“Ambrose Evans-Pritchard writes in the Telegraph, Europe has been worrying about economic decline and techno-stagnation for a quarter of a century”
Our Take, With Doug Sheridan
Ambrose Evans-Pritchard writes in the Telegraph, Europe has been worrying about economic decline and techno-stagnation for a quarter of a century. The gnawing angst has finally given way to something closer to panic.
The biannual gathering of the European elites at the Ambrosetti forum was a succession of grim warnings, punctuated by confessions from battle-weary officials that the half-formed structure of the EU makes it almost impossible to solve any of the problems.
The eurozone has scarcely grown for seven quarters, and fiscal austerity has yet to begin. Germany has seen no accumulated growth since 2018. The dawning awareness that next year may be just as bad has finished all remaining illusions.
So has fear of the “China shock 2.0”, this time larger and rising far up the technological ladder. “If we go on like this, Europe is simply going to die,” said a doyen of the EU illuminati.
“America innovates, China replicates, Europe regulates. It is an extraordinary picture of our situation, because it’s true,” said Italy’s prime minister, Giorgia Meloni. “In 1990 the EU of 12 states made up 26.5% of world GDP. Today the EU of 27 states makes up 16.1%, while the US is still at 26%."
The long-awaited report on Europe’s crisis of competitiveness by Mario Draghi, the man who saved Italy but lost Germany in the process, landed this week with a polite warning that the EU has shot itself in the foot.
Mr Draghi said disposable income per capita in the EU had grown at half the pace of the US since 2000. The culprit is the technology sector. “The main reason EU productivity diverged from the US in the mid-1990s was Europe’s failure to capitalise on the first digital revolution,” he said.
It's a bleak outlook. Europe does not know how to make 21st century computers on wheels and cannot make the batteries needed to power them at competitive cost. Chinese carmakers are “one generation ahead of Europeans in terms of technology in virtually all domains, including EV performance, software, user experience, and development time.
Where did it all go wrong? Exorbitant energy costs are part of the story, as are the shallow pool of venture capital and the failure to create a genuine EU capital market (that was in London). But the rot goes back further and has much to do with the coddling of vested interests.
The report concluded, “Europe is stuck in a static industrial structure with few new companies rising up to disrupt existing industries or develop new growth engines. The top three investors in R&I [research and innovation] in Europe have been dominated by automotive companies for the past 20 years.
Our Take: Until Europe stops basing it's thinking on conceits espoused by leftist economists like Thomas Piketty, and embraces those of economists like Hayek, the European Union will continue to fade from relevance. The first step should be to drop its strange fixation on netzero—it's not the lifeboat elites say it is.