Democracy & Technology Blog Growth and Jobs for Europe?

EUROCHAMBRES, the association of European chambers of commerce, has a new report out measuring the EU’s progress achieving its ambitious plan of becoming “the most dynamic and competitive knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion, and respect for the environment.” Unfortunately, the report concludes that the EU is still losing ground.

In two years’ time, the gap EU-US (sic) has widened for all economic indicators:

  • Income (GDP per capita). The current EU level for income was achieved by the US in 1985. Since the first edition of the study, the time gap has increased by 3 years;
  • Employment and R&D. Both the current EU levels for employment and R&D investment per capita were reached by the US in 1978. (+3 years and +5 years respectively);
  • Productivity (GDP per employed). The current EU productivity level was achieved by the US in 1989 (+3 years).
  • The current EU level of Internet users per capita was reached by the US in 2002. The gap for this indicator was assessed for the first time in this edition of the study.
  • European leaders are attempting to overtake the U.S. without cutting taxes or reducing regulation. That’s what they mean when they talk about sustainable economic growth, social cohesion and respect for the environment. I hope they’re successful, but I fear they’ve set unrealistic goals and will continue to punish innovative American companies as a result. After accusing Microsoft of market dominance for commanding a mere 34% of the server market in the aggregate, European Union regulators have turned their attention to other successful American companies. Qualcomm, which offers discounts on bundled products, and Intel, which offers volume discounts, are both under investigation as a result of complaints the EU has received from American and European competitors. This is because the current generation of European leaders, like their mercantilist forbears, possess a vision of finite possibilities in which one country’s success comes at the expense of another’s. At least that’s how I interpret the following passage from a high-level report prepared by the EU in 2004:

    Europe has to develop its own area of specialisms, excellence and comparative advantage which inevitably must lie in a commitment to the knowledge economy in its widest sense — but here it is confronted by the dominance of the US. The US threatens to consolidate its leadership. The US accounts for 74 % of top 300 IT companies and 46 % of top 300 firms ranked by R & D spending. The EU’s world share of exports of high-tech products is lower than that of the US; the share of high-tech manufacturing in total value added and numbers employed in high-tech manufacturing are also lower. In a global economy, Europe has no option but radically to improve its knowledge economy and underlying economic performance if it is to respond to the challenges of Asia and the US.

    In fact, “economic integration runs deep,” as the EU commissioner for the internal market and services, Charlie McCreevy, noted this week in a Wall Street Journal column comparing Sarbanes-Oxley to the Europe’s more cautious approach in regulating financial markets. The EU resisted the temptation to impose Sarbanes-Oxley regulation and this is a key reason their capital markets are thriving and outperforming ours as a result. Some Europeans are celebrating, but McCreevy pointed out “anything that hurts U.S. capital markets also hurts European companies and our economy.” That’s how the U.S. and the EU need to view antitrust and competition policy. Since we’re economically integrated, anything that harms innovation on one side of the Atlantic hurts companies and the economy on the other side. And obviously the reverse also must be true.

    Hance Haney

    Director and Senior Fellow of the Technology & Democracy Project
    Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.