Europe looks to future and sees greater risk-taking, innovation

Gleaming Jaguar cars rolling off rejuvenated assembly lines in the Midlands of England, 75 percent of them headed for buyers in the US, the company privately owned, production tripled over six years, profits booming. . . . Inventor Roland Moreno sitting in a small set of offices in a shabby Paris office building, suddenly hearing that his own invention -- a ``smart card'' 50 times more powerful and far more flexible than a conventional credit card -- has been adopted by French banks and telephones, tested in the US, copied by the Japanese, and -- after 12 years of waiting -- is now earning him $50,000 a month. . . .

A continent falling behind the US and Japan in the race for global markets, its industries good at medium technology (autos, steel, plastics, chemicals) but hindered by lack of size, flexibility, and venture capital from plunging into the race for high-technology (computers, lasers, telecommunications) that experts say is the real wave of the economic future. . . .

Will the real Western Europe please stand up?

Is it the continent of well-managed industry like Jaguar cars, stressing what director David Boole calls ``global markets, quality, attention to detail and service to the customer?'' Is it the continent of individual inventors, not just Mr. Moreno but Britain's computer wizard Sir Clive Sinclair? Or is it a continent still too slow to change, to take risks, to free-wheel?

Today, the answer is all three.

The crucial question for the rest of this century and beyond is how fast Europe can change from being a collection of well-heeled consumer nations such as Britain, France, West Germany, and Italy, buoyed by falling oil prices and a strong dollar, into a collection of states where government works closely with industry (as in Japan) to enable Europe to shift much faster into high-tech growth areas.

Most analysts interviewed recently see Europe doing well for the next few years, with inflation low and economic growth above the 3 percent mark on average.

They are less sanguine about the extent to which European governments can cooperate, given the vast disparities between the wealthier members of the European Community and the poorer, newer members such as Greece, Spain, and Portugal. One suggested solution: ``variable geometry,'' a diplomatic term meaning that richer countries move faster, leaving poorer members free to join in cooperative ventures when and if they can.

Yet most experts agree that there is new determination in the air, both among politicians, Euro-bureaucrats in Brussels and among economists and businessmen. After decades of losing ground to the US and Japan, Europe seems to be in a mood these days to try new moves to catch up.

``If America is the breadbasket of the world, and Japan and Southeast Asia are the factory floor of the world, then Europe is the boutique of the world,'' says a Dutch economist. ``A boutique is a fine place to visit . . . but not such a good place to live, maybe.'' His point: Europeans can afford to buy, but the goods they make don't sell as well as they should in competition with the US and Japan.

At the 24-nation economic coordinating agency in Paris known as the Organization for Economic Cooperation and Development, contrasting views are heard.

``Europe's been doing extremely well,'' says John Llewellyn, OECD's chief economic forecaster. ``Its exports compete very successfully in the US market. You Americans have a large balance of payments deficit -- about $150 billion: much of that has gone to buy European exports.''

Mr. Llewellyn takes issue with those who argue that government intervention holds Europe back. ``Quite the reverse,'' he says. ``Look at the computer industry, and at aircraft. . . . They're dynamic.''

Nor does he accept that Europeans prefer security to taking risks. ``True, Europeans think it's important to look after the sections of society that do least well.''

At the same time, he sees no unique European way into the future: ``The number of American and Japanese firms in Europe is increasing . . . yet the will of the people to compete is strong.''

West German economist Friedrich Klau says European inflation rates are low, and the difficulties in adjusting to oil price rises in 1973 and 1979 are now largely over. The toughest problem remaining is unemployment.

John M. Marcum, director for Science, Technology and Industry for the OECD, and a former senior official in the Reagan administration, sees problems ahead.

``One of the main obstacles for Europe,'' he says, ``is to shift from large state-run projects [nuclear power in France, the European space program, and so on] to new, small, high-tech industries that tend to create jobs.''

Mr. Marcum highlights three more areas challenging Europe: innovation, risk-taking, and education.

``Often in Europe it's hard to set up new businesses, and hard to abolish ones that fail. Penalties for start-ups and failures are a major problem for innovation.''

``There are some European entrepreneurs, but most are still looking for security with big traditional industry rather than striking out on their own.''

As for education, Marcum says more than 5 percent of the US population is in some form of advanced education, but in Europe the figure is less than 2 percent.

``Europe is behind in the high-tech field,'' he says. ``It needs more innovative entrepreneurs, and large numbers of trained scientists, engineers, and technicians who can shift flexibly from one target and one opportunity to another.''

Second of two articles. The first appeared March 17.