Europe’s technological departure is now obvious. A little flashback. In a formidable effort to catch up after World War II, the ratio of labor productivity to that of the United States increased rapidly, from 25%, in 1945, 100%, in 1995. This crazy rise inspired the so-called “Lisbon” strategy. At the end of 1999, the economic growth of the European Union at 15 caps at 2.8% when that of the United States is at 3.6%, thanks in particular to the wide diffusion of new information and communication technologies. But the euro has just been successfully launched, unemployment is falling massively, debts are being absorbed – the late “pot” of Christian Sautter, the French Minister of the Economy at the time – and optimism is in order.
In March 2000, European heads of state developed the Lisbon strategy, aiming to make the EU “the most competitive and dynamic knowledge-based economy in the world” by 2010. This ranting goes relatively unnoticed. Fortunately, since, from 2004, an evaluation report highlighted the weaknesses of this project with too many, too ambitious and partially contradictory objectives. Well-founded questioning: on the eve of the 2008 financial crisis, the productivity ratio between the euro zone and the United States had fallen to 80%.
Explaining this productivity gap, which has only widened to reach 31% at the end of last year, has become the quest of many European economists. If the prize for the most original thesis goes to the generalization of the taking of amphetamines supposed to fight against the attention disorders of more than 10 million Americans, the most serious idea is that Europe has not not invested enough in new technologies. These are available identically all over the world, so anyone could grab them. The proof is that young companies experience increases in productivity almost 3 times higher than those of their older counterparts. But these companies can be counted on the fingers of one hand and do not know how to grow. The fragmentation of European markets means that companies with more than 250 employees represent only 30% of total employment, compared to double that in the United States.
The curse of fragmented markets
As the European elections loom, getting out of the technological rut requires awareness. Salvation will not come from more public investment in research and development. Over the last decade in Europe, R&D spending increased from 2.1 to 2.2% of GDP, when it jumped by 2.7 to 3.5% across the Atlantic, thanks to the private sector. European companies will only take the risk of investing if they think they will find sufficient outlets. Fragmented markets are our curse. In this respect, the report by the former President of the Italian Council Enrico Letta on the future of the single market, submitted on April 18, puts forward an interesting idea: producing a European Code of business law, the 28th alongside those of each of the Twenty-Seven, which would be recognized as equivalent.
When an area is technologically behind, catching up involves the installation of foreign companies to capture their know-how, which will then spread. This is what Tesla experienced with its Shanghai factory, largely subsidized by Beijing, whose aluminum gigapress process was adopted by all local manufacturers.
To encourage innovative companies, beyond subsidies, we need zero-interest debt, which makes it possible to reduce the cost of investments and, above all, of massive public procurement. The American secret lies in the capacity of public actors, notably the Department of Defense, to purchase innovative products and services in large quantities. Finally, we must put an end to the siphoning of European savings. Since 2012, the outstanding amounts of euro zone savers in American public debt increased from 500 to 1,600 billion dollars. A large popular bond, with a yield higher than American bonds, would be a nice snub.
Robin Rivaton is Managing Director of Stonal and member of the Scientific Council of the Foundation for Political Innovation (Fondapol)
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