Apropos Mario Draghi’s competitiveness report: Regarding digitalization, he noted that 🇪🇺 EU’s competitiveness would be slightly higher than the U.S.’s, but if you factor back in the 🇺🇸 U.S. digital sector, the EU’s chronically weak productivity becomes clear. This highlights that #digitalization is a key driver of growth and prosperity, rather than traditional factors like labor costs and flexibility. The engine of digitalization is #innovation, driven by #skills, #education, and #entrepreneurship. The report urges closing the innovation gap with the U.S., which requires interventions of historic proportions. While roughly the same companies are driving innovation in Europe today as they were 20 years ago, in the U.S. (and China), today’s innovators are entirely different from those of 20 years ago. Also, 30% of European 🇪🇺 unicorns have left Europe due to structural burdens and lack of scalability.
While Draghi does not advocate a relaxation of enforcement, he calls for competition law that is more flexible towards innovation. Bringing the EU back on track will require an estimated investment of $880 billion, equivalent to 5 percentage points of GDP (for comparison, the Marshall Plan contributed only 2-3% to GDP, while Germany grew around 10% in the 1950s). Without deep structural reforms, better policy coordination, and political unity, this will not be possible. What is not needed, based on this report, is certainly not more regulation, but rather more focused regulation. The EU has over 60% more regulatory pieces than the U.S., and tech companies in the EU face 100 tech-focused laws and 270 regulators active in digital networks across all member states (p. 26). While some of the new digital regulations enhance safety and security and may trigger innovation (although mainly targeted towards U.S. big tech or Chinese firms concerning digitial infrastructure), they do not boost the productivity needed to sustain Europe’s competitiveness and prosperity.
