Edit: As this post has garnered some attention, I’m currently collecting signatures for the five policies outlined below here. If you are in the technology or science ecosystems and agree with the policies, it would be great to count on your signature.


““Europe is rich. [The] question is how you . . . get Europe to regain self-confidence. I’ve never seen anybody succeeding with a lack of confidence,” said Kristalina Georgieva, the IMF’s managing director. “So maybe if the European leaders talk more about what Europe can do rather than what it cannot, we’ll be in a better place.””1

The internet has been awash with anti-europe memes for as long as I can remember. It’s a common experience opening up X and seeing American VCs harp on about how all the EU does is over-regulate and how Europe is doomed to failure. It has become so common that even some Europeans have started to believe this. I will show that the data points to this being largely unwarranted, but that there’s a kernel of truth to the accusation and there is still a case to be made for European Accelerationism.

So what is wrong with Europe?

While it’s unclear what specifically the anti-European argument is, I will attempt to present a steel-man:

  1. Europe does not have the same tech giants that the US, and increasingly China, have.

There’s no question that the “Magnificent 7” stocks are unparalleled world-class companies, having driven 2/3rd of the US public markets growth in 2023. Further, out of the top 50 global companies by market cap, 36 are American, and only 13 are European. Only 24% of the Fortune 500 are European.23

It is clear that given the size of our continent we should be doing much better.

  1. Our investments in AI fall short, in large part as a consequence of the above.

We have fallen behind in AI investment, which is both an existential threat for the EU and evidence of our lack of competitiveness at a global scale.

  1. The EU over-regulates and Europe is overly statist.

It is difficult to come up with an objective metric of this, but it is undoubtedly true that some European countries have excessive bureaucracy, taxation, and are globally uncompetitive. Countries such as Belgium, Germany, Denmark, and Sweden are to the right of the Laffer curve, meaning they would actually increase their tax revenues if they reduced their tax rate.4

The EU is often accused of regulating too much, and we can all point to some instances where this is likely the case, whether it be pseudoscientific food labelling, ESG requirements, or the seemingly never ending list of anti-trust cases against American tech giants. It also has a frighteningly long list of largely unknown agencies and bodies that could surely be rationalised.

Facts about Europe

In doing some research for this essay I put together a small list of things where Europe is world leading. I bet some of them will come as a surprise to the reader. For example, did you know that European countries are among the most tax competitive, or that we have the highest rates of entrepreneurship and business density in the world? Here are a bunch of other indicators, ranging from Economics to Education and Health:

I mean, just look at those stats! It’s hard to argue that we have anything but a truly fantastic continent. To directly address the European doomer arguments however, this is what the data speaks to on the points above:

  1. We have the largest economic market in the world, and the data shows that our tech ecosystem is growing rapidly, fast approaching the world leader.

  2. We produce the most AI research behind China, the second most AI code repositories behind India, and have a very high amount of AI companies; the countries with the highest amount of AI companies per capita are European.

  3. We also have among the most tax competitive, and freest economies on the globe. Our infrastructure is world-leading in so many areas - I hope the reader will pardon a bit of Euromaxxing but we invented the world wide web, we have high speed rail tunnels under the alps and roundabouts under the sea. Among many other examples, Europe is home to CERN, ITER, the Onkalo spent nuclear fuel repository, and the Copernicus programme, but in anything from energy, sea, roads, rail, scientific, and air infra, the only countries that can rival us are the Asian Tigers and Japan. There’s no two ways about it: we are a continent of builders.

Based on the above, I think it’s fair to say that while some of the criticism is entirely valid, the doomerism as a whole is not justified. We live in a brilliant continent, and it’s sometimes easy to forget just how priviledged we are to be in Europe. Lets not let narrative supersede reality.

What can we do to improve?

Still, there is much we can do to improve. We can, and should have high expectations, aiming for being world-leading in every aspect. In the spirit of blog-driven policy making, below are a few proposals to accelerate European potential; Europe on Rails if you will. They are intended to be acceptable across the political spectrum, evidence-based (let’s keep it effective, after all), and relatively easy to implement.5

  1. Corporate tax: change to cash flow tax design

The differences in standards of living between countries is not attributable to technology, the qualities of the workers, or the skills of the entrepreneurs, but to the availability of capital.

