Financial Times - Can Europe Make a Difference?
Open Markets Europe director Max von Thun argued in this co-written article that Europe has an opportunity to counter concentrated tech power and assert global economic leadership by aligning digital markets with democratic values and deeper economic integration
I was in Italy last week to attend the Aspen Europe security conference, but also to escape the sense of dread I’ve felt since the Iran war began. As Ruchir Sharma recently wrote in the pages of the FT, America’s fundamental economic strengths keep allowing Donald Trump to wreak havoc around the world without totally tanking the US economy (at least not yet). Yes, there’s a good chance the Democrats will sweep not only the House but Senate in the midterms, and then we’ll see what they have to offer up as policy (more on that in a future Note). But in the meantime, I fear that makes Trump even more dangerous.
He and those around him may well be the subject of investigations should Democrats take Congress, and some people in and around the administration could be facing jail time. Like all strongmen, Trump will do whatever he can to prevent that (including, I suspect, trying to derail elections in some way, or perhaps use a reconciliation bill to pay out fiscal stimulus to voters in cheques that he personally signs in advance of voting day). He may also continue to stir up trouble abroad in various ways to further confuse and distract the electorate.
Assuming things don’t get better in the US in the short term, one must ask if they will get better in Europe. Meaning, will Europe recommit to itself to deeper integration? As I’ve written before, I think that if there were a true fiscal union and cross-border risk and burden-sharing between member states, we’d see capital flow into the EU because investors are looking for a dollar hedge. Yes, gold has gone down during the Iran war, but that’s more about the dollar-oil peg and the fact that investors had to sell gold to cover some of the leveraged losses that came from plunging US stocks.
Of course, it’s always easier to see the upside for Europe when you are writing from the US. Various colleagues believe that things have to get a lot worse in Europe before things get better. As my colleague Martin Sandbu noted, last week’s “EU Inc” effort to try and streamline business regulation across the bloc was a poor substitute for real legal and capital integration. It almost makes one wish (almost, not quite) that Trump had invaded Greenland, because a sovereign threat may be what it takes to push European nations to recommit to their own common future.
One might argue that even if that happened, Europe is at a huge disadvantage technologically relative to China and the US. Yes, true enough, there isn’t a European equivalent of the Magnificent Seven or China’s own digital giants. Nor do Europeans want the sort of surveillance state that both China and America seem to be settling for. Yet that might be something of a competitive advantage given that we are starting to see a significant political backlash around Big Tech in the US. Witness last week’s ruling that Meta and Google actually are endangering child mental health with social media, or the pushback in industry and among the general public about the way in which AI data centres are sucking up electricity and raising prices. If Europe could figure out a way to move into the digital future with a stack and a regulatory regime that is more compatible with democratic values, perhaps it could carve out more of a place for itself in the digital world — particularly as AI moves into industry, where European companies are still often world-beaters.
I’m sure some Swamp readers will regard this analysis as Panglossian. But I am looking for bright spots in a dark world, and I think Europe is still one of them. To help me parse these ideas and lay out what can happen — and what is happening — to increase competitiveness on the continent, I’m joined in the Swamp this week by Max von Thun, who runs the Brussels branch of the Open Markets Institute, a non-profit think-tank which is dedicated to combating concentrated power and supporting democratic values.
Max, tell me where Europe is making progress, and where it could still make some. Is there any way that Europe could lead a coalition of “middle powers” of the sort that Mark Carney discussed in his now famous Davos speech? Those powers would represent 40 per cent of global GDP relative to 20 per cent for the US and 20 per cent for China. Help us understand what needs to happen for Europe to get off the sidelines and take a real leadership position in the global economy again.