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Competitive advantages of the EU – how to use them for managing the 21st century?

Competitive advantages of the EU – how to use them for managing the 21st century? © Office of the President


Ladies and Gentlemen!

Somewhere ahead is a bifurcation point. Either we will conquer the climate change or we will not. unless we take radical steps, we cannot even contain, and certainly not reverse the climate change.

Technological change is tackling the problem, but without global political effort the trickling down of this change to every CO2 emitter today is too slow and also economically painful.

Taxing CO2 emissions sends the right signal to the market, but obviously annoys small emitters, including petrol station customers in rural France, because they are unable to changetheir energy source. They can only change their consumption. The big change depends on us, the politicians.
Yet we have not managed to add any serious grid capacity to bring solar from southern Europe to the north and make wind energy move the other way. We do nothing to harvest wind and wave energy to bring it to shore. We are just politically lazy, in the face of a realizing risk.

Even here in Europe, where we do not have any political limitations to these grid-building actions, because we do not have to lock into investment with regimes we do not trust. We are at home, and we can decide between us.

Jeffrey Sachs stresses that globally we should spend 1% of our GDP on climate change. That means, in Europe, we should set aside another EU budget for tackling energy questions, and we should run it centrally to reach every citizen with clean and affordable energy.

Switching to clean is not a personal or a national, but an EU wide effort! Imagine if we spent about 200bn a year in Europe on developing green energy, and long distance interconnections!

This is probably the biggest initiative we could take unitedly, because we are the EU. No one else could agree so quickly to do it. No other region in the world  has mechanisms like common spending schemes in place like we do. No one else has the necessary legal space like the common procurement procedures and competition legislation in placeThere is only the EU, that, can begin this global task of saving our planet.

Selling the solutions we will find while changing to green energy will guarantee economic success in the long term as well. Look at what windmills did to the Danish economy, if you are looking for success stories from the same clean energy sector.

Only if we manage to save our planet, we shall gain the right to start talking meaningfully about the future digital and AI technologies, changes in the society they cause, and how we can use European advantages to manage that change as well.

Because, as always, there are European advantages to managing cross-border developments. Nothing happens within the borders of any nation state, when we talk technology development or science today.

Nonetheless, and I really want to repeat this, there is no point in developing all this thinking abouttechnological change. if our planet will be too warm in general to support human life.

So, all that I will talk of from this point onwards, has novalue  if we do not clear the utmost challenge of climate change. No value. But let us hope and continue.

We continue to see how digital technologies change all aspects of our society: work, social systems, tax systems. As we can already see, the systemic change is as large as industrialization was at its time.

Like industrialization, digitalization, above all, replaces the physical element of human labor, leaving our cognitive capacities still a human monopoly. Yes, more and more we see machines learning human behavior and reflexes. We see them used and even exploited first by the intenet trolls, then text generators like trolls etc. Machines are better than we are in understanding and trading at the stock exchanges. However, I predict that the humankind will stop supporting systems, which have grown elements we cannot understand and therefore do not trust. Compared to the 90s, less people are investing through stock exchange and prefer for example crowd finance platforms. Not because they estimate better risk-return balance, but because they understand what these platforms do.

I am sure the same will happen at the big marketplaces of opinion, in the social media. Already people are less trustful of what they see in Facebook, because they learn the patterns of appearance of self-interested content. It can lead to a Facebook where people have put algorithms to work to represent themselves and left. The algorithms will continue, but peoples` minds will be somewhere else.

With this, I want to say that the cognitive capacity of the human being is still their own monopoly, while the physical capacities can be more or less completely left to machines.

Even assuming that the technology develops so fast that we will see singularity, compassion will still be out of its reach.

Yes, machines can learn the simplest cognitive elements, reading sad and happy or angry faces. But this is not enough to understand the complexity of human feelings. Even truly singular computer will not feel or sense humans correctly, because it will only process the brain, not the rest of body biochemistry that we have in addition to the brain. A lot of the human being are emotions.

