Wednesday, 25 April 2018

A cartel won't be dynamic - why the EU is bound to fail

Europe, and the EU in particular, is set up to fail in the technologies that matter for the future. 

European society and industry are not ready for the big changes needed to make the transition to next-generation technologies. The EU continues to live off the dividends of the past. The biggest IT and biotech companies are all American, and it looks increasingly as though the battle for the next generation cars and the artificial intelligence industry in general is going to be one between the US and China. 

Who says so? Wolfgang Munchau on his pro-European website, Eurointelligence:

"...the political system is failing to provide the conditions for the EU to adjust to the new world. The EU was originally conceived as a producers' cartel. Protecting the likes of Volkswagen through golden shares and fake emission tests seemed at one time to be a good idea to bolster domestic industry against competition. But it does not look so good at a time when the car industry faces two simultaneous technological revolutions - from fuel-drive to electric, and from self-driven to driver-less. "

On artificial intelligence he notes top academics saying "Europe is not keeping up: most of the top labs, as well as the top places to do a PhD, are located in North America."

Munchau goes on to say "The problem is Europe's inability to organise an intersection between academia and the private sector. It is interesting that the two universities mentioned - Cambridge and ETH Zurich - are either outside the EU or will be will be soon. The scientists are advocating the creation of a pan-European research institute to which academics can contribute. They are saying the problem is not a lack of money but a lack of researchers doing work on systems with actual industrial potential."

Germany's economy is faltering - retail sales have "crashed" in the last six monthly reports and exports are flat** - so it is difficult to see the EU doing well in the short term. The structural problems Munchau describes are more serious long term strategic weaknesses. With some economists saying that the UK is already £100bn better off so far than the Project Fear estimates*** this would be a very,very bad time indeed for the UK to stay hitched to the EU cartel in a customs union.

*The Old World and the New, Eurointelligence, 25 April 2018

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