This is a quote by Ludwig von Mises, but really it could have been said by any mainstream economist. 67 According to the OECD, corporate tax is the most economically damaging way to raise taxes.8 Due to its inherent mechanism, it is highly distortionary and inefficient, but the good news is that there’s a way to make it much better. Corporate taxes should be made to be cash-flow taxes, meaning that they are only collected when profits are distributed to shareholders instead of on an annual basis, because this incentivises businesses to reinvest their profits into their firms, leading to new capital formation and increased economic growth.

Hierarchy of Taxes

We already have the best global examples of this fiscal design in Estonia and Latvia9, with the UK recently implementing a similar mechanism with full expensing. At the same time, the EU has the power of scale to implement economic literacy across all of its member states, while allowing states to compete with each other on other factors. It stands to reason therefore that the EU should implement this policy across all member states, and other European countries should follow suit.

  1. Common Markets - Defense Procurement, Capital, and Electricity

The second proposal is to build common markets where possible, with the most urgent being for Defense Procurement, Capital, and Electricity.

a) Most economists agree that a common European Capital market will put Europe on much stronger footing10, and the head of the IMF has mentioned this is absolutely key for Europe to fix its economy. This is a policy that requires nothing other than political will, it would vastly improve access to capital across the union and put the risk of stagnation to bed.

b) A common Defense Procurement market would allow our defense-tech sector to thrive, which is necessary now more than ever in the face of increasing threats and authoritarianism globally. Europe faces the very real risk of being the only global power with realistic projection capabilities defending freedom and democracy. It is said that Europe is forged in crises, and what bigger crisis is there than a looming global conflict? We should use this opportunity to create the conditions to develop our homegrown Palantir and Anduril equivalents.

c) The relationship between energy use and economic development is very clear11. To accelerate a transition away from fossil fuels, while powering the electrification and increased demands of a future where AI and other technologies will require abundant amounts of power, we need to facilitate a common energy market. We need to connect Portuguese solar with French nuclear and Danish wind if we are to ever gain strategic autonomy. Luckily great strides have recently been made in this direction and there seems to finally be a political desire to go through with it.12

  1. Standardisation

One of the greatest benefits of the EU is its potential for standardisation across multiple countries. Innovations like the digital single market or the Societas Europea (SE)13 are great but don’t go far enough. Spend enough time with entrepreneurs in Europe and you’ll soon hear horror stories that are hard to believe14. Let’s take a page out of our own best examples, as well as the Indian Digital Public Infrastructure, to vastly reduce our bureacracy and increase our scalability.

a) Build on the SE framework to provide a limited company formation process as quick as Britain’s. It should cost €20, be fully digital, and instantly valid in the entire EU and compliant with various tax schemes. We have done the difficult part and set precedent with SE, let’s take the next step and free our builders and creators.

b) Create standardised convertible note investment instruments. Much like the American SAFE note has become an easy to understand standard that startups can use to raise capital in a few minutes, we should have a European equivalent. We could start with a few more dynamic host countries such as Estonia and Luxembourg, and then make it implementable across all other countries.

c) Standardise other public digital infrastructure - health records, know your customer processes, payments infrastructure, e-signatures, immigration, and other public services should all be standardised and accessible by REST API.

d) A common design system across all European government services. The current disparity in interfaces both within and across countries is an embarrassment - it is costly, insecure, not inclusive, and simply a huge waste of time and resources. We should follow the British example of the open source gov.uk design system15 and apply that across the entire EU, while making it available for other countries to follow suit.

