, as crude oil is replaced by electricity, putting power grids under pressure and demanding new investments in batteries and alternative drivetrains. Even healthcare systems will feel the difference, as the number of road-related deaths is reduced, easing the pressure on emergency healthcare services, but also reducing the numbers of organ donors.

And of course, the shift towards Industry 4.0 and Society 5.0 will have major repercussions on the world’s labour markets, with the rapid rise in robot installations both in traditional manufacturing and in the service industry (Figure 9).19 Even the most conservative estimates suggest that a sizable part of labour markets will undergo profound change in coming years: 9% of jobs are at a high risk of being rendered obsolete by machines, while another 25% of jobs risk changing significantly, as at least half of the tasks they involve will be altered by automation.20 At the same time, the integration of new technologies means it is becoming cheaper, in some cases, to produce locally than to outsource to countries where cheap labour abounds. Reshoring also provides companies with other advantages, such as more flexibility and shorter distance to customers.

In light of these developments, many leading companies are remodelling their supply chains and updating their investment decisions. Germany’s Adidas has recently invested in a state-of-the-art manufacturing plant based in Bavaria that will enable it to bring production home, while shortening the delay from shoe design to customer to less than a week, and enabling buyers to personalise the final product.21

Similarly, forward-thinking cities are investing in digital technologies aimed at improving the quality of life: from smart parking lanes and traffic lights, to smart electricity grids, customised health and digital education.

These shifts must be supported through EU and Member States’ research and investment programmes. On the one hand, the EU should further boost support for a wide range of research and innovation projects, while ensuring that the outputs of these investments contribute to the development of cutting-edge technologies that are commercialised in the EU.

On the other, it should review its current infrastructure and investment programmes to ensure that financing decisions are anchored in a sufficiently long-term vision, given the accelerated pace of change of modern societies. The investments made today must not be found to be outdated in a few years’ time. They must seek to reduce the digital gap between European regions – in particular between rural areas and major cities. Finally, they must take into account the transition risks of the digital transformation to avoid investing in assets that could potentially become ‘stranded’ in the digital age.

Finally, Europe needs to drastically boost investments in people. Citizens need upskilling throughout their whole lifetime in order to be able to make a smooth transition to the digital era. Effective tools are needed both in the pre-market (ex-ante) and the post-market (ex-post) phases. In the pre-market phase, proactive impact-investing,22 and the development of skills-building schemes such as training vouchers are pathways worth investigating.23 In the post-market phase, it will be necessary to offer safety nets for those negatively affected by structural changes in labour markets resulting from innovation-driven automation and digitalisation. This could be done by building on – and broadening – the scope of the EU’s Globalisation Adjustment Fund to anticipate and support technological adjustments.

Source: International Federation of Robotics, 2016

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Figure 9: Service robots set to take over many sectors

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Building a digital democracyBeing alert to emerging threatsIf gone unchecked, digital technologies and Artificial Intelligence have the capacity to generate unprecedented social and political volatility.24

Large-scale screening and psychological profiling of voters, combined with targeted deployment of politically-motivated advertising, play an increasing role in political elections.

In addition, digital has become a megaphone enabling the spread of fake news and unfounded stories. A 2016 Stanford study25 found that 82% of 8,704 surveyed middle-school students could not distinguish between a real news story and a sponsored content web advertisement – and the result is arguably just as valid for Europe. At a time when people are spending so much of their time online, producing and consuming data and information of all sorts, the scope for influencing public opinion and exploiting the digital vulnerabilities of the population is significant (Figure 10).

At the same time, digital technologies and Artificial Intelligence are reshaping the way we behave and interact. The first generation of digital natives – young citizens that have grown up with digital technologies – are coming of age and already exhibit distinct expectations from previous generations, whether with regard to their education and employment perspectives, the media, public services, and customer services more generally.

The developmental impact of early age and lifelong interactions with digital technologies are still largely unexplored, but it has been demonstrated that substantial online surfing and social media activity seem to be associated with high levels of anxiety and depression, for example, while disturbing new phenomena such as cyber-bullying and cyber-extortion have emerged.

Finally, while Artificial Intelligence opens up seemingly endless possibilities for innovation and growth, as its uses multiply, so do the ethical dilemmas that accompany them: From automated cars facing having to decide who to save in case of an unavoidable crash; to voice and facial recognition systems helping to identify individuals and track behaviour, with important benefits for security and law enforcement, but potential risks for private individuals if used inappropriately.

Towards digital citizenshipAgainst this backdrop, the deployment of tools and frameworks to prevent misuse of the Internet and to accompany the spread of Artificial Intelligence has become a precondition for the development of a digital democracy.

The European Commission has presented guidelines and principles with the aim of increasing the proactive prevention, detection and removal of illegal content on online platforms. It will also set up a task force with the goal of establishing a common EU approach on how to fight the spread of hatred, violence and terrorism online.

In addition, digital media literacy needs to be enhanced through education and awareness-raising campaigns. This will be critical in avoiding echo chambers, ensuring that citizens are exposed to a plurality of views, and helping them to better distinguish between real and fake news.

