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Framework Conditions Political discourses are being changed by the digital age. Influencing a society that is open for global tidewaves and that changes with digitization, is more difficult than changing the previous national based industrial society. Digital society moves to quickly for traditional detailed regulation to keep up - and traditional subsidies, tax excemptions or duties must be significant to influence the behavoir of citizens or companies whose wealth increases by 2-3 percent annually. Industrialized countries of the OECD area have recognized in general that the course of society will no longer be controlled nut must be governed by a more complex mix of instrument, under the headline of "framework conditions". In general, framework conditions aim at changing society by making activities or behavior that are to be promoted grow more competitive in comparison to unwanted activities. As illustrated below there exists four types of framework conditions:  1. Regulation a) legislation that prohibit or makes certain behavior mandatory; b) incentives in the form of subsidies, tax excemptions or duties, and public procurement; c) communication, i.e. campaigns, branding activities, standards, etc. Regulation reduces uncertainty and improves transparency in a certain domain, and this promotes the economic investments of the market. It also ensures that competition among companies take place on equal, non-distortive conditions. In general, regulation must not depart too much from the regulation to be expected at the international level. Otherwise investments will seek other regions or countries where this is the case. Therefore, highly intrusive regulation must be promoted at the level of international cooperation, e.g. through the EU or the WTO. Regularion must be designed to be easily administered and complied to, preferably through a digital business system that combines seamless woth the business atoms of citizens or companies. It must be introduced with a realistic deadline so that investments for compliance can be bundled with other investments already planned. Private suppliers of certificates may facilitate that companies are certified to comply with regulation as part of certificates according to other quality standards. 2. Competition If local companies are to play a role in the specific market, the area should be liberalized before this happens in comparable countries and regions. In this way local companies will build a productivity advantage making them competitive on other markets that are liberalized. Regulation of the competition must be highly efficient to ensure that competition remains vigorous and to break up the establishment of oligopolies. Typically competition is strong in new markets, while it tends to be replaced by the dominance of a few firms as products become more mature and competition has weeded out the weak players. Competition works within the limits of regulation, and especially regulation's demands for market information keeps competition transparent and alive. Demands for authorization should be limited to areas where this is highly critical to avoid risks concerning health or safety. 3. Knowledge Markets The need specific for education and training depends on the level and type of knowledge being critical for the business system that is to produce the changed condition. Som industries need shourt courses, other industries lack highly skilled ph.d.s. If the latter is the case, education can only be carried out at reaserch communities at the international level, or grants must be provided to make students qualify themselves in research environments abroad. The consulting industry is an important factor in the diffusion of new knowledge and practices. It learns from hiring highly skilled academic labour, and from projects for advanced leading-edge customers. Regulation may limit the diffusion of knowledge. Demands for certain types of training for performing specific jobs will limit innovation. And incentives, like taxing high incomes, may function as a tax on higher education that will make young people under-invest in their skill profile and limit the adaptability of society. However, regulation is important for the protection of new ideas. The intellectual property system provides, in the one hand, a monopoly for companies or persons on using, selling or licensing innovations. On the other hand, the content of patents must be published with the purpose that others may continue innovation even further. It is a precondition for private investments that advantageous ideas can be protected and traded, making them more profitable and less risky in the long run. 4. Capital Markets Political initiatives would include the stimulation of knowledge intensive capital markets in domains where growth is desired, but where knowledge and transparency make a barrier against investments. Most OECD countries provide co-financing for the exploration phase for high tech or risky industries. General EU and WTO rules against state subsidies, however, set narrow boundaries for the role of the public sector. Furthermore government may facilitate meeting points between entrepreneurs and investors, and offerings of training for entrepreneurs in the production of transparent business plans. Finally, the taxation of capital and companies influence the general access to capital. Most countries set a low level of taxation for companies and capital, recognizing that investements move still more freely across the boundaries of the nation state.
Sources - recommended reading Danish Ministry of Economic and Business Affairs (2002): The Danish Growth Strategy. Schultz. Joseph A. Schumpeter (1942): Capitalism, Socialism and Democracy. Allen and Unwin, London. OECD - publications from the Directorate for Science, Technology and Industry. Christopher Freeman & Luc Soete (1997): The Economics of Industrial Innovation. MIT Press. Niccolo Machiavelli (1512): The Prince.
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