Even though I don't live in a place that's been locked down by the coronavirus, I've been taking precautions like avoiding crowded places, and this has meant a lot of long walks have replaced my gym sessions this weekend. Naturally when I go for these walks I think a lot of deep thoughts, and so today I chewed over a question that's been bothering me for about 15 years: Is Europe setting itself up for irrelevancy?
The root of this question is a conversation I had in my very first week at journalism school, when I engaged one of my fellow students on her thoughts on China. I don't know how we got there, but she was very in favor of China's rise, and predicted that Europe would be irrelevant in the coming century. This was kind of blasphemous to me, in part because I was (and still am) an advocate of Western liberal democracy over China's corporatist authoritarianism.
A few months later I attended a talk at school about Latin America, and was struck by one of the journalists there saying that Latin America had made itself irrelevant. I didn't know much about the history of the region, but the idea stuck with me.
In any case I kept both those thoughts in mind for years, so that when I got to that book I've referenced before, The Nordic Theory of Everything by Anu Partanen, something in my brain dredged them up.
As I've said, I'm keen as any leftie to remake the US in the image of a Nordic social democracy, but something about Partanen's tone struck me as off. It took a while to realize that she was completely leaving out China (and Asia generally) from her analysis. That is to say, yes, it would be great if the US would guarantee healthcare, parental leave, good-quality education and so forth, but the big Asian economies aren't moving in that direction - so is it really a prerequisite for competing in the future?
Probably, but then Europe has other problems beyond this complacency (which is, by the way, very Nordic). That's been brought home to me by the discussion around the role of Huawei in delivering 5G.
Europe is, oddly, probably better placed than the US to deliver 5G network infrastructure, because it's home to two companies that build such equipment: Ericsson and Nokia (also both Nordic, funnily enough). That said, Huawei is enormous, and already in most operators' networks worldwide, giving it a head start of years compared with those two... and an even wider head start over any US competitors.
This hasn't stopped the US from raising concerns about whether Huawei's equipment is trustworthy - concerns that at least a bit valid, even if the administration is acting on them in a pretty ham-handed way. Yet the US's position is weakened by the fact that, as noted, neither Ericsson nor Nokia (nor both in concert) is ready to position themselves as a counter-weight to Huawei. Without getting into the merits of the "race for 5G" (which I think is a stupid talking point), any country that refuses to use any Huawei equipment risks delivering an inferior network experience, at greater expense and over a longer time.
So where does Europe's supposed irrelevancy come in here? The fact is that European companies haven't been able to grow to the scale of US or Chinese companies. This could be because of the regulatory environment (i.e. the fact that a regulatory environment exists in Europe, whereas it doesn't in China or the US), or it could be because both China and the US are more willing to let companies grow monstrously big to "compete on a global level".
The EU on its own is comfortably larger than the US, and if you add in non-EU European countries you'd add a further 100 million inhabitants... and that's without including Russia. But what I believe hamstrings it in this sphere is the still very fragmented state of business - there are a number of pan-European firms, but they tend to be smaller than US counterparts... or owned by them.
And the situation in tech is worse. I don't believe that Europe is a tech wasteland, because there are some notable companies that have come from there. The problem is that Microsoft has bought all of them (a slight exaggeration, but still).
Where the political fragmentation hurts Europe, even despite the presence of the European Union, is that certain things are still done in a certain way in Italy, compared with Germany, compared with France, and so on. Certain countries' labor markets are more flexible and dynamic than those elsewhere, so all the young people leave their home countries and go to the places where they'll find jobs. This creates a high degree of noise to signal for any budding entrepreneurs, while also starving their home countries of the experience needed to build an innovation ecosystem.
And because I'm a whining Remoaner, it's worth pointing out that leaving the EU won't fix this issue, but rather make it worse. It's not pro-EU propaganda to point out that companies want to do business in a harmonized environment, and when multiple countries harmonize their environments it becomes easier to conduct that business.
To summarize, the problem for Europe is creating enough space for innovative companies to flourish without all decamping to the Silicon Valley (this is a two-fer of self-interest for me, because it makes Europe more dynamic and it keeps loads of Europeans from coming here to the Bay Area and putting even more strain on it). Part of the problem is being able to scale a company to a point where it can compete globally, and the other part is simply having room in the market to do things in tech - for example, who needs another search engine when everybody just uses Google?
This assumes that having large companies is the only measure of success, which to be clear I don't believe. Germany's economy is built on an enormous number of small and medium-sized enterprises that act as suppliers to big ones, for example in the car industry. But having enough small companies creating goods that are in demand is an important prerequisite.
I don't believe that European countries are setting themselves up well to do that. Too many of them are still too protectionist (for example France and its insistence on farming subsidies), while attempts to limit movement from outside the EU, or from the EU into Britain, won't help the underlying causes of population movement.
In fact, if we take a look at the history of Latin America, there was a time when countries like Argentina, Brazil and Chile were much more active internationally. However, they fell into a period of economic nationalism, political populism and military rule, which caused them to fall behind the countries of Europe. Folks in the global north may know of Eva Peron from Andrew Lloyd Webber's musical Evita, but in truth her husband's regime made Argentina ungovernable, and ripe for the military takeover that blighted the country for decades.
As Europe splits off into different populist or nationalist camps, whether in Hungary, Poland or the UK, they should look at the history of Latin http://frad-lab.blogspot.com/2020/03/how-scandinavian-design-and-social.htmlAmerica and avoid the pitfalls those companies hit, to avoid the same fate.
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