The European Union is losing the race for new technologies

Takeaway

Banerji: Europe has a second chance. Arup Banerji, the World Bank Group Regional Director for the European Union, presented highlights of the Europe 4.0 report, which will be published this spring. It shows that Europe is currently lagging behind the United States and China in the global technology race. Europeans are still leaders when it comes to traditional industry, but European companies are no longer on the podium in the sector of new technologies. This is bad news for the future of the continent, because technologies makes it possible to create new products and services, as well as increase the productivity of existing businesses. Banerji distinguished three types of technologies: transactional (including cloud services, machine learning), informational (including platforms) and operational (e.g. robots, drones, 3D printing).

Banerji: competition or competitiveness. Operating technologies partially replace employees. The dissemination of such technologies will increase the competitive force of European industrial giants, but this, in turn, will promote an oligopolistic approach and reduce competition in the internal market. It can be countered by developing and providing transactional technologies that lower market entry barriers for new businesses and help small businesses compete with larger entities. For new and small companies, the barrier to using technology is often their inability to finance the investment. According to Banerji, Europe lacks the environment to develop medium-sized companies. Innovative startups from Europe usually seek funding on American markets – not because of the better availability of capital, but because of more friendly regulations. As a result, Europe is failing to create unicorns despite its enormous potential.

Hakansson: globalisation vs. location. According to Stefan Hakansson, Global Director of City Energy Solutions E.ON, it is a mistake to compare Europe to China or the United States. Real economic progress and development are currently taking place mainly on a local scale, in cities and agglomerations, not entire countries. Meanwhile, European cities – London, Berlin or Paris – are smaller than New York or Beijing, which creates a different environment for business development. Hakansson also believes that the challenges of the climate crisis and the new green deal are an opportunity for the European economy. However, this requires a profound change in the business model that will create added value where we have not seen it so far, for instance, in waste management. An appropriate regulatory environment can simultaneously support climate goals and promote economic development.

Nowohoński: 5G is the highway of the future. Maciej Nowohoński, a member of the management board of Orange Polska, believes that data will be the most important resource in the future. Data transmission, storage and analysis will consume increasingly more energy and resources. Improving data management and ensuring their fast, stable transmission (as in the case of 5G) will create an environment conducive to the development of most traditional industries, as well as entirely new businesses. Nowohoński also said that while the use of economies of scale is fundamental for most modern companies to increase efficiency, one cannot lose sight of the local perspective. According to Nowohoński, many businesses are adapted to operate on a local scale, because this allows them to remain close to their clients and best meet their needs.

Piotrowski: no common market. Jan Piotrowski, editor of the Economist Business Department, is convinced that some EU regulations, such as the unfinished construction of the common market, pose a barrier to development. Piotrowski emphasised that the services that currently form the majority of the European economy are still heavily regulated at the national level. As a result, service companies do not have easy access to consumers in other European countries and cannot take advantage of economies of scale. It is easier to obtain large scale service companies in the US or China, where internal markets are much larger. The lack of access to cheap capital for innovative companies is also unconducive to the development of innovation – the venture capital market is much more shallow in Europe than in the US. The current direction of European policy – supporting selected champions – is a risky path. According to Piotrowski, investments should be decided by the market rather than politicians who make more mistakes in such matters.