Europe: not a lack of self-confidence, but an excess of regulation
Europe could use a bit more self-confidence when it comes to developing technology, Paul van Gerven wrote in Bits&Chips last month. I agree that we must become more self-reliant and take greater responsibility for our own future. But I don’t believe that a lack of confidence is our biggest problem.
That confidence is very much there. We have ambitious entrepreneurs, a stable and highly capable technology base and, particularly in the Netherlands and the surrounding region, an exceptional track record in disruptive innovation. It’s no coincidence that American investors are highly successful at identifying our most promising growth companies. By contrast, European investors, banks and pension funds often believe they must invest in the US to generate attractive returns. In effect, you could say that Americans are buying our best companies with our own money. In doing so, we surrender control, influence and profits.
We could bring about a major shift if our savings, pension assets and investments flowed directly into our own companies. That would allow us to retain ownership and decision-making power instead of handing them over to a financial system dominated by the US. We would also gain greater operational agility if Europe applied its regulatory framework with less rigidity.
Because access to capital is indeed the only problem. A second, equally damaging issue is that we’ve trapped ourselves in a web of rules. We’ve developed a collective expectation that government should regulate everything. At the same time, governments have increasingly embraced that role themselves. Every incident leads to a new law, every problem to a new regulation. The underlying assumption is that risks can be eliminated by imposing more rules.
The consequences are now visible all around us. Society moves more slowly, organizations become bogged down and innovation-driven problem-solving is held back. There always seems to be a regulation standing in the way of what’s needed at that moment. Governments themselves appear trapped within the systems they’ve created. Major issues such as nitrogen emissions and grid congestion drag on for years without resolution. If there’s one area where a lack of confidence is evident, it’s within administrative and political institutions that no longer dare to deviate from established procedures.
The same pattern can be seen at the European level. On critical issues such as defense and foreign policy, Europe struggles to make decisions, even as the war in Ukraine demands leadership, resolve and strategic direction. No one seems willing to step forward, take responsibility and set a clear course.
Perhaps, then, we should spend less time asking what governments can do more of and more time considering what they should let go. Give entrepreneurs, companies and citizens the freedom to develop solutions. Make outcomes more important than compliance. That requires governments to relinquish some of the power they’ve accumulated, creating space for entrepreneurship, innovation and renewal.
