China, Silicon Valley, Russia — and the end of Europe’s economic holiday
Until now, Draghi’s report has had one tangible impact. It has prompted industries to produce new reports claiming they can bridge the gaps he identified and, therefore, deserve exemptions from legislation, additional funding, and political attention. This reaction has created a “more, more, more, me, me, me” echo chamber full of squawking parrots and bleating sheep from which social media eagerly learns. In the Netherlands alone, four national strategy reports were released in just a couple of weeks.
Don’t get me wrong: this is not an argument against strengthening, embracing, and developing a strong, resilient, and intelligent (digital) industry. However, a few fundamental questions underlying the need for action must be answered first if we are to escape the echo chamber. It is difficult, but we need to be honest and admit that the way we have structured the economy over the last 40 years no longer works. The free-market mechanisms and attempts to bring public services into the market have not worked as well as anticipated, and long-term planning has largely been absent. Otherwise, we would not be in the current situation.
Let’s be honest: the hailed free market, left to itself, doesn’t seem to work, and when you talk about government intervention, invasive rules, and regulations are often the first things that come to mind — at least until an industry is in trouble and needs to be saved. This brings us to the fundamental question: what role do we want the government to play in the economy? That is followed by the question of who will pay for it. Yes: taxes, the thing everybody claims to hate and avoid, but from which everybody benefits.
Judging from the industry’s great diligence and conscientiousness in producing report after report, the urgency is high. However, independent outsiders rarely write these reports. These reports are often authored by the very captains of industry who made their careers in the past decades. Now they mount the pulpit to preach fire, brimstone, and damnation. The evil spirits of Russia, the US, and China can only be exorcised, banished, and cast out by spending, investing, and subsidising. That is the only way to cast away the black, heavy, dark thunderclouds that are gathering on the horizon and drifting our way, ready to unleash a devastating storm. But thunderstorms don’t come into existence at the swing of a magic wand; they result from two or more elements triggering an exponential growth scenario, the very kind of growth every business strives for.
Let’s have a look at some of these elements. We start with the Chinese elements. China has become the world’s factory and just reported a trade surplus of $ 1 trillion. This didn’t come overnight. It is a development started in the 1980s: a long-term view, part of China’s heritage. Think about Hong Kong. China waited almost 100 years for Hong Kong to return; by then it had become a fully developed regional commercial hotspot under British rule.
Let’s proceed with the American element, or rather the Silicon Valley way of working, practised and preached since the 1980s. And actually, the Silicon Valley way of working is a monoculture. They throw a lot of ideas against the wall, throw a lot of money at it and see what sticks. Whatever sticks is scaled very quickly, systematically neglecting social, democratic, and security externalities. It’s an unbelievably powerful and destructive mechanism.
Let’s close with the Russian element and Stalin’s most famous line, widely attributed to him: “A single death is a tragedy; a million deaths is a statistic.” Russia is a ruthless machine willing to absorb enormous human costs for strategic goals, with a massive amount of unexploited fossil fuels as strategic leverage. The Soviet Union imploded at the end of the 1980s and in the early 1990s, and today Russia is prepared to do whatever it takes to reclaim its sphere of influence.
Together, these three elements form the pressure fronts that collide over Europe. Europe, which, as former NATO Secretary General Jaap de Hoop Scheffer put it, became lazy by outsourcing its manufacturing to China, relied on Russia for its energy, and trusted the United States for its defence. This trajectory began in the 1980s and 1990s with the full embrace of the neoliberal thought framework. It accelerated with the belief that the Western way of thinking was the only viable option after the Berlin Wall came down: the end of history.
However, the comfortable zipping cocktails at the swimming pool while the world worked came to an abrupt end with Russia’s invasion of Ukraine, followed by the election of Donald Trump, and China’s “sudden” dominance of critical supplies and technological advancements in many fields like robotics, cars, green tech, and dark factories.
If Buzz Lightyear were here, we would have called him to the rescue. But he isn’t, so we take the second-best option: the government. In a former post, ‘Violence, governance and digitisation’ (only in Dutch), I wrote that the role of the government and the way we pay taxes needs to be drastically reviewed. So, yes, probably more data centres, but not by redefining the role of public governance and institutions in the economy. Because it is not just the economy, stupid, it’s also healthcare, education, green tech and the protection of biodiversity. The economy is just an abstraction layer on society. Any U-turn or hairpin bend we take now will shape the world that future generations will have to live in around 2065–2070.
