Blue Model Brussels
EU Corporatism Stifles Digital Age Promise

“Why is there no European Google?” It’s a question we’ve been asking—and exploring the answers to—for a while now. A piece today in Politico Europe indicates that some people on the other side of the pond might be starting to catch on to the key issues here, too. John Springford, a fellow at the Centre for European Reform, argues that:

Brussels mandarins bemoan the lack of a “European Google,” and think they can help create one. Fearing that it is engaged in a race to create online giants — and losing it — the EU is resting on an outdated economic idea: the “national champion,” elevated to the European level.

The European Commission’s strategy for the digital single market contains some good ideas: harmonizing online consumer protection rules, curbing “geo-blocking,” which is used to charge different prices in different countries, and reducing VAT compliance costs, to name a few.

But the EU wants to liberalize while giving European companies a helping hand.

By a helping hand, of course, leaders in Brussels mean cracking down on the American competition, particularly Google. It’s corporate welfare by way of regulation. Not surprisingly, it winds up in practice being the opponent of liberalization, protecting large corporations on the old European model from their modern competitors. The results are not good:

Manufacturing productivity on both continents grew at 3 percent a year between 1995 and 2007; but services productivity grew at 3 percent a year in the U.S., and just 1.3 percent in the EU. The difference was mostly due to a surge of American information technology investment.

And as we’ve pointed out before, there’s a significant gap between the U.S. and EU when it comes to the emergence of “unicorns”—start-ups that reach a valuation of $1B.The “third industrial revolution” of the digital age is creating a lag in Europe, where the legal and cultural climate is not conducive to the kind of creative destruction from which successful tech companies emerge.

It’s good to see these issues get a bit of organic attention in Europe, and even more heartening to see some of the correct diagnoses being made as to why there’s no “European Google.” But nobody should underestimate the scale of the shift that would be required on “the Continent” to adjust for the 21st century a corporatist model that dates back to before Bismark and Colbert.

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