Hey, G-20, Encourage Innovation

Not one session during an afternoon of closed-door task-force meetings at the New York Forum went by without discussion of innovation.

But here’s the catch, said event organizer Richard Attias, “We create jobs if we innovate. But innovation often comes from small-in-size companies.” And those companies around the world are having an especially tough time coming up with capital these days.

So to remedy that, Attias said at a press briefing that he would be pushing colleagues to include creation of a world financial institution dedicated to funding innovative companies among the suggestions from the group of 500 business leaders to the ministers from the G-20 countries gathering Saturday.

“Why can’t we have an institution where we can finance innovation?” he said at the forum that wrapped up Wednesday.

Sounds far-fetched. But that’s just one idea coming out of the New York Forum, an international gathering that included top business leaders—60 percent of them from the U.S. and 40 percent from around the world.

And it’s strikingly similar to a resolution passed by a gathering of young entrepreneurs from around the world earlier this week, which will also be presented to G-20 leaders.

One key reason for the emphasis on finance, innovation, and entrepreneurial businesses? “We need growth. It has to be sustainable growth,” said Michel Fredeau, a senior partner with Boston Consulting Group, which helped run the New York Forum.

That emphasis on sustainable growth is certainly one that’s shared by at least one of the people who will be at the summit.

Christine Lagarde, minister of economic affairs, industry, and employment for France, said during a round-table discussion that growth is near the top of the agenda for the G-20 meeting, along with monetary and fiscal policy.

“I think we will also discuss growth—self-sustained, job-creating, sustainable growth,” she said.

Other suggestions the forum is likely to forward to the G-20 include some standardization of the rules of corporate governance throughout the developed and developing world; and a suggestion that there be more cooperation between the public and private sector and between nations on setting the rules of business.

“We are all interconnected,” said Fredeau. “We need to recognize it’s a global economy so the collaboration between countries, between public and private, is key.”

There were still other ideas floated at the Forum. Among them, this one from Carlos Slim Helu, the Mexican telecom king and richest man in the world: The digital revolution needs to go beyond developed and developing countries and envelope the entire world.

“We need to carry the digital revolution worldwide,” he said. “It will be available for everyone.”

But here in the United States, said Edmund Phelps, a Nobel Prize-winning economist, there’s plenty of trouble. And it could be trouble that jeopardizes the nation’s long-term health.

“I think there’s been a tremendous loss of dynamism in the U.S. economy,” Phelps said. “We gotta get it back.”

The problem, he said, isn’t that entrepreneurs in the U.S. no longer have great ideas. It’s that the financial system is no longer at the service of those entrepreneurs and ideas.

“They lost their expertise in lending to business,” he said.

He wants the G-20 to focus on bringing that dynamism back to not only the United States, but also Western Europe, where, he said, “dynamism was lost years ago.”

Lagarde bristled at Phelps’ characterization of the West as lacking energy.

“As much as we would like to paint Europe as this half asleep area and the United States as going that way, I think he is wrong,” she said, pointing out that in the past 20 years, innovation from companies such as Apple and Google in the U.S. has led the world.

Where she didn’t disagree, though, was that there is a crisis of confidence in the developed world, including the U.S., and that funding for innovative companies is key to rebuilding economies damaged by the financial collapse of 2007 and 2008.

Until that flow of capital—from banks, from venture capitalists, even from the government—starts going to the most dynamic and innovative new ideas, the U.S. economy is in for a long slog, Phelps said.

So maybe, just maybe, that idea of an international fund for innovation isn’t so far-fetched. We’ll see this weekend just how seriously the G-20 ministers really take such suggestions.

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Kent Bernhard Jr. is News Editor of Portfolio.com