Empire Building?

The Economist (TE) in its Charlemagne column of 13 October offers an explanation of why Europe (i.e. the EU) will “…never produce a Google”.

https://www.economist.com/europe/2018/10/13/europes-history-explains-why-it-will-never-produce-a-google

Europe lacks large firms in areas like social media, e-commerce and cloud computing comparable in scale to America’s Google and Microsoft, or China’s Alibaba and Baidu.”

Europe’s history explains the lag. … All this [diversity] created competition. Today, however, Europe’s patchwork is a disadvantage. New technologies require vast lakes of data, skilled labour and capital. Despite the EU’s single market, in Europe these often remain in national ponds. Language divides get in the way.”

Europe-US stocks

While this explanation isn’t wrong, it isn’t complete. The author cites history but perhaps the answer has as much to do with ‘the art of the possible’ (i.e. politics). As usual, TE lazily equates the EU with Europe and in so doing leads itself astray. There are successful global industries and companies in Europe (e.g. finance in London, Airbus and, for a while, Nokia in Finland). But these are, as they must be, in member states but not in the EU (unless you equate that with Europe as J-C and TE so often do).

What distinguishes Beijing, Boston, Shanghai, Stanford, and many other locations of digital innovation, from Europe’s centres of digital innovation? Nothing, except that the places mentioned, and all those not mentioned, are based in nations. ‘Europe’ is a geographical term comprising a collection of distinct nations: the EU is a legal entity, a government, but without legal entitlement to a territory (excepting, perhaps, diplomatic enclaves) and therefore it has no companies.

What would it take for the EU (as distinct from ‘Europe’) to compete commercially with China or the USA? The EU cannot produce major international companies itself; it is a government only and to support an industry it would need some territory among other things (such as, for example, the right to tax company profits). What would the EU do with its own national identity, which it lacks?

Let’s imagine, just for a moment, that the EU has some legally defined territorial identity and the powers that go with that; and let’s call it, fancifully, an ‘empire’. It might build a high-tech research institute, such as the universities in Beijing, Boston, Shanghai and Stanford, with spun-off, independent entrepreneurs starting up and growing into major international companies, but based in EU territory rather than in the territory of a member state. This is fanciful we know but bear with us for a little longer while we digress through a little bit of background.

Which Europe?

The EU sees itself (or, more habitually, “Europe”) as a major international player and as a potential super-power to match China and the USA. We can’t find their own explanation of why this “Europe” has not produced any companies to match, for example, Google, Alibaba, Amazon, or Tencent, but they do seem to believe that this is possible. Here is Jean-Claude Juncker from his State of the European Union (SOTEU) speech to the European Parliament in September:

https://ec.europa.eu/commission/sites/beta-political/files/soteu2018-speech_en_0.pdf

Only a strong and united Europe can master the challenges of global digitisation.”

A strong and united Europe is what allows its Member States to reach for the stars. It is our Galileo programme that is today keeping Europe in the space race.”

So the EU (sorry – “Europe”) can do something (though Galileo is a project not a company) but only if it continues on its path of unification. We disagree with the notion that ever closer union could produce European companies that match, in scale and performance, the likes of those mentioned above. ‘Europe’ could do this, without unification, but only in the sense that a European nation (or more than one – consider Airbus) could give it a legal identity.

Is the EU ambitious to become an empire*? And is the ambition for a ‘defence’ force, a police force and its own intelligence service part of the answer?

Here is J-C again in his SOTEU 2018 speech:J-C-5

If Europe were to unite all the political, economic and military might of its nations, its role in the world could be strengthened.”

Now perhaps we are getting to the point: if the EU were unified, politically, economically and militarily (particularly if ‘qualified majority voting’ became the norm) then the federal government of the EU would be in a strong position to hijack suitable sovereignty from its member states or, at the very least, to treat the whole land area of the EU as its legal territory as it gained full command over its members. Then it could set up, oversee and tax companies (whether competently or not is a different question).Order restored-2

Is this realistic? As things stand – no, not at all. But if the EU were ‘unified’ – “a strong and united Europe” – would it then become realistic? Probably yes. However, if member states, and their citizens, see this coming they would surely choose to head off further unification. And thereby put the kybosh on the EU dream (or nightmare).

____________________________________

*Here are two dictionary versions of the term ‘empire’; reflect particularly on the second:

an extensive group of states or countries ruled over by a single monarch, an oligarchy, or a sovereign state.”

supreme political power over several countries when exercised by a single authority.”

[from Middle English: via Old French from Latin imperium, related to imperare  ‘to command’]

 

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