Finally, in a rapidly changing world, more consideration needs to be given to how all these transformations may affect and redefine traditional rights and freedoms. Are there new sets of rights and responsibilities – for companies, governments and citizens alike – to be defined? How does public order translate in the digital space? How must the notions of transparency, accountability and fairness by upgraded to remain meaningful in the digital age?

Source: Buzzfeed, 2016

15 million

12 million

9 million

6 million

3 million

8.7 million

Mainstream news

Feb.-April May-July Aug - Election Day

Fake news

7.3 million

Figure 10: Fake news taking over from mainstream media?Total Facebook engagements for top 20 US election stories

11



ConclusionsThe world is at a critical turning point. One that requires rational, level-headed, forward-looking and ambitious decisions to be made.

Europe has the fundamentals to lift itself up as a pioneer in the digital world. The EU is, indeed, the global standard for quality of life, carefully balancing economic, social and environmental objectives. But preserving that record and making it valid for the digital world calls for bold actions – and urgently.

Fighting gravity has never been a successful endeavour. So for Europe to thrive in the digital space it must embrace inevitable transformations and adapt its values, rules and strengths to it. Practically, this means incentivising the adoption and diffusion of digital technologies in the economy, and defining and

enforcing new safety and security standards for the digital age. This is not just a legal question, but one that fundamentally hinges upon the technological capacity and readiness of institutions and companies. This means that the public sector and public services will have to update their ‘operating systems’ and invest in equipping people to find and grasp opportunities in a new world of work.

Long-term success is by no means a given. Times of transition require endurance and resilience, as well as honesty: some will probably gain more than others, at least temporarily. However, many more will lose out if Europe delays reforms. Europeans have learnt this lesson the hard way in past transitions and crises.

Today’s leaders have the opportunity to be remembered as those who were able to look forward and set the foundations bringing the European project squarely into the digital age.

Notes1. In 2016, $13.6 billion was invested in Europe’s tech sector,

compared with $2.8 billion in 2011, according to the World Economic Forum, ‘Step aside Silicon Valley, there is a new tech hub in town’, April 2017.

2. Pélissié du Rausas, 2011

3. European Commission, ‘Report from the Strategic Policy Forum on Digital Entrepreneurship’, 2015.

4. Ericsson, ‘Ericsson Mobility Report: On the pulse of the networked society’, June 2016.

5. European Political Strategy Centre, Strategic Note Issue 7, ‘Integration of Products and Services: Taking the Single Market into the 21st Century’, 6 October 2015.

6. Startup Europe Partnership: ‘European Dual Companies: A Scaleup Migration’, 21 June 2017

7. European Commission, ‘A framework for the free flow of non-personal data in the EU: Fact Sheet’, 19 September 2017.

8. European Political Strategy Centre, Strategic Note Issue 21: ‘Enter the Data Economy: EU Policies for a Thriving Data Ecosystem’, 11 January 2017.

9. European Digital SME Alliance, ‘Position Paper on European Cybersecurity Strategy: Fostering the SME ecosystem’, 31 July 2017

10. European Commission: ‘Digital scoreboard 2017’ (figures from 2015), 2017.

11. International Information System Security Certification Consortium, ‘Europe demanding world’s fastest cybersecurity workforce growth as region’s skills shortfall is forecast at 350,000’, from the 2017 Global Information Security Workforce Study: Benchmarking Workforce Capacity and Response to Cyber Risk, June 2017.

12. European Political Strategy Centre, Strategic Note Issue 24, ‘Building an Effective European Cyber Shield: Taking EU Cooperation to the Next Level’, 8 May 2017.

13. European Commission, ‘Report from the Strategic Policy Forum on Digital Entrepreneurship’, 2015

14. Capgemini Consulting, Study to the European Commission, Re-using Open Data, “A study on companies transforming Open data into economic and societal value’, 2017

15. Royal Society, ‘Data management and use: Governance in the 21st century’, 2017.

16. See Open Data Barometer, http://opendatabarometer.org/?year=2016&indicator=ODB

17. European Data Portal, ‘Open Data in Cities 2’, June 2017.

18. European Commission: ‘Open Government in a Digital Single Market’

19. International Federation of Robotics and The Economist

20. Arntz, M. T. Gregory and U. Zierahn, ‘Automation and Independent Work in a Digital Economy’, OECD, 2016

21. The Economist: Adidas’s high-tech factory brings production back to Germany, 14 January 2017.

22. Investments made with the intention to generate measurable social or environmental outcomes alongside a financial return

23. Such schemes exist in other countries: in Singapore for example, the ‘SkillsFuture Credit’ makes an opening credit of 500 Singaporean dollars (roughly 320 euro) available to all citizens aged 25+ to take ownership of their skills development and lifelong learning: http://www.skillsfuture.sg/credit/about#programme1

24. Global Risks Perception, World Economic Forum, 2016

25. Stanford History Education Group: ‘Evaluating Information: The Cornerstone of Civic Online Reasoning’, November 2016.

PDF: ISBN 978-92-79-73304-8 • doi:10.2872/978256 • ISSN 2467-4222 • Catalogue number: ES-AA-17-008-EN-NHTML: ISBN 978-92-79-73305-5 • doi:10.2872/845321 • ISSN 2467-4222 • Catalogue number: ES-AA-17-008-EN-Q

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