  1. Digital Sandboxes

While regulation plays an important role, it has a trade off of making one of the pillars of liberal democracy, market access, less inclusive. One way to overcome this is using Digital Sandboxes, which are testing grounds that allow companies to try new ideas safely within rules and regulations. Inspired by the UK’s Financial Conduct Authority (FCA) approach16, these sandboxes could be a game-changer for industries like healthcare, energy, and transport, which are often held back by strict regulations. By setting up these test zones across the EU, businesses can innovate without the immediate fear of breaking the law. This would not only speed up the introduction of new technologies but also make it easier for solutions proven in one country to be rolled out across the EU. Support from both public and private sectors could further lower barriers for small businesses and startups, making it easier for them to bring fresh ideas to the table. This move could attract more investment and keep Europe competitive on the global stage, ensuring high standards of safety and consumer protection.

  1. European Advanced Research Agency

The EU could significantly advance its innovation capabilities by revising the charter of existing frameworks like the European Institute of Innovation and Technology (EIT)17, which despite a budget of over 2 billion Euros doesn’t have a functioning website at time of writing, to emulate the successful models of Arc18 and ARPA in the US, and ARIA19 in the UK. These institutions aim to drive transformational change by serving as independent hubs for groundbreaking research and development with long time horizons. By adopting a model that encourages radical ideas and accepts the risk of failure as part of the innovation process, a revamped EU agency could accelerate the development of new technologies and solutions. Drawing on the collaborative and cutting-edge research environments of other European organisations such as CERN and EMBL20, this agency would not only push the boundaries of scientific advancement but also ensure that the EU remains a leader in global innovation. Such a transformation would invigorate Europe’s innovation landscape, ensuring that significant investments are translated into tangible, world-changing advancements.

Conclusion

To conclude, while we must recognise an element of truth in some accusations of European doomerism, the data warrants a very different narrative. We have excellent conditions on which to build upon, and by establishing an advanced research agency, leveraging digital sandboxes, standardising processes, implementing unified markets, and promoting good corporate tax design, Europe can usher in a renaissance of innovation and growth. The continent already boasts numerous strengths, from a robust economic market to leadership in scientific and infrastructural endeavours, and now is the time to amplify these strengths through strategic policy and investment, turning potential into reality.

Let this be our clarion call: to rise, to strive, and to succeed. This is European Accelerationism.

PER ARDUA AD ASTRA LFG 🚀

Q.E.D.

Footnotes

  1. https://www.ft.com/content/af44329d-e861-449e-9d2f-0656e2e0aa15 

  2. https://uk.marketscreener.com/quote/index/MSCI-WORLD-107361487/components/ 

  3. https://en.wikipedia.org/wiki/Fortune_Global_500 

  4. https://www.lisdatacenter.org/wps/liswps/711.pdf 

  5. https://www.economist.com/britain/2023/11/30/how-to-change-the-policy-of-the-british-government 

  6. https://blogs.worldbank.org/en/psd/productivity-prosperity-long-run-it-almost-everything 

  7. https://www.jeffsachs.org/newspaper-articles/money-makes-the-world-go-round 

  8. https://taxfoundation.org/data/all/eu/comparing-corporate-tax-systems-europe-2023/ 

  9. https://www.oecd.org/ctp/tax-policy/tax-policy-reform-and-economic-growth-9789264091085-en.htm 

  10. https://www.kentclarkcenter.org/surveys/capital-markets-union/ 

  11. https://ourworldindata.org/grapher/energy-use-per-person-vs-gdp-per-capita 

  12. https://www.euractiv.com/section/energy-environment/news/macron-at-sorbonne-energy-key-to-french-presidents-new-european-paradigm/ 

  13. https://europa.eu/youreurope/business/running-business/developing-business/setting-up-european-company/index_en.htm 

  14. https://eidel.io/how-to-found-a-company-in-germany-14-easy-steps-and-lots-of-pain/ 

  15. https://design-system.service.gov.uk/ 

  16. https://www.fca.org.uk/firms/innovation/digital-sandbox 

  17. https://en.wikipedia.org/wiki/European_Institute_of_Innovation_and_Technology 

  18. https://arcinstitute.org/ 

  19. https://www.aria.org.uk/about-aria/ 

  20. European Molecular Biology Laboratory, an organisation based on the CERN model.