We will, therefore, not be more and more unemployed as machines take over routine chores from us. Compassion, showing it and spreading it in the society, will be our full time job. From one side, there will simply be more time to be a compassionate human. From the other side, since a huge amount of human interactions previously necessary to use, for example, the simplest services, will be lost.

Take an internet bank transaction as example, or self-check outs or self check-ins or whatever. How many pairs of eyes a person living in the beginning of this very century looked into on a daily basis, compared to what we see now? This trend will continue, until our daily lives do not need human interaction anymore.

Providing human interaction will therefore become a prominent economic sector. With this, mind you, I do not want to say that a human being today is lonelier and, in the future, even lonelier because the daily business runs without much human contact. I see this as something positive. In the beginning of the century, all of our time was consumed by providing each other with various services – banking, sales, car wash, serving in the coffee shop and restaurants, checking us in or planning our holidays abroad.

This happens less and less. However, we can and will still spend our time with other human beings, interacting with each other. We see the demand rising for all kinds of actions, which simply make us happier or safer.

There are globally more and more people who make a living from caring for our minds, but also from keeping us happy, entertained, in a good community where one can feel they belong. Bankers who have lost their boring menial function of transferring our money, are actively seeking to advise us on money matters. Personal experiences can be sold on the internet either directly or through commercial advertising, making seeking personal experiences a job.

Take the example of schools. Here, in Paris, one of the future school models is piloted in Paris42: it is a supported training machine, where educational content is akin of a computer game. The teachers are not teaching, but supporting learning. Their job has not become less relevant, far from that – they provide their students with networks, networking skills, but, above all, they teach them on how to be a compassionate human being. The class of  42 in Paris or Lyon is a place where you come to be with other people – your classmates, your mentors, and teachers. It is a warm and supportive environment, by the way.

I predict that this we will have in all school types in 10-15 years. Machines are much better in transferring technical knowledge we still need to have. Machines test and provide new tasks for learning based on the test feedback. Kids` real knowledge of our world will be less and less a direct function of their age, as it has always been for previous generations. It will be rather a function of their age and interests. Because a lot of knowledge is out there online and kids are using it to learn. The fact their knowledge is something different from what we have in the schoolbooks, does not make it less informative. We need to fulfill the gaps and connect the dots in their brains full of fragmented information.

But we cannot teach them in the same universal way we have so far. The variations in their knowledge will be far bigger. So, teaching has to become supported learning.

A good primer of what is to come is the change in the kids` ability to learn languages. Traditionally, girls have performed better in language tests in school. This has changed. Now boys perform better in English. The reason – they are more active in computer games, so their language skills are rather good from an early age. Kids in my son`s class, he is nine, all have quite good command of English. It does not match at all the expectations of the school program – that they are beginners with the vocabulary of 500 words and very basic grammar. Instead, they use words like leprechaun, and pronounce them better than their teachers.

Alas, none of them can write leprechaun or many of easier transcription, because their skill is mainly oral. And they need special tutoring in order to understand which are rude words, offending phrases and vocabulary, double meanings of expressions. Shortly – they know a lot of language technicalities, but hey lack basic cognitive sense of the language they are technically already speaking. They err constantly against cultural space of English while speaking it, because of the technical nature of their language skills.

So, we should teach them differently. We should show them how language can be used in the human interactions without offending anyone or missing the point they try to make. See – we no more teach language, but we teach how to use the language in human interactions, to stay within the acceptable borders of assertiveness, without trespassing on the rights of others. Being a responsible compassionate human being.

We are back where I started, to the tech part of this speech. The society will be free from menial and boring, technical tasks. But it will need special education in being a compassionate human being – a skill where humans excel and cannot be replaced by any machine learning tool. Cognitive part of us is safe from competition by machines. Teaching and learning cognition will be a big part part of training. Being compassionate will be a job.

