IVA's President on small economies with big influence
Dear Friends of IVA,
At a recent lunch hosted jointly by IVA and His Royal Excellence Prince Daniel, Finnish President Alexander Stubb eloquently described how his country has built up strong positions in research, advanced technology, and digital infrastructure. He asserted that small economies and strong innovators like Finland, Sweden and the other Nordics can exert influence far beyond their economic size or military capacity by building alliances with each other.
What we are talking about is leverage.
Sweden and Finland are not superpowers. Yet we belong to a region with a remarkably strong capacity for innovation. Sweden, Denmark and Finland are the only EU countries besides the Netherlands in the top ten of the 2025 Global Innovation Index. This is no coincidence: They invest more than three percent of GDP in research and development, have innovative and competitive companies and a long tradition of collaboration with academia.
Sweden, Finland and our other Nordic neighbors share not only geography and history, but also convictions about the value of research, education and international cooperation. We have shown that technological leadership, innovative strength and economic development can go hand in hand with openness, sustainability and societal trust. Nordic cooperation can leverage these strengths to build and mobilize capabilities even beyond the region. In these times when large powers are undermining international organizations and rewriting the rules according to their national interests, we should welcome collaborations like these.
However, I increasingly find myself in troubling conversations that begin with lamenting the shortcomings of the European Union and end in resounding agreement that we need more Nordic cooperation. I fully agree that stronger Nordic ties in many areas will bring many benefits, but this cannot substitute for Sweden’s proactive engagement with the EU. We need both.
Nordic cooperation may seem like a safe harbor in a turbulent world, but in a world where size matters, such ties must be a catalyst for European cooperation. Of course, there are barriers to overcome (like EU coordination with non–member state Norway). But in defense, telecommunications, advanced manufacturing, the energy transition, life sciences and digitalization, we have expertise that is crucial to Europe’s future. Yet Sweden, one of the main contenders in chips and biotech, with companies like Eriksson and Astra Zeneca and the top ranked medical university KI, has been notably absent from the discussion about the EU’s Chips and Biotech Acts.
One problem is lack of national co-funding for participating in strategic European initiatives. Another is that Swedish public administration, a full thirty years after joining the EU, is still not sufficiently geared toward strategically engaging in EU policymaking. The government is making efforts to strengthen this EU competence and to increase Swedish representation in the EU Commission, but more needs to be done. Sweden’s lack of strategic weight in Brussels is an issue, not only for Sweden, but also for Nordic countries’ influence in the EU. In competitiveness and industrial policy, research and innovation policy, energy, environmental and climate policy, the Nordics have much to contribute both to design and to delivering positive results.
Simply put, the EU needs the Nordics and the Nordics need the EU.
Perhaps the most notable recent analysis of Europe’s challenges is Mario Draghi’s report on European competitiveness, which identified the crucial need for greater productivity, investment and innovation in EU countries. At a time when the EU is in dire need of not just diagnoses but also delivery on economic development, sustainability and security, the Nordics could become a “speedboat” for driving Europe toward greater competitiveness, technological strength and resilience.
And speedboats are urgently needed, as the slow implementation of Draghi’s recommendations shows. A study in July revealed that only 60 of the 383 recommendations – 15.7 percent – had been fully implemented – albeit 41.3 percent with partially implemented measures. The pace is too slow for Europe to catch up with the US and China economically and technologically – as Ursula von der Leyen pointed out in her State of the Union address last week.
The EU needs to bolster its ability to deliver. Here, the Nordics can help. One concrete joint initiative is the Nordic Compass, an alliance of 30 leading companies and foundations. Taking its lead from the Draghi Report, the group supports initiatives and public-private partnerships in capital markets, deep tech, defense and energy, working together with government, industry and other stakeholders.
The Greek mathematician Archimedes, who discovered the law of the lever, is said to have remarked, “Give me a place to stand, and I will move the world.” Cooperation can give small economies like the Nordics this leverage to move things far beyond their individual weight.
To become inspired about the impact small economies can have in the EU, I suggest reading Alexander Stubb’s insightful article in Foreign Affairs. And for powerful evidence of how much the EU matters, Canadian Prime Minister Mark Carney offered compelling, concrete ideas on how the EU and Canada can build closer ties in last week’s speech in the European Parliament.