EU’s lack of technological innovation is fundamental strategic flaw

The EU appears to have a tech innovation problem despite getting much else right.

The vast majority of apps and tech-based platforms that EU citizens depend on are US-made. Just the dominance of Apple and Microsoft alone when it comes to our computers and phones is gargantuan.

Then you have Uber, Airbnb, Google Maps, WhatsApp, Skype, Instagram, even dating apps like Tinder and Bumble. And of course there is the all-powerful tech app behemoth — certainly for younger generations — that is TikTok from China and which wields enormous influence.

“Europe significantly lags behind the US and China as a tech power,” says the Twitter account Science Is Strategic, highlighting how this “tech stagnation” has serious “economic consequences for Europe’s prosperity and beyond”.

Data-rich 🧵 below on the economic consequences of tech stagnation for Europe’s prosperity and beyond (1/25)

Cc: @GerardAraud @Noahpinion @erikbryn @paulg pic.twitter.com/bObDsHPCQK

— Science Is Strategic (@scienceisstrat1) August 20, 2023

This lack of tech innovation represents a major strategic flaw for the EU’s proclaimed vision.

In the name of environmental concerns the EU is focusing on deindustrialisation and considering ideas such as “degrowth”, even though it doesn’t have the technological depth or replacement capacity that might help facilitate the transition and mitigate the economic consequences.

“Germany is losing competitiveness. We are experiencing a creeping process of de-industrialisation,” CDU leader Friedrich Merz warned. https://t.co/OOH8HWj28Z

— Brussels Signal (@brusselssignal) July 31, 2023

In its efforts to regulate and level the business playing field, the EU too often churns out unnecessary red tape that restricts innovation and entrepreneurship.

The EU does have successful tech companies like Airbus, the multinational aerospace designer and manufacturer, and ASML, the Dutch company that manufacturers machines used to produce computer chips. These “are genuinely world leading”, Science Is Strategic says.

But the bloc doesn’t have enough of these sorts of companies — especially when you consider it is drawing on 27 developed nations — and its dominance remains in traditional sectors such as tourism and producing the likes of luxury, more high-end goods.

“The overall risk for Europe is that its prosperity and influence will continue to decline given how important technology is to economic vitality and competitiveness,” Science Is Strategic notes. “Slowing tech competitiveness has already contributed to lower levels of productivity growth and per capita income in Europe [versus] the U.S.”

Looking to the future — one that is obviously going to be more technologically orientated — this lack of technological diversity does not bode well. It is another symptom of a lack of dynamic thinking and action in the EU mainframe that leaves the bloc strategically compromised compared to the US and China.

The EU clearly is not blind to the future, and in some areas it arguably has more “vision”. As Science is Strategic notes, “Europe has taken climate change more seriously than other major powers”.

But it lacks flexibility and too often puts all its eggs in one basket to pursue grandiose schemes that lack practicality. The counter-productive results are clear to see: the US economy and the Eurozone were roughly the same size in 2008—the US is now nearly twice as big.

“In terms of overall venture funding, the US  towers over all other countries,” Science is Strategic says. “Europe’s large economies like France and Germany underperform given their size.”

Germany has long been regarded as the engine of the European economy but that engine is sputtering and the “Sick Man of Europe” label is starting to stick. https://t.co/qzaQsHznz9

— Brussels Signal (@brusselssignal) August 2, 2023

While the EU busies itself with focusing on its Digital Services Act and AI Act in an attempt to regulate the internet and artificial intelligence, when it comes to being proactive in terms of actual AI research, publication of AI scientific papers, and private investment in artificial intelligence, the EU is falling further behind the US and China.

In terms of AI funding, Europe 🇪🇺 is a distant third to the US 🇺🇸 and China 🇨🇳.

It’s not even close (7/25) pic.twitter.com/mlfkCkYQmu

— Science Is Strategic (@scienceisstrat1) August 20, 2023

The EU gets a lot right, especially compared to the US and China. It remains healthier and safer than the US, while compared to the authoritarian ways of China it’s a libertarian paradise.

As the current surge of migrants and refugees around the borders of Europe attests to, no one can dispute that Europe retains a huge appeal to many coming from countries that can not come close in terms of providing rule of law, protection of civil liberties and a social contract and welfare services.

But highly skilled immigrants “express preferences to move to the US” — as well as to the UK — “ahead of all European countries by a wide margin”, Science by Strategy notes. “Slowing tech competitiveness has already contributed to lower levels of productivity growth and per capita income in Europe [versus] the US.”

Europe has been and remains a significant research and development spender — but it was recently overtaken by China which has thrown the proverbial kitchen sink at R&D.

Even the US is feeling the heat from China too. A Goldman Sachs forecast for 2075 predicts the world’s three largest economies will be China followed by India with the US in third place.

And where’s Europe’s economy in 2075? “No European country is even close”, Science by Strategy notes (and as the graph makes abundantly clear).

Others counter the somewhat pessimistic take by Science is Strategy, suggesting it is less the case that Europe is declining and more that other nations are catching up.

Either way, the figures indicate that the EU for all its efforts and money spent appears to do a worse job than the US and China of turning investments into actual jobs and companies.

That needs remedying if the EU is to compete and hold its own in a 21st-century global—perhaps even interplanetary—economy and marketplace.