Why do I think Europe is best placed to tackle this future world? First and foremost, compared to all the other rich regions globally, Europe is specialized in human compassion. It is built on human compassion. European Union was created to avoid war and linked atrocities and therefore its tasks have never been purely economical, or linked to technology development in order to provide more and more added value or productivity. It has been built to provide first and foremost, national security to all the EU and neighboring countries, who have used this security to grow personal security and safety tools for their citizens.

Hence, we, as an European society, understand compassion. We have for example long rejected the notion that if you have not bought an expensive health care package you will be left to die in case you contact a costly disease. We have trained us to maybe even forgo, as societies, the top of the top of human achievements in healthcare, to make healthcare widely available to all in society, notwithstanding their social status.

We have not quite managed to provide for egalitarian school systems, only some of us – like Nordics and my own country – have. The rest are striving to make schools and education more egalitarian. Because otherwise social mobility, a right all our citizens should enjoy, is hard to achieve.

We see our middle classes rising up for the lack of compassion in our society. Yes, they are not starving and they have a wide social services network to provide for their basic wellbeing. However, they feel unhappy, because they have not been listened to, valued enough, provided space in the speeches of politicians. European people do not accept the fate of being obsolete, being someone who does not matter and for whom there is not enough compassion in our society. They put on yellow vests and make themselves visible. Or they go and vote Brexit. Or vote for extreme nationalists with an almost communist strive for controlling every aspect of peoples` lives in eastern parts of Europe, maybe even in Estonia in March after the coming elections.

See – in Europe, we have a demand from our citizens to provide more compassion. Compassion, not new gadgets. That is what people demand.

New gadgets have helped to make life easier and will continue to do so.

Today, all people have domestic help of the value of probably tens of servants in the terms of the beginning of the 20th century. Yet they are unhappy and want something else. Not something more, but else.

The fallout is within the context of human interaction. People feel the society is coming apart, there is no mobility between the different parts of society. People do not dream of 5G, I am sorry to say. They dream of happiness and hope.

What can we do? Where do we need to change?

I explained already about the change our schools need to undertake. To teach our kids to be compassionate human beings.

Our jobs are already changing as well, driving us towards sectors of working with peoples` minds and mindsets.

Meanwhile, let’s look at our capacity to start providing that compassion we are currently unable to provide. What are our very European social security networks doing?

First of all, they are losing their taxpayers. How?

Our social systems are industrial economy based. Vitally, they must change. Because, in the old format, we will not be able to offer an egalitarian society, a society which always offers hope—for us or our children.It will be less and less feasible, because the more affluent employees opt out as our European social model is demanding a lifestyle which they are not living—with a stable job, stable contributions and a fixed address and country. The digital nomads  will go private, ending the solidarity based models by numerous opt outs.

All others will be less and less part of the tech-rich and simply rich society. We have to act quickly to avoid this trap, which can totally kill social mobility and lead our citizens to streets to protest against our societies, which cannot provide opportunities anymore.

But we have to do it without limiting the global benefits of technologies. Technologies are making the job market global, allowing us to work where and when suitable, without necessarily moving ourselves physically. Very often people say that digital takes jobs away and we should be scared. Quite on the contrary. Digital makes the job-market more equal, more accessible. And you know, what? Also much bigger. Because you do not have to necessarily work in your own country.

It is perfectly feasible to know the Estonian tax-code and work from somewhere in Africa. If you are for example an African girl, eager to learn bookkeeping on-line. You are welcome! Estonia of course does not say that the underlying documentation always needs to be in the country of bookkeeping. Everything is electronic anyway, so you can manage it from Africa.

I think it could solve a lot of our problems, if we all in the developed world collectively took this view that technologies and their use needs to be enabled, supported, nurtured, not ignored or even limited.

I know we do not. It is a worrisome issue and I will tell you why. I call this the Alice in Wonderland issue. This means that... You know Alice in Wonderland, yes?

