There is a nice line in TS Eliot’s Little Gidding:

We shall not cease from exploration
And the end of all our exploring
Will be to arrive where we started
And know the place for the first time.

Given the democratic experiments underway in the US and UK to review how they want to be governed it is interesting to spend time with those who enact and enable the political visions.

Michael Lewis’s excellent new book, The Fifth Risk, is perhaps the longest love letter to the romantics, such as Max Stier, working to improve public service.

As Lewis writes: “He [Stier] thought the US government was the single most important and most interesting institution in the history of the planet.”

Lewis goes on to give the examples of the people doing these jobs and their value to society and how little regard they are held in by many who should know better.

There is a similar questioning underway in the UK about its role and involvement with the European Union (EU) and its main administrators, the European Commission (EC). Spending, therefore, a few days in their company on the topic of Innovative Enterprise in the beautiful city of Vienna, Austria, has been enlightening.

The event was held as the European Parliament debates the forthcoming €100-120bn budget for 2021 to 2027 and tabled a reputed 1,000 amendments to the Horizon Europe element covering innovation – Science Business has been following this closely with good reporting and analysis – which is the continent’s Most Important Budget.

While the budget discussions affected the seniority of some of the Austrian event attendees the discussion was excellent even if the agenda planning sometimes failed to showcase them effectively:

The broad theme of the event was “how does Europe support access to finance for innovative ideas?”.

The two, interrelated areas of focus were having greater EC support, particularly through the European Innovation Council (EIC) being piloted over the next few years, and encouraging national agencies to invest more in research, development and innovation (RD&I) policies. Patrick Child, deputy director-general at the EC’s research and innovation department, said Austria was second among its 28 member states for research intensity at 3.16% of gross domestic product (GDP), behind only Sweden. But the EU as a whole has yet to reach the 2% RD&I funding levels as a proportion of total GDP and trails other regions, particularly in Asia, investing more.

The EIC is being divided into two elements – a Pathfinder part, with about 25% of the expected budget, to provided grants to pre-commercialised ideas around strategic themes, including quantum, bio, blockchain and artificial intelligence; and an Accelerator, with three-quarters of the budget, to help startups scale up with blended finance between debt and equity.

With its focus on “excellence,” according to Hermann Hauser, chairman of the high-level advisory group to the EIC, the reception for the EIC was positive among entrepreneurs and other financiers and, subject to political approval, the €2.7bn budget in the pilot phase should scale up to about €10bn for the 2021-2027 period.

Acting as the glue between the two is the European Investment Bank (EIB), which could perhaps be better renamed the European Infrastructure and Innovation Investment Bank, ie EI³B. On behalf of the EC’s misnamed European Fund for Strategic Investments (EFSI is not a fund but a backstop facility), the EIB has helped underwrite the guarantees that encourages national promotional banks to encourage loans and other financial instruments to be provided to small- and medium-sized enterprises (SMEs). The EIB has also directly invested in and lent to these SMEs.

For EFSI, the EIB provided €7.5bn in a guarantee facility with €26bn from the EU that is expected to encourage €500bn in private capital by 2020 and a 1.3% boost to GDP, according to Wilhelm Molterer, chairman of EFSI’s governance board. Molterer said its success had been driven by its market rather than politically-driven approach, lean governance and alignment with the EIB without a sector or country target.

But as a leverage mechanism the risk to EFSI and other public guarantees comes if the default rate among SMEs increases more than expected in an economic downturn. EFSI was started after the global financial crisis was ending and so has had a record period of benign economic conditions. Alessandro Tappi, chief investment officer at the European Investment Fund (EIF), a subsidiary of the EIB particularly focused on innovation through debt and equity, said about half of its guarantees to risky projects had been returned as the economy had improved but a “default rate of about 10% to 15% would capture the bulk” of the guarantees, although this is hard to measure.

Tappi’s boss, Pier Luigi Gilbert, CEO of the EIF, had earlier explained how it had used EFSI to support 500 transactions and also developed new products, such as a fund of venture capital funds, called VentureEU. The EIF has been the biggest European investor through VC funds and Gilbert noted it had backed a third of European unicorns – private companies worth at least $1bn – usually at an early stage.

While notable successes, however, a third of the unicorns works out at 23, Gilbert added, indicating Europe is still missing its share of the world’s unicorns. Molterer and Hauser both pointed to a core challenge in translating more of the R&D into innovation as the lack of corporate engagement. Molterer said companies invested 1.25% of GDP in RD&I, below Japan’s 2.6% or South Korea’s 3.5% and so even in fields where the EU has a research advantage, such as nanotechnology, it was failing to translate into products.

Hauser, who is also an angel investor and partner at VC firm Amadeus Capital Partners, was more pithy. As an Austrian he said the country was a microcosm of what was happening in the EU and the world. Hauser said the continent was “pissing away” its research leadership in, say, quantum through a lack of industrial investment by corporations and a lack of large funds to scale the ideas. Europe remains a “disaster” in translating technology, according to Hauser, but a “likeable partner for the US and China perhaps because we are so weak”.

Partnerships, however, matter, he added. And Gwennael Joliff-Bottrell, director general for research and innovation, highlighted one such partnership, the Breakthrough Clean Energy Innovations fund between the EC and the Microsoft software firm co-founder Bill Gates-backed VC firm to “invest patient capital” in a gap in the market between grants and bankable projects.

Other similar initiatives included the EIB’s Thematic Investment Platforms, initially covering the bio-economy, according to Shiva Dustdar, head of division at the Innovation Finance Advisory section of the EIB. Dustdar said its call for a fund manager to run this bio program would close this month. And Henri-Francois Boedt, senior loan officer at the EIB’s InnovFin Infectious Diseases Finance Facility, described how it backed nine of the 117 requests in this field since 2015.

One such project, F2G, tackling fungal infections, signed a €24m loan with the EIB on stage and Ian Nicholson and Ralf Schmid, CEO and chief financial officer at F2G respectively, laid out what this type of backing meant – patients with these types of fungal infection have a 90% to 100% mortality rate if untreated within six weeks and existing treatments now have been compromised by antibiotics resistance strains. “Nothing is possible without the EC,” they said.

But rarely is this message communicated, let alone well. Dry focus on figures and statistics, poor presentations and sparse attendance diminishes the impact of the work being done to improve people’s quality of lives. In a time of shortened attention spans and febrile discussion boards and active misinformation spread to corrupt the polity this weakness is unacceptable.

Sixty years ago Carl Gustav Jung, a noted collaborator with Viennese psychoanalyst Sigmund Freud, wrote in the Undiscovered Self: “Everywhere in the West there are subversive minorities who, sheltered by our humanitarianism and our sense of justice, hold the incendiary torches ready, with nothing to stop the spread of their ideas except the critical reason of a single, fairly intelligent, mentally stable stratum of the population. One should not, however, overestimate the thickness of this stratum. Taking plebiscites as a criterion, one could on an optimistic estimate put its upper limit at about 40% of the electorate….

“The mass crushes out the insight and reflection that are still possible with the individual, and this necessarily leads to doctrinaire and authoritarian tyranny if ever the constitutional State should succumb to a fit of weakness.”