Alarms are intensifying about the European Union’s lag in the development of high technologies compared to the United States and China. In 2024, the Draghi and Letta reports dissected the causes of this delay and launched decisive proposals. Draghi has supported a greater public investment effort and estimated that the EU would need to allocate 800 billion euros a year to catch up. Letta underlined the poor capitalization of European companies and estimated the European savings that go to the United States every year at 300 billion euros.
A year later, despite these strong warnings, European inaction is evident. Draghi criticized the fact that only 11% of his proposals have been implemented and that now, to make up for lost time, the necessary investments should be increased to 1.3 billion euros per year. Christine Lagarde, president of the ECB, has just described European inaction as “irresponsible”. And he explained the causes of the flight of European savings: “American markets have offered returns approximately five times higher than European ones since 2000.”
Among the reasons for the superior dynamism of the American and Chinese economies is the greater weight of state intervention in their economies. The eye-opening study analyzes the need for a new industrial policy in the EU The new industrial policy in the European Unionby professors Rafael Myro and Vicente Salas, published by the political economy opinion and reflection group EuropeG.
The study, which delves into the work of Letta and Draghi, calls for a review of the regulation and competition policies applied by the Union. The analysis raises a “trilemma” between industrial policy, regulation and defense of competition. Describe the three scenarios that exist in the world: regulated market (predominance of regulation and competition, which has been the traditional EU model), concerted market (predominance of regulation and industrial policy, close to the US model), e target market (prevalence of competition and industrial policy, similar to the Chinese model). And he underlines that Draghi and Letta “leaned towards intermediate models target market you“organized”.
The authors link the competitive weakness of European companies to the role of the large ones lobby in certain sectors. They remember that industrial policy seeks to correct market failures to preserve the social value of certain goods and services, that the free market responsive to private interests and benefits is less optimal. They explain that industrial policy “is closer to economic planning, that is, to the economic management of the State”.
In Our obsolete market mentality, (1947) Karl Polany had already dismantled the purported benefits of economic liberalism: “During the course of the war,” he explains, “the United Kingdom introduced a fully planned economy and abolished the separation of government and industry resulting from the 19th-century conception of freedom. However, public liberties were never more entrenched than at the height of the war.” We need to recover the classics.