There was a cat, the Cheshire Cat. When he left, the grin did not leave but lingered on. Well we see that our job-market is changing. Industrial jobs are vanishing. Do you think that our social model of tax-gathering and distributing it according to where people live and where they work, in a single place, will stay? It will linger on for a while, like the grin in Alice in Wonderland. We know that finally also the grin packed itself up. We do not realize yet that more and more people work independently, we see the numbers growing up everywhere, but we are not adapting. We still expect people to have a working address and one company where they work, maybe two. Or maybe they are an independent worker living in in this country registered in this address. Then we tax them and then we provide services to them.

This is not the way to go. Our citizens travel – you need to offer services globally. For example, a citizen must be able to vote wherever he or she finds himself or herself. We need to develop schools where people can educate their children in their maternal language even if they are very far from home.

Logic states that we should have some new contract where people pay taxes to the country they feel closest to, live in or are citizens of, and this country offers them services globally.

We try not to just sit on our hands and complain about it. During our EU Council presidency, we got officials from all ministries of finance together in Tallinn to discuss what could be our global proposal to solve this issue that industrial jobs are vanishing, but our social system is based on our industrial model.

If we are not quick to adapt, more and more people will every day opt out of our social models. Later they opt back in when they need health-care or education for their children. By then we have lost a big proportion of their earnings. Only the pension system really penalizes you for late opt in, everything else you can opt in practically without loss.

However, we do not want to lose our welfare state in Europe.

We appreciate it and we want to keep it.

It could help us to make the digital transition easier than was the transition from agrarian society to industrial society. Because at that time, it was painful for the people.

This transition is as big.

Estonia is often called a digital frontrunner. In fact, it is more societal than tech frontrunner. It is the only country which has brought business and government together to put technologies to such use that they can and are benefitting the whole society.

Estonian e-government is like an app store, everybody can develop services on it: private companies, public sector, people-to-people. You can, too! If you become an e-resident, you have access to this app store and you can use it for developing your business. It will be an EU business, so you could actually do a lot of creative things on this app store.

Estonia as a society is of course not an app store. It is a fully European country, passionate about its social security net and also compassionate about its people.

To ensure that all Estonians learn and all Estonians participate in the great digital change, we opened the e-governance platform for businesses. Not only because we think it is a good thing if government and businesses do things together. We needed it so people would have combined number of e-services to use, both public and private, so they would get used to it.

Our worry was that if we do not make the private sector use the same backbone of digital services, people will only maybe declare taxes on-line initially with their digital ID and this is too little. They will not get used to regularly using their digital ID. Therefore, we very much supported that private sector was on the same platform.

We can now convincingly state – digital technology can only benefit all society, if the government supports its use, if necessary legal space and its most important attribute – identification – is provided, like in analogue world, by the one who has the means and right to guarantee it as a legal identification for all parties. The one who can do it is the government.

Governments need to stop forgoing their main obligations as soon as the new technological developments make it uncomfortable for them. This is the lesson we learned. This applies to digital, will apply to AI and any future developments.

It is a much more valuable lesson than any other we have learned from turning into a digital nation –for tech use to benefit all – it has to have the government as a sponsor. Not as the payer, but as someone who supports development. Too often, we tend to mix up the two in Europe – the responsibility to develop and the responsibility to provide creative space. We should not.

What do we have now, which could make digital disruption, both ours and the following ones, easier for people? Our social and educational systems, if we change them quick enough, as I have already suggested..

However, it will only happen successfully, if we stop all talks about specifically taxing digitally provided services and also stop trying to keep the old jobs alive even if they are dying naturally. It is as if we had taxed tractors so that people could still go and work manually in agriculture. We did not and we also did not help people to feel supported when they moved to industrial areas. The majority of our ancestors actually had rotten lives in those years, only gradually getting better with productivity rises in industry.

We need to take care that our people can manage this new societal change, and for that, we need tax money.

