Do we actually have a clue about what’s happening in the economy? #data4policy – Lucia Kleštincová

Do we actually have a clue about what’s happening in the economy? #data4policy

26.11.2018 • 4 min read

You’ve heard about the shoemaker’s son walking around barefoot. Same for the state that supports the booming data economy but is incapable to use this golden goose for its own modernisation.

Export of goods and services accounts for 96% of our GDP. Moreover, 85% of the export is directed to other EU member states. The more the external factors like Trump’s duties or Brexit impact the European economy, the more the Slovaks will feel it through their salaries, prices of food or gas. Paraphrasing Metternich, when Europe sneezes, Slovakia catches cold. Therefore a crucial question for all of us in Slovakia is how fast can politicians and their advisors actually understand, what’s happening in front of them. Does the system actually empower them to react to economic shocks in a speedy and responsible manner?

Remember, we are talking about this in the era when Amazon can forecast much better, which products I’m interested in, than myself. When LinkedIn knows more about the trends on the labour markets than our employment agencies. When co-working hubs have a better overview of innovation capacity of our country than our investment agencies.

In 2018, Slovakia should be already capable of predicting the market developments, just like private businesses can assess their customers’ behaviour. Due to many reasons, however, we still lack the right data, technology and human capital to process them. This is the context that sets everyday reality for us, public policy makers, both at national and European level.

Let’s illustrate this at an example of one of my favourite topics – preparedness for Brexit. Who can say with certainty, what is actually happening in the Slovak, British or European economy? On the basis of rather anecdotal discussions with businesses and investors we can guess some impacts of Brexit referendum on the economy, investors’ decision making or complicated recruitment of experts. Nonetheless, it always takes some time for these trends to show in official statistics and to land on the desks of policy experts responsible for mitigating risks of UK’s withdrawal.

Therefore I’m currently exploring in the European Commission how to modernise the data sources, that the decisions about our single market are based on. It is not enough to only draw from the official statistics, which are just a partial and relatively delayed reflection of the reality.

That is why, just a couple of weeks ago I organised the very first meeting to brainstorm with the Member States experts about the causes, symptoms and possible solutions:

  • How can all kinds of data and artificial intelligence tell us, what is actually happening in the economy in real time? For example, how are various construction projects advancing? How are components transferred across the value chains? Why are some supplies not flowing as smoothly as they could?

  • How can we identify as quickly as possible those products that are not conform to the legislation? Ideally without having to wait for the results of national inspection authorities…

  • How to understand, which are the barriers holding back trade across the member states? And this does not only apply to goods but also services, which make up a huge share of the value of traded goods (transport, insurance, installation, legal or advertising services). Not to mention the free movement of people, whose meaningful understanding is extremely complicated in the internal market today. Where do entrepreneurs face unnecessary paperwork that should no longer exist in the EU?

These are examples of situations where better microdata could help us radically improve the rules for the functioning of the internal market and thereby make it more effective. Of course, it’s not just about more intelligent use of data. This topic interferes with the DNA of the state governance as such. We are also looking into what it means for administrative operations, privacy protection, ensuring a fair and ethical use of data and technology for public policy needs.

Of course, it’s complicated. On the one hand, representatives of innovative companies claim that business data are proprietary and they have no incentives to share it with regulators (disregarding of the anonymisation technology). Those with greater social responsibility are aware that the authorities have no chance of ensuring flexible responsiveness to the reality if the market players do not allow them to understand it. Of course there are also many other complications such as GDPR issues, the blockchain bubble, or lack of digital literacy and analytical skills across the administration.

One of the leaders of McKinsey told us at our last meeting that according to their estimates, the European public administration uses only up to 10-20% of the potential offered by big data for modernization of policy making process. This is due to two reasons: isolated data silos and a lack of excellent data analysts.

In view of the current distribution of political forces across the EU, it is probably not surprising to judge as a big success the degree of agreement reached regarding the urgency to address these issues. It is all about jointly creation innovation, which can turn upside down the way we used to govern the states and the EU until now. At a minimum, the classic legal paradigm will need to integrate much more an in-depth understanding of our economy in real time.

Where does Slovakia appear on this mind-map? As an optimist I’m trying to see the light at the end of the tunnel, which is lit by a few enthusiasts knowledgeable of global trends and dreaming of a massive transformation of the way our state is governed. However, this optimism is often hit by all kinds of maladministration episodes and scandals. It’s good to have Europe in a driving seat, advancing topics that everyone is struggling with at a national level.

The content of this website does not reflect the official opinion of the European Union. Responsibility for the information and views expressed in the therein lies entirely with Lucia Klestincova.

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