There should be more options about how you can contribute to the state and it should be much, much more flexible in the future.

But we need an international agreement on it.

It is extremely important that we understand that these new jobs, they are not created only for software engineers. Yes, they do create the carrier service, but the content service is much more democratic. If you think what has been the main income source for big tech companies, if they are not in carrier service, or hardware? Talking. Short talking – Twitter. Long discussions – Facebook. I mean, what is hi-tech in them? Nothing. It is not something where you need a PhD. For example you can make money as a travelling youtuber. Or think of people who are handicapped. Let us take an autistic person living somewhere in a rural area in whichever country who loves to knit red socks. Ten years ago, he could not have made a living out of his favorite pastime, because in the region there were not enough takers for red socks. In addition he is afraid of talking to people and so he cannot sell. These problems are all solved now. He can make independent living selling these socks online, without moving, with no fear of human interactions, a global market!

We must not think tech is dangerous, it is taking jobs away or only creating jobs for the educated and the mighty. It does not need to be this way, if you make it inclusive. We have made digital inclusive in Estonia. I am quite sure that other countries can make it too.

If we can do this in Europe, we will be world champions in wealth generation and welfare provision as we are used to be. If we stall, if we react too late, we cannot do it and we will have the digital division in our society akin to divisions of rich and poor, making that division even stronger.

Our European Union has an environment where we naturally operate cross border in analogue life, we already have free movement of people, lots of cross-border freedoms, but they are cumbersome to use in an analogue world and do not apply at all to the digital world I have described. Yet again, more than any other region in the world it is the European Union where we already have a competitive advantage. Adapting this to technology based working nomads can only be easier from this starting point.

I also sense that this is our obligation. Having legalized and promoted the free movement of people we have to at the same time keep them engaged as citizens of the country of origin, participating in the cultural, educational and democratic space of the country of origin. Online school, online voting, online social service provision, seamless global medical coverage for our people wherever they are, all are part of this new world.

In order to provide, a tax model, which allows for this new world should be created. We can still tax consumption in our country and property and I believe we should continue to do so. But salary related taxes are not easily gathered from people working intermittently, for many companies at a time, independently, online simultaneously in many countries. Some kind of new agreement is needed. I like to call it a safe dock agreement – an agreement between the government and citizens to pay taxes in exchange for globally provided support. Again, Europe can be the pioneer because Europeans are already used to working freely in 28 countries. We have the need and we have the tools like no one else globally. Another chance of using EU competitive advantage for better future, if you please.

You see? Our predecessors have created the EU, which not only has avoided wars in Europe. Not only answered to the need to create huge common market in order to foster economic development of our continent. They have also prepared us for the future – we, as the EU, carry numerous advantages created by the EU, to succeed in preparing our societies for technological changes.

The founders of the European Union have created a Europe which can save the planet. I come back to this again and again - thinking of new tax, education, e-governance systems is pointless, unless we save the planet.

Europe has always had an obligation vis a vis the whole world and accepted it. We have to raise our ambition. We have the opportunity to stop climate change, if it is stoppable by stopping rising the CO2 emission levels. It is not sure it can be stopped. But it must be tried.

For our planet to be saved, we must act quickly and radically, because since Europe is the only continent rich enough, coherent enough, connected enough, regulated enough, which can do it.

Just – we must decide. Decision-making in EU can be a painful process, but again – our union normally manages, in the face of any urgency. There is urgency, believe me.

Thank you for your patience and attention! Thank you to the heads of this university for giving me this wonderful opportunity to present to you my impatience and my impression that we are wasting, in a way, the advantages created by our union.
Do better, please, than our generation of leaders! And support those of our generation who want to do better, resist the simple solutions proposed, ask for solutions for a long time, forever! We are in your hands and in your service.

President Kaljulaid spoke in Paris in Paris at ÉNA (École Nationale d'Administration) and the speech was